SOUTH KINGSTOWN — A Superior Court judge this week awarded damages to a New York City couple after finding that the Westerly tax assessor illegally bumped up the assessment of their Watch Hill home by $959,000 a year even as housing values dropped throughout town during the economic downturn.
Judge Kristin E. Rodgers found that the 12.2 percent hike in the value of Laurence F. and Kathleen Whittemore’s house amounted to an over assessment of $959,000 each year from 2009 through 2011.
Rodgers determined that the assessment of the six-bedroom house in the exclusive waterfront neighborhood should have instead decreased by 6 percent to $4.95 million. She awarded as damages the overpayment made by the Whittemores, plus 12 percent interest.
The exact amount of the damages has yet to be calculated, according to David Thompson, who became Westerly’s tax assessor this summer.
“It was a surprise to us,” Thompson said of the decision. It was “difficult to understand,” he said, how a house could be purchased for $7.1 million and then be assessed at $2-plus million less by the court.
The town has not decided if it will appeal, he said.
According to Rodgers’ ruling, the Whittemores started looking for a summer home in Watch Hill in 2005 after years of vacationing in the area. They wanted a place to spend time with their teenage children before they headed out on their own.
They learned in 2008 that 5 Manatuck Ave. would soon be listed for $7.85 million. The property had ocean views and was an easy walk to the water.
The parties entered a purchase and sale agreement for $7.1 million that June. The closing, however, was threatened by the financial collapse. The Whittemores had intended to sell stock to finance a large part of the deal, according to the ruling.
Washington Trust Co. agreed to provide primary financing. The bank had two appraisals done, which came in at $6.9 million and $6.5 million respectively.
Housing sales nationally and statewide, meanwhile, had taken a plunge. A revaluation conducted in Westerly in 2009 showed a drop in assessments, particularly in exclusive Watch Hill.
Three nearby houses, for example, decreased in value by an average of 7.1 percent, the ruling states. In contrast, the assessed value of the Whittemores’ property rose by $700,000-plus to $5.98 million as of Dec. 31, 2009.
Laurence Whittemore, who works in securities at J.P. Morgan, met with then-Tax Assessor Charles E. Vacca about what he viewed as an excessive assessment. Vacca lowered the assessment to $5.90 million — a 12.2 percent hike from Dec. 31, 2006, the ruling says.
Whittemore continued to contest the assessment, hiring Stephen O. McAndrew to perform an appraisal. McAndrew used sales in Jamestown, in Newport and in the Shelter Harbor area of Westerly for comparison since there were no comparable sales in Watch Hill. He estimated that the decline in the area at 6 percent annually, and placed the value of 5 Manatuck Ave. at $4.9 million. The hike in the assessment of Whittemore’s home was “unprecedented,” he said.
Whittemore argued to the town that the house should be valued at $4.9 million. Vacca and the Board of Assessment Review refused to provide relief. In Dec. 31, 2010, Whittemore filed suit in Superior Court, arguing the town’s assessment of the house was arbitrary and disproportionate to other properties in the neighborhood.
The Whittemores, despite their appeal, paid property taxes of $57,278, $57,514 and $57,514 for the contested years.
At a bench trial last spring, Whittemore acknowledged that he and his wife significantly overpaid for the home, the ruling states. They sensed, according to the ruling, that time was slipping away and wanted to spend time with their children. Vacca, too, stated that he considered the $7.1-million sale an outlier.
A manager for Vision Appraisal Technology, who assisted in the town’s revaluation, said factors such as views, neighborhoods, and landscaping are used to determine assessments and that location plays a big role. He did not disagree that there had been a 6 percent decline in market values, in general, but said that reduction should not apply across the board.
In ruling, Rodgers observed that Watch Hill is an exclusive, highly sought neighborhood that showed little real estate movement at the time of the revaluation due to the market crash. The judge looked to the three comparable assessments in Westerly that showed an average dip in value of 7.1 percent.
Trial testimony and Vacca’s own calculations “further support the finding that the Watch Hill properties were generally subject to a 6 percent annual decline in fair market value.”
She found that Vacca had used the increased assessment of one outlier to justify the increased assessment of another. Conversely, the judge concluded that the tax assessor’s decrease in some nearby assessments while increasing Whittemore’s assessment “was also arbitrary and erroneous.”
She questioned the appraisals conducted on behalf of Washington Trust as lacking in objectivity as new regulations resulting from the financial collapse had not yet come into play. Additionally, she rejected McAndrew’s appraisal because it relied on properties in locations inferior to Watch Hill.
Finally, the judge faulted Vacca’s reduction of the Whittemores’ initial $5.98-million assessment without an “articulable basis,” too, as evidence of the “arbitrary nature of the process.”
“In sum, Vacca’s justification in assessing nearby properties at lower amounts based on the paucity of sales should have also been applied to 5 Manatuck,” Rodgers wrote. “Indeed, it was inconsistent and arbitrary for him to increase the property’s assessment in light of lowering other assessments in the same area based upon the general decline in the market … . In doing so, Vacca failed to perform his duties properly.”
The Whittemores’ lawyer, Kelly Fracassa, did not return two phone calls placed to his Westerly office. Laurence Whittemore also did not return a phone call.