When news of the complex deal to build 
a D.C. United soccer stadium broke last month, many of the city’s reporters and concerned citizens became back-of-the-envelope mathematicians.

One hundred million dollars for the city to acquire the land for the stadium site at Buzzard Point, plus $40 million for the city to provide the necessary infrastructure, plus about $150 million for D.C. United to build the stadium equals somewhere near $300 million.

A $1 annual base rent times the 25- to 35-year ground lease for the stadium equals a whopping $25 to $35 flowing into District coffers from the team, plus a potential share of the stadium’s profits—and of course the anticipated tax revenue.

And the city-assessed value of the Frank D. Reeves Municipal Center ($109 million) minus the city-assessed value of the Buzzard Point parcel owned by the developer Akridge that the city was supposed to get for it in a trade ($8 million) equals a whole lot of value Akridge would have to make up to the city in cash or other compensation.

Except that nobody thought the Akridge parcel was worth just $8 million. (For that matter, the Reeves Center assessment was also fairly meaningless, since Akridge would be tearing the building down to build a new mixed-use development.) Akridge paid $75 million in 2005 for four contiguous Buzzard Point parcels, spending about $17.5 million on the one it plans to trade to the city. City Administrator Allen Lew, who negotiated the deal on the city’s behalf, says that in his talks with Akridge President Matt Klein, he said, “Let’s pretend your site at Buzzard Point is worth $20 or 25” million—an arbitrary figure, but probably in the general range of where a planned independent valuation will place it.

Akridge’s parcel is far from unique. Across the city, property assessments lag consistently behind sale prices, costing the city hundreds of millions of dollars in lost tax revenue.

An analysis of properties sold in the District in fiscal year 2013 (beginning Oct. 1, 2012) through April 30 shows that the total assessed values of the properties—the basis for property taxes—at the time they were sold was less than 85 percent of the total that they sold for. The Office of Tax and Revenue expects to bring in $1.9 billion in property tax revenue in fiscal year 2013. If that figure represents just 85 percent of what the city could be collecting, the lost revenue would come out to more than $300 million. (The exact figure of lost revenue is difficult to calculate, since property tax rates vary by property type and value, and because of various deductions.)

For comparison, Mayor Vince Gray’s heralded one-time investment in affordable housing this year is $100 million, and providing permanent supportive housing to every homeless D.C. resident would cost about $53 million per year, according to a plan by the Interagency Council on Homelessness. The city could fund both programs, with money to spare, just from the additional revenue provided by property assessments at 100 percent of market value.

Granted, no one wants to pay more taxes, particularly not at a time when the city’s running healthy surpluses. But underassessment isn’t a very fair or effective way to blow would-be revenue, particularly when most D.C. residents are renters and some property owners are getting off easier than others.

OTR follows up property sales by reassessing the properties for the following year’s taxes. After these revisions, according to OTR figures, properties citywide that were sold in 2012 will be taxed in April 2014 at 93.9 percent of their sale prices.

Why only at 93.9 percent? Robert Farr, director of the Real Property Tax Administration at OTR, says slight underassessments are typical, and that figure falls within the 90 percent to 110 percent range standard set by the International Association of Assessing Officers. “If you just bought your house for a million dollars, and we come in and assess it at $975,000, that would be acceptable to you,” he says. “But if we assess it at $1,025,000, that will upset you.”

But even 93.9 percent falls short of the Real Property Tax Appeals Commission’s stated mission “to ensure that properties are assessed at 100% of market value.” And there are a few other problems.

First, because the higher assessments take a year to kick in, the city still loses considerable revenue in the interim.

Second, assessments don’t fall evenly across all properties. While the 2014 revisions show residential properties being assessed at 96.9 percent of their value, commercial properties are assessed at just 89.9 percent. Breaking it down further, single-family homes are assessed at nearly their full value (97.1 percent), while multifamily apartment buildings are assessed much lower (79.3 percent). In other words, big property owners tend to get a bigger break on their property taxes than regular homeowners. (Farr says commercial properties are harder to assess than single-family houses because there are more factors at play: Assessors might not take into account, say, the drawbacks of a longtime office tenant that’s paying lower rent than a new one would.)

Furthermore, the system tends to favor up-and-coming neighborhoods, where assessments can’t keep up with rising property values. Of the 66 neighborhoods listed by OTR in its 2014 revisions, single-family houses in 60 of them are assessed below sale prices. But the discrepancies in fast-gentrifying neighborhoods like Columbia Heights and Trinidad are among the greatest, with property values rising more quickly than assessments.

The strong market has made it hard for assessments to keep pace. “When the market is stable and values aren’t moving much, then the assessments are going to stay stable as well,” says Farr. “When you’re in an increasing market, we’re constantly trying to catch up.”

But Farr says it would unwise for the city to try to predict future market values in its assessments. “That would be very risky,” he says. “Our crystal ball’s only as clear as anybody else’s. The code says fair market value as of a given date. They don’t say project forward.”

Of course, not everyone wants to see higher assessments. “If you called the real estate lawyers in this town,” says David Umansky, spokesman for the Office of the Chief Financial Officer, “they would tell you that our assessments are way too high.”

And so they do.

“I don’t think there’s any systematic underassessment by any means,” says Tanja Castro, an attorney with CastroHaase, a law firm specializing in helping commercial property owners appeal their assessments. Castro says these appeals allow property owners to provide the city with additional information to allow for a more accurate assessment.

But appeals are generally made by people seeking a reduction in their assessments, and so the effect is a further downward skewing of the city’s assessments—and its tax revenues.

Last year, more than 8,000 owners appealed their assessments to OTR, and the appeals resulted in a $1.85 billion reduction in the tax year 2014 assessments. More than 3,000 of those owners then made a second-level appeal to the Real Property Tax Appeals Commission, and about 300 people a year take their appeal to the third and final level, the D.C. Superior Court, according to Farr.

OTR often settles appeals to avoid an expensive legal process. “On appeals, we consider, how strong is our case?” Farr explains. “Is it a smart move to settle the case? Or should we go into a knock-down drag-out fight?”

The vast majority of appeals result in a lower assessment or no change. But on rare occasions—according to RPTAC, fewer than 1 percent of the second-level appeals—the property owner ends up with a higher bill.

Akridge is one of those unlucky few, as it happens. The company recently appealed the city’s assessments of its Buzzard Point properties, hoping to bring the highest-assessed parcel down to the per-square-foot level of the other three. Instead, when OTR released its new assessments on Monday, the three lower-assessed parcels rose to the level of the higher one.

That shouldn’t affect the stadium deal, which has its upcoming independent valuation, but it will mean higher taxes for Akridge—though nowhere near enough to make a dent in the fortune the city’s losing thanks to underassessments elsewhere.