Consolidated Condo Tax Meeting recap

Operating from memory, as I’ve misplaced the notes I took at the meeting, below are the discussion points from the MVT CID Consolidated condo tax forum. Attendees included the MVT CID, Madrigal Lofts, 555 Mass and two members of the Office of Tax & Revenue. The Sonata and City Vista condominiums will also be affected but did not send representatives.

Presently for office and apartment buildings the CID sends tax bills to the building as a whole. These entities then pass on the costs to their tenants. For condominiums the CID bills each individual unit owner. Over the last several years the volume condominium units has increased six fold to nearly 1200 units. The administration costs of billing 1200 condo owners twice a year are high and consume 9% of the CID’s annual budget. Additionally since many condo residents do not understand the CID tax the collection rates are mediocre – often 60% for new buildings and 80% for mature buildings. This plan for a consolidated condo tax hopes to simplify the administration overhead and streamline costs.

Residents have objections on several fronts (after the jump). I am not a lawyer so the legal-esque points may not be articulated perfectly:

  • The administrative overhead the CID is saddled with is not our problem. Residents are not convinced the CID and OTR have done everything they can to improve their administrative processes. For instance several existing capabilities for collecting real property taxes are not being employed for the CID tax: Escrow and online payment. Some residents percieve that the consolidated condo tax is just government pushing their administrative responsibilities onto other entities (condo boards) rather than taking responsibility for improving the way they operate.
  • Presently a condo owner delinquent on their CID tax must resolve this obligation at settlement or their sale will not consumate. If the tax was instead assessed to the building then passed along in condo fees the legality around it is different. The condo board must file a lien against the unit owner. To file a lien involves securing legal counsel and increases the condo boards administrative costs.
  • Most condo by-laws state that all costs must be distributed by units par-value. The CID tax is a flat $120 tax. While in the end D.C. legislation would likely trump condo-by-laws it would create a new layer of complexity in condo fee accounting where some items are flat and others are determined by par-value.
  • Condo fees are a sensitive issue for resale of your condominium. Potential buyers searching through MLS listings often rule out properties from consideration sight unseen based on listing price and condo fees. The proponents of the consolidation suggest (paraphrasing) “the net effect for the owner is the same whether you pay $10 extra a month in condo dues or $120 a year to the government in taxes.” This may be true from a personal budgeting perspective but not from a resale perspective.

I think concerned residents would like to see the CID and OTR improve their efficiency rather than saddle condo boards indirectly with tax collection. While the CID and OTR absorbed that feedback it remains to be seen how strongly it will be considered or whether they will instead stay committed to directing energy towards getting the consolidated condo tax into emergency legislation so it will take effect in Fiscal Year 2011.

Lastly, this issue is really bigger than just the MVT CID. The Capitol Riverfront, NoMA and even Downtown BIDs are watching intently and hope to jump on the bandwagon.

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  1. 1

    MVTer says

    You can take the CID assessment off of your federal income tax. You cannot take the condo dues off as a deduction. The pass through eliminates this. Also, the OTR is charged with collecting back taxes. Why are they ignoring the non-payers. This is basically an extra tax that they are in a position to get. Bad idea.

    Finally, if they want to do this, the CID MUST start giving each condominium a representative (named by their BOD on their CID BOD). It is controlled right now by developers.

  2. 2

    SM, 555 Mass says

    This will potentially saddle condo boards with huge liabilities. Upon best estimates presently, 20% of buildings do not pay. That equates to a $6k liability for my condo board – plus the time and expense of pursuing those fees from non payers. This is simply lazy government and an attempt to pass the buck to someone else. Many residents I speak to do not support MVTCID, believe it another abrogation of DC Council’s responsibilities. If they are forced to pay their neighbors’ bills as well as their own, there would be a lot of very unhappy people.

  3. 3

    SM, 555 Mass says

    There is no upside for the condo buildings to this. Even if we were offered 10 spaces on the board, it wouldn’t make up for the financial penalty imposed on us by this move. This move is to make THEIR life easier and richer, which I have no interest in. There are ways for them to make their life easier as has been stated – online payments etc. This is simple a money-grab from condo Boards and I view it as a primary responsibility of Board members to oppose it since there is no net positive in my opinion.

  4. 4

    Dave says

    I was familiar with this general issue before reading this post, but now, having read the post, I’ve switched sides. Whereas I previously though it would streamline things to have the condo associations handle this, I now agree that it’s not their problem, nor in their interest to assume this responsibility. Chasing non-payers is expensive for whoever is doing it. The CID wants the money, let them collect it. Offloading their administrative burdens on volunteer condo board members is a non-starter. Adding in the par-value issue, the tax deductibility issue, etc. make this even more obviously disadvantageous for condo owners and boards. Agreed; no upside for the COAs to take this on, and we’ll NEVER be able to give this responsibility BACK once we’ll assumed it.

  5. 5

    pqs says

    MVTer: I’m almost positive that the CID taxes are not deductible since they are not based on the value of the property. Do you have other information?