By Thomas Harding

9.45 am, Wellness Center, Romney.

We were all waiting for the Governor of West Virginia. There were maybe 20 of us – fitness center staff in blue polo shirts, executives in neatly pressed grey suits, a state senator in bright skirt and jacket – waiting in the concrete and steel lobby of the newly built wellness center in Romney. We were all standing, except six-term mayor William Hicks who sat in the corner, cane in hand, muttering that it was about time the governor showed up, and how he wanted the day to be soon over.

Then he arrived. The governor: olive green summer suit, yellow and green striped tie, slicked-back salt-and-pepper hair of a 1950s movie star. He stepped spryly out of a state trooper’s green Explorer, and with press officer and assistant in tow, walked through the glass sliding doors and greeted the small crowd of notables. This was the first event of the day and he was upbeat, energetic, and attentive. 

At the end of a short speech praising the multi-million dollar building, which had opened a year earlier, the governor took a piece of paper from his jacket pocket – and just as he would at every public event and campaign stop throughout the day – he read a not-entirely-pertinent quotation. Five minutes later, right on schedule, the assistant whispered something quietly in the governor’s ear. It was time to move on to the next venue.

This was stop number one. Fourteen hours, ten events and a hundred miles later, Gov. Joseph Manchin III would finish up the day at a campaign gala in Martinsburg. It was going to be a long day. 

Joe Manchin III was born on August 24, 1947 and grew up in Farmington, WVa, population of 300, situated thirty miles southwest of Morgantown. He went to public schools and played basketball and football. He won a football scholarship to WVU, but his career was cut short by a knee injury.

While he was away at college, tragedy struck: the family grocery store in Farmington burned down. Manchin returned home to help rebuild the store. To this day he refers to this event as a turning point in his life, a lesson that you can pull yourself out of adversity through combined community effort.

At WVU Manchin met his wife Gayle Conelly. They married in August 1967, and they now have three children: Heather, Joseph IV, and Brooke. They are known by their six grandchildren as “Nana” and “Dadoo”.

Manchin’s grandfather, Joe Manchin I, or “Papa” as Manchin called him, was an Italian immigrant and coalminer. In 1927 Papa Manchin was fired from his job at the Farmington mine, because he was caught organizing for the union. He tried various jobs, including circus performer, where he was known as “Nicodemus the Strong Man,” and beer garden owner — a place where poker was played in the backyard. Joe Manchin III told me, with a glint of mischievous pride in his eye, that Papa may also have sold liquor out of the back of his garage during prohibition. Papa eventually settled down and set up the grocery store. Later Joe Junior set up a furniture and carpet store next door. Both would serve terms as mayor of Farmington.

After college, Manchin worked in his grandfather’s grocery store and his father’s furniture and carpet stores in Farmington. This was where Joe III learned to be a tradesman and how to do business in small West Virginia town.

On November 20, 1968, another tragedy hit the family: a massive explosion rocked the Farmington coal mine. Manchin remembers waiting at the company store to hear the news, being frustrated at how long it took to get information. When word finally came, the news was bad: His uncle and cousin had died, along with many of his classmates. The cause of the explosion was never determined. This event became another touchstone for Manchin. During the Sago Mine disaster years later, Manchin committed to swift communication to mine families. For first time Gov. Manchin became recognized on the national stage.

In the 1970s Manchin worked in the energy sector running Enersystems, a coal brokerage in Fairmont. This fact has been airbrushed out of his official biography. You will not find it on the official bio on the Governor’s website, or that of the Democratic Party or the National Governor’s Association. Enersystems is now run by the governor’s son, Joe Manchin IV.

In 1982 Joe Manchin III was elected to the House of Delegates. Four years later he was elected to the state senate. While in the senate, Manchin’s cousin, State Treasurer A. James Manchin resigned after being threatened with impeachment for defrauding the government. Manchin remembers this period as “a very difficult time,” but he says his cousin was ultimately vindicated when he was reelected to the legislature a few years later.

In 1996 Manchin sought the Democratic nomination for governor, but lost to Charlotte Pritt. She had the support of organized labor, and successfully painted Manchin as the pro-business candidate. Pritt lost the general election to Cecil Underwood. After winning the secretary of state post in 2000, Manchin won the governorship in 2004. This time he had the support of both the unions and the business community. In his inaugural address he said:

“Well, I can tell you this much, business as usual just won’t cut it anymore. We must pursue a new and different course. The days of giving in to those who would take advantage of our state and our system of government are over. The people of this state deserve better. You deserve better.”

Four years later, on January 9, 2008, in his annual State of the State speech, Manchin touted the achievements of his administration: the lowest unemployment rates in the state’s history; a smaller government budget; a budget surplus; $300 million to upgrading water and sewer projects; and an increase in broadband access from 57 percent to 80 percent in 2008 during his term.

