Sharon Morrow, the city’s embattled chief tax collector and check writer, has been on the ropes more times in her career than the badly battered heavyweight boxer Buster Douglas. Yet unlike Douglas, Morrow, head of the Department of Finance and Revenue, manages to stay in the ring.
Morrow, a top official in Finance and Revenue during the Barry years, fled the government following her controversial decision exempting owners of 4000 Wisconsin Avenue NW from paying D.C. property taxes for 1988. Morrow sided with the building’s owners in ruling that the $50 million structure could not be taxed until the roof was finished and all the windows on the top floor had been installed. Morrow chose to ignore the fact that the lower floors were occupied by lease-paying tenants and six thriving movie theaters, and that the owners purposely delayed installing the windows to avoid taxation.
Despite her novel interpretation of tax regs—which spurred the D.C. Council to write a law closing this loophole—Morrow returned to District government soon after Sharon Pratt Kelly won the mayor’s office in 1990. After pledging in her campaign to cleanse the District bureaucracy of the taint of her predecessor, Mayor-for-Life Marion S. Barry Jr., Kellysurprisingly picked Morrow to direct Finance and Revenue, the agency that oversees tax collections and government spending. And Morrow was the first Dixon/Kelly appointee to win council confirmation. Yet problems within the city’s most important—and one of its most troubled—departments have mounted during the past three years.
Homeowners regularly complain about unfair and erroneous tax increases on their residences, while downtown commercial property owners annually benefit from millions in tax reductions. Income tax refunds were delayed for months during each of the last two years. (LL has been awaiting our 1992 refund for over six months now.) A $5 million project to computerize property tax rolls was plagued by mistakes and charges of a conflict of interest between Morrow and a member of the group awarded this contract. Jewish employees claimed that Morrow targeted them for dismissal when downsizing her department in 1991, and a discrimination case is pending before the U.S. Equal Employment Opportunity Commission. The department’s immigrant African employees also have complained about their treatment in the workplace during Morrow’s tenure.
Mayor Kelly, however, seemed oblivious to problems at Finance and Revenue until earlier this year, when tax collections fell well below Morrow’s estimates and contributed to the city’s unexpected deficit. The D.C. Inspector General also launched an internal probe into the department in the spring, and then-D.C. Council Chairman John Wilson laid plans to hold oversight hearings on Finance and Revenue early in the summer. In February, Wilson had called on Kelly to fire Morrow after he learned that Finance and Revenue had spent $31,000 to recall tax notices and print new ones because the first batch did not contain Morrow’s name. LL is certain that taxpayers wouldn’t have minded that omission.
Worried that Wilson might expose additional waste, fraud, and abuse during hisoversight hearings—and that such disclosures could damage Herroner’s re-election chances—the Kelly administration quietly began searching for a new Finance and Revenue director. And Morrow began looking for a new job. But Wilson hanged himself May 19, and the planned hearings died with him. The Inspector General’s investigation—which the mayor’s office insists was initiated at Morrow’s request—has dragged on with no conclusion, and Morrow has managed to survive the summer.
But the pressure on her to leave is building again, and reports are circulating that her departure appears imminent. Two of Morrow’s top aides have exited in recent weeks. If Kelly needed more motivation to dump Morrow before her re-election campaign gets under way, the just-completed race for council chair provided that push.
All five council chair candidates campaigned against Morrow and advocated her exodus, although the winner, Dave Clarke, did so with less urgency than some of his rivals. Even Socialist Workers Party candidate Emily Fitzsimmons, who was unaware of Morrow’s shortcomings before the campaign, said she had been persuaded to oppose Morrow’s tenure by candidate forums in which anti-tax activist Marie Drissel recounted the department’s misdeeds. Morrow will be an even bigger issue in next year’s mayoral race, particularly if she is still heading Finance and Revenue. What perplexes many Morrow critics is Kelly’s reluctance to remove her and the inability of the mayor’s administration to recognize the problems plaguing the department.
“If Sharon Morrow leaves tomorrow, the sound you will hear all over this side of Washington is the sound of the employees cheering,” observed a Finance and Revenue official.
Morrow is receiving criticism from some unexpected sources these days. Among them is Ron Hudson, the soon-to-be-replaced head of the city’s property tax appeals board. Hudson said in a recent telephone interview that his board is being made the “scapegoat” for the “incompetence” of Morrow’s department. He claims city assessors under Morrow’s direction committed errors that overstated the values of commercial properties. In correcting those “errors,” the appeals board reduced the tax burden on downtown property owners by $33 million for fiscal year 1994. The reduction for homeowners was a mere $2 million—trifling in comparison, although, Hudson points out, a greater percentage of homeowners won their appeals, which typically involved much smaller reductions than those sought by commercial property owners.
