SOUTH PORTLAND — The city has denied another appeal by the Maine Mall’s parent company, which was lobbying for a smaller tax bill.

General Growth Properties, the second largest mall owner and operator in the country, owns 12 properties that comprise much of the mall complex. It previously sought a smaller tax bill in 2006, but that request was also denied at both the city and state levels.

GGP last week sought to win back money it paid on property taxes based on the city’s April 1, 2009, assessment. The company contested the assessment of nine properties, which the city said were worth about $242.6 million. It argued its case on July 22 before the city’s Board of Assessment Review. 

The firm hired its own appraiser, David Lennhoff, who said the properties were worth only $181.7 million. Lennhoff did not provide appraisals for the remaining three properties.

Valuation of income-generating property like the mall relies heavily on how much income the property generates. At the heart of the disagreement was Lennhoff’s notion that much of the value of the mall was not in its real estate, but was derived from “intangibles,” such as contracts and reputation.

Lennhoff and GGP argued that because so much of the mall’s value isn’t derived from physical property, that value should be deducted from the firm’s property tax bill.

“We think only about 80 percent of the valuation is real estate value,” said John Goldberg, GGP’s attorney. 

The city’s attorney, Bill Dale, called Lennhoff’s notion of “business enterprise value” a “novel theory.” 

“GGP has invoked this theory to drive their price down,” Dale told the board. He said the theory had been found flawed in every court in which it had been used, and urged the panel not to be “the first body to adopt this theory.” 

In an interview, Dale said the concept of intangible value had been recognized at least once in the Maine Supreme Court, but that it was deemed so “inextricably intertwined” that it couldn’t properly be quantified. Thus, the court ruled, the full assessed value should be taxed. 

The city assessor, Elizabeth Sawyer, said that in her valuation of the GGP properties she made some deductions based on intangible values. Sponsorships, for example, didn’t count toward the mall’s valuation.

“So if Pepsi paid the mall to make their soda the ‘official’ soft drink of the Maine Mall, that income wasn’t counted toward the value of the property,” Sawyer said. “We don’t totally disagree with the theory, but they’re talking about huge reductions to the income that just aren’t acceptable.”

Sawyer also said that GGP may be using Maine as a test to make this argument, and speculated the company may take it all the way to Maine’s Supreme Judicial Court.

GGP has 60 days from receiving written notice of the town’s denial of the appeal to take the issue to the state Board of Property Tax Review. Goldberg said he didn’t yet know if GGP would appeal the decision.

If it does, choosing Maine as a testing ground is a risky move because the system so heavily favors assessors. Maine law presumes the validity of the assessor’s valuation in property tax disputes, leaving the burden of proof on the taxpayer to show that the property was overvalued, either fraudulently or through an unjust assessment.

Either way, the issue isn’t dead. Sawyer said GGP has already started filing for an appeal of its 2010 valuation of nearly $220 million for all 12 Maine Mall properties.

Mario Moretto can be reached at 781-3661 ext. 106 or mmoretto@theforecaster.net. Follow Mario on Twitter: @riocarmine.