In my last article, I shared examples of what we’re seeing being outsourced in property tax management. However, just because we’re seeing certain areas being outsourced doesn’t mean it’s right for your business.  

In this post, I’ll share recommendations for what can and should be outsourced at each stage of the property tax lifecycle. I’ll also cover key tips to optimize your outsourcing engagements.  

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Values/Assessments Management

As mentioned in my last post, one of the most common examples I see in strategic outsourcing is the assessment review process. But there are some key considerations for optimizing your outsourcing strategy here.  

Regardless of industry, you and your team know your portfolio and strategic goals best. As such, you won’t simply want to hand over your entire list of properties to a third party.  

When it comes to property tax appeals, you may have key priorities that change year over year, or unique knowledge that third parties don’t possess. What’s more, only you deeply understand fluctuations and events in your portfolio – some of which may impact which property tax assessments you plan to appeal.  

For example, you might:  

• Avoid filing certain property tax assessment appeals that are "close enough" and therefore not worth the time and effort to pursue
• Skip an appeal because you believe the cost benefit is not in your favor,  
• Leave out specific appeal opportunities because filing too many (or “blanket appealing”) may hurt relationships at the local level, or  
• Focus your efforts on certain property classes or types that are more in line with your corporate priorities and strategies.

Clearly, some property tax appeals will be a higher priority for you and your company.  It’s up to you to guide third parties with respect to what you want to appeal.

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As such, I recommend the following approach for strategic outsourcing of property tax assessment appeals:

1. Begin early. Analyze your portfolio and pay particular attention to locations and property types/classes where you want to reduce values to stay competitive and/or align with strategic objectives.  ‍
2. Conduct an initial analysis and develop a list of potential appeal opportunities. Using your own data and software tools, such as itamlink property tax management, and determine which properties you think should be appealed.  ‍
3. Share your list with your third party. Have your consultant review the shortlist and provide their expert advice and opinions.  ‍
4. Discuss and review their recommendations to ensure strategic alignment. Ensure you understand why they made the recommendations they did and that they continue to align with your strategic objectives.  ‍
5. Approve the final recommendations and file appeals.

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Appeals Management

Once you’ve approved the appeals to pursue, you’ll need to consider how you’re going to manage the appeals. This is where third parties play an important role: they’ll help keep you on track and execute the appeals from filing to close.  

Don’t underestimate the importance of regular communication here. You need to stay informed of your property tax appeal statuses at each step of the way. For example, you should know what phase in the appeal process you’re at, what’s been discussed and reviewed, what meetings have happened, and the possible outcomes being offered, negotiated, and/or settled. Make sure to clarify expectations on both sides in terms of what communication should look like.  

Tax and Expense Management

Third parties can be an important and useful resource to help you verify tax bills. However, the approval and payment of tax bills themselves should remain internal. There are a couple of reasons for this.  

First, I’ve often seen that outsourcing tax bill payments can be costly and duplicate an organization’s existing efforts, as the data must come back to their accounting system anyway. What’s more, companies managing a multi-property portfolio already have internal teams dedicated to Accounts Payable (AP). Because paying property tax bills isn't any different from paying other real estate expenses, it can all be housed within the same department.  

Once tax bills are reviewed and approved, you can make the payments using systems and technologies you’re probably already using. For example, Nexus Systems, AnyBill, MRI Software, Yardi, and others can all be leveraged to streamline property tax bill payments. Automating tax payment processes can help save time on manual data entry, improves accountability and auditability, and reduces risk due to data errors.  

Forecasting and Budgeting

I also recommend keeping your forecasting and budgeting processes internal. That’s because - as I’ve said before - strategic outsourcing should be limited to functions that don’t give away your strategy or make up your “secret sauce.”  

You know what’s going on with your properties best. You have the most insight into what’s planned and upcoming for your portfolio. As such, you’re best equipped to understand what could impact future real estate activities and, subsequently, your property taxes.  

But leveraging consultants as advisors in this process can be useful, as they can shed light on key areas. For instance, they can provide insight into industry and market trends external to your portfolio, as well as specific jurisdictions or regions to pay attention to.  

While not specific to outsourcing, internal communication is key during planning and forecasting. You should speak with and solicit insights from your property managers to understand what’s going on internally with your properties.  

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Leveraging Software to Optimize your Strategic Property Tax Outsourcing Strategy

Strategic outsourcing can’t be done without proper tools and systems. Below are recommendations for leveraging software to optimize your entire outsourcing strategy.

Ensure you own and manage a centralized, integrated property tax software system

As property tax teams increasingly work with a variety of specialized providers, it’s likely each provider has their own system. It’s not efficient or realistic to manage a dozen logins and stay on top of the data in each third party’s system. Nor will relying on a collection of systems managed by third parties allow you to tie all the data together into a 1000-foot view of your portfolio.  

As such, you need a software system where you control and own the data that allows you. Ideally, the software allows you to:

• Centralize all your property tax data, including the data from your individual third parties
• Integrate with other systems you use in your real estate and property tax processes
• Manage third party (as well as internal) access and permissions from a single, central location so you can easily ramp up or down consultant projects as needed
• Provide insight that informs strategic business decisions, through BI and reporting functions, dashboards, etc  
• Easily share data across property tax, accounting, other departments, and third parties  
• Digitize, manage, and easily locate paper documents, such as tax bills and assessment notices.  

Final Recommendations

In order to optimize your outsourcing engagements, you need to be able to make decisions based on the best available data. Software can help ensure you maintain a holistic overview of your portfolio but should also let you “drill down” as needed.

• Don’t outsource strategic objectives or decision-making. Your strategy should always remain with you.  
• Ensure you own the software and data. Many third parties will have their own systems. However, you must control the data and have full ownership of the system. This ensures you can easily share the data across teams and providers, manage access,  
• Invest in software that helps you develop and maintain a data-backed strategy. You need to make strategic decisions based on the best available data. This is only possible with a centralized, robust, and integrated software that offers reporting/BI capabilities.  

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About the author

This post is part of Rethink Solutions’ Rethinking Your Property Tax Management Outsourcing Strategy series, where we provide tips and advice for optimizing outsourcing engagements. This series is written by Mordechai Katzman, President of Rethink Solutions. Mordechai has more than 20 years' experience advising firms on property tax management strategy, technology, and processes. He has spoken locally and internationally at events for the International Property Tax Institute (IPTI), Insititute for Professionals in Taxation (IPT), and the Council on State Taxation (COST), to name a few.  

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For more posts in this series, or to explore our collection of property tax management resources, visit our blog.

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