“The board was caught up in a situation where Finance and Revenue did not do its job,” Hudson claims. “They may want to use me as a scapegoat because Sharon Morrow did not do what she was supposed to. But I refuse to allow this board to be the scapegoat.”
There was another thing Morrow did not do: She failed to direct her department to write the regulations necessary to implement a 1990 law enacted to close the loophole she opened with her novel interpretation in the 4000 Wisconsin Ave. case. The lack of regulations contributed to an embarrassing reversal for Hudson’s board, formerly known as the Board of Equalization and Review but recently renamed the Board of Real Property Assessments and Appeals. Lobbyists for the owners of the new $30 million building at 1401 H St. NW succeeded in having the property temporarily removed from city tax rolls after convincing the appeals board that the building was not 65 percent complete, as the new law requires.
Hudson, who did not participate in that decision, said the appeals board was forced to reach its conclusion because Morrow’s department had not written regulations defining when a building is 65 percent complete. However, the law clearly states that new buildings will be placed on the tax rolls upon the issuance of certificates of occupancy, and such a certificate had been issued for 1401 H St. NW. Finance and Revenue officials failed to point this out to the mayorally appointed appeals board, which—startlingly—has few members with prior experience in dealing with complex tax assessment issues. After the hue and cry sparked by the board’s initial decision, Hudson was forced to re-hear the case and reverse the earlier ruling exempting the building from taxation. “If that [certificate of occupancy] had been brought out in the first hearing, the board would have had a basis for keeping the building on the assessment rolls,” he says. “It was the incompetence of the assessors’ office that allowed that to happen in the first place.”
Hudson, doing his best you-can’t-fire-me-I-quit routine, says he intends to tell the mayor he plans to resign from the appeals board. But Deputy Mayor Ellen O’Conner, who is directing Kelly’s search for a new property tax appeals board chairman, has not even bothered to interview Hudson for the post—whose term technically ended Sept. 15. Hudson may have sealed his fate during a June 11 meeting between the mayor’s staff and the appeals board. O’Conner and Kelly’s chief of staff, Karen Tramontano, had requested the meeting with the nominallyindependent board to find out why the amount of tax breaks had totaled $17 million above Morrow’s estimates, which had been used by the mayor to plan her budget. Those tax breaks cost the city much-needed revenues and added to the deficit while putting money back into the deep pockets of commercial property owners.
When confronted by O’Conner about the size of the commercial tax breaks that the appeals board handed out in April and May, Hudson produced a March 14 letter from Morrow to Wilson, warning the council chair that commercial properties had been over-assessed. To compensate, tax revenues would have to be reduced in the appeals process. The letter stated that these reductions would total more than $30 million, instead of the $18 million originally estimated. O’Conner also had signed this letter, but, according to Hudson, she seemed stunned that he was aware of it and that he produced it during the meeting.
The issue of favorable treatment for commercial property owners will not go away, regardless of what the mayor does to avoid it. After a three-and-a-half-year struggle, Service Employees International Union Local 82 has won approval of a ballot initiative that seeks to reform the city’s commercial property tax appeals system. The ballot initiative would require that all hearings and records of the tax appeals board be open to the public; it would also create a public advocacy office to file tax appeals in the public interest and assist citizens with appeals, and would allow D.C. taxpayers to appeal assessments of commercial properties.
Supporters of the initiative must collect signatures from approximately 14,000 registered voters by January to get their proposal on the ballot in the next citywide election, scheduled for September ’94. They collected some 10,000 signatures last Tuesday, a day on which the realtors and downtown office building owners—the two fiercest foes of the initiative—saw their council chair candidate, Charlene Drew Jarvis, suffer humiliating defeat. To call public attention to their effort, initiative proponents have been holding news conferences in front of downtown office buildings that have won lucrative tax reductions.
Last week, the group of labor and housing activists assembled in front of the Oliver Carr Co. headquarters at 1700 Pennsylvania Ave. NW. According to Local 82, which is spearheading the Justice for Janitors campaign to unionize custodians, developer Carr has won $15.1 million in tax reductions from the appeals board on 27 properties over the last seven years. This week, the group gathered in front of the Warner Theater building, which had its taxes lowered by $101,000 by the appeals board this past spring. The board reduced the value of the building by $4.7 million after lobbyists for developer and co-owner Joe Kaempfer argued successfully that the market value of the new building, just completed last year, is much less than what it cost to build.
“The developer already had been given huge public subsidies to restore the Warner Theater,” noted downtown housing activist Terry Lynch, a supporter of the proposed initiative. By winning the additional tax breaks, Lynch said, “basically, they sold the same horse five times.”