Tax Court Trims Motel’s Assessment

WILDWOOD – A state Tax Court decision shaved more than a million dollars off the assessment of a Wildwood motel for the years 2008 and 2009. 
In an April 21 decision, Presiding Judge Patrick DeAlmeida found that Wildwood over-assessed the Stardust Motel at 3900 Ocean Ave. based in part on a 2006 zoning board approval for a much larger high-rise facility that would have included the Stardust. 
At issue was the proper method for assessing the value of an investment property, and the highest and best use of properties within Wildwood’s Hotel/Motel zone.
In 2008 and 2009, the 1960s-era Doo-Wop-style motel was assessed at close to $2 million for each year, according to a copy of the tax court’s findings.
The assessed value of a property determines the owner’s tax obligation for county, school, and local property taxes.
Free-Will LLC, the motel owners at that time, appealed the assessment, and a two-day trial held at the time included expert appraisers from the motel, who put the value at $880,000 and $850,000 for 2008 and ’09, and the city’s expert, who testified the value was instead $2.2 million for 2008 and $1.95 million for 2009.
Part of the discrepancy connects to what the city expected to happen in the area around the Wildwoods Convention Center. According to the tax court documents, in 2006, the Wildwood Zoning Board approved a high-rise hotel project, with 67 rooms, a pool, thousands of feet of retail space, two towers of 23 and 24 stories, spanning two city blocks. The 22 lots the plan encompassed included the site of the Stardust.
But that project approved just before a serious downturn in the national economy, never happened.
According to the tax court findings, the expert testifying for the Stardust acknowledged that there was a market for older hotels and motels in Wildwood and surrounding towns to be purchased for demolition or refurbishment as condominium units.
“He opined, however, that by the relevant valuation dates the market for such uses of motel properties had stalled and was unlikely to return in a meaningful way,” reads the decision. The expert was unnamed in the decision.
The city’s expert, however, argued that the highest and best use of the property was as part of a future high-rise development such as the one the Zoning Board approved.
The court ruled that the city did not offer objective market data to support concluding that the redevelopment was feasible or even physically possible at the site. The court also states that such a project would need many more approvals than that of the Zoning Board.
There was also a disagreement about how to determine the value of the property: Whether to give more weight to comparable sales or to the amount of money likely to be made by the investment property, referred to as the income capitalization approach.
Based on that and other measures, the court ruled that the equalized tax assessment for 2008 was $727,800 and $839,500 for 2009, according to the tax court decision.
The court also vacated a $177,500 added assessment from 2009, which was added after the assessor observed improvements under way at the motel, according to the tax court opinion.
A man who answered at the Stardust said no one was available at that time to comment for this story, and no one responded to a message left at the motel.
According to Wildwood Assessor Jason Hesley, the motel was sold in 2011 for $1.159 million to Solven Properties 4100, LLC.
In 2014, a deed transferred ownership to Solven Properties 3900 for $1, the current owner of record.
Hesley said he was not the city’s assessor when the appealed assessments took place, and so would have no comment on the tax court decision. Hesley was hired in 2011.
To contact Bill Barlow, email bbarlow@cmcherald.com.