The governor’s supporters think he has done a great job. One such supporter is Scott Rotruck who is Vice President for Chesapeake Energy, Chair of West Virginia’s Tourism Commission – appointed by the governor – and a contributor to Manchin’s campaign.

Rotruck says Manchin’s greatest achievement was the privatization of workers compensation in his first year as governor. “It took many people to achieve, but it wouldn’t have happened without Manchin,” he said. “The governor did it by bringing everybody to the table and making a compelling argument that the state would be better off if it took this course. It showed the world that we could affect meaningful change.”  

But there many things that the governor and his supporters do not brag about.

West Virginia is the only state in the county where the death rate exceeds the birth rates. According to the 2009 West Virginia Executive Budget, a report produced annual by governor’s office, this was due to the:

“High median age, risky job mix, and low health status of many of it residents. Second, the state attracts overall about as many residents as it loses from other states (low net migration). This is related to the states relatively slow economic growth.”

Not a very happy scorecard by any measure.

But things get worse. The state has the third lowest growth rate in the country, increasing by 0.1 percent from 2006 to 2007. This is the third year of deceleration in growth in successive years, all since Manchin took office.

On education, West Virginia is one of the bottom ten states in the 2007 rankings for maths, reading, writing and science according to the US Department of Education. West Virginia has the third highest obesity rate in the nation, at 28% of the population, and ranks second in terms of diabetes, with 9.8% of the population with the disease.

On energy, while the governor has declared we must work to reduce greenhouse gas emissions, he is an ardent supporter of coal powered plants, one of the biggest contributors of climate changing gasses and a huge contributor to the state coffers.

As the governor says, there is much more to do.

10.40 am, Romney Senior Center, Romney.

Event number two for the governor in Romney went swimmingly. The small white meals-on-wheels truck was accepted with open arms by the volunteers at the Romney Senior Center, a one level brick building downtown. Now drivers would be able to deliver 2,000 hot meals each week to the elderly, who would be grateful for the warm grub, company, and attention. This was the first of 17 similar trucks distributed by the governor statewide from a $600,000 fund. Romney was a proud pioneer, and thankful for the governor’s largesse.

After a brief cutting of blue ribbon and more photos, the drivers were sent off with a “Now go and deliver your meals, you lazy lot”.

The elderly ladies, who had dressed up for the governor’s visit, went indoors coffee. As they watched Manchin walk boyishly into the kitchen and grab something to eat — as though he was taking something from his grandmother’s refrigerator — they giggled coyly to each other. 

After a short break it was time for event number three

Noon, Hampshire County Judicial Center, Romney

Over 300 people came out in the hot noon sun for the ribbon cutting — this time a red ribbon. Most crowded onto the sidewalk, trying to stay in the shadows of the newly built courthouse. Most were from Romney, but also present were state delegates, two sitting members of the West Virginia Supreme Court, a candidate for the Supreme Court, as well as a candidate for U.S. House of Representatives.

One local resident in red suspenders and blue train driver hat, joked, “Next time I’m here it will probably be in hand-cuffs.”

A prayer was said, the pledge of allegiance was uttered, the national anthem was sung. Then the governor was introduced to great applause. 

Manchin is clearly cherished in Romney. To the crowd’s pleasure he spoke of his love for Hampshire County, how he had visited as a boy and fished on the banks of the South Branch of the Potomac, how he and his high school teammates looked forward to an away-game in Romney as a chance to get away from Farmington, how he loved the beauty of the trees and the valleys so much that he had asked his helicopter pilot to fly low on the way in that very morning. 

At the end of his speech Manchin pulled out the creased paper from his jacket and read another quotation.

1.30 pm, Taggart Hall, Romney

One and a half hours later the governor was at another, more intimate event, this time across the street at a beautifully restored 18th century building. In a small low-ceilinged room toward the back of the building, Manchin surprised 86 year-year-old Mary Susan Williams by giving her the 35th Star, West Virginia’s highest honor. After a few words – this time without a quotation from his cheat sheet – Manchin sat down. With Williams’ family gathered around in their Sunday best, she told stories of 1963, when Joe had stayed with her while visiting Romney for a football game.

“I remembered that he was Catholic, but I had made a ham for dinner,” she said smiling, her hand patting the Manchin’s knee. “It was a Friday night, so I asked him if he would like to eat fish. Joe says, ‘I’ll eat it … if you make it.’ He was sooo polite. He didn’t like to eat fish you see!” Everyone laughed.

Manchin looked at her with delight. He said, “That’s true,” and went on to tell the group that after the football game, which his team lost, his teammates and residents did the snake-dance through the streets of Romney. Manchin was clearly having fun, charming all those around.

I asked the governor’s assistant if it was always like this, with the governor jumping from one event to the next through an over-packed schedule that ground on from dawn to dusk. “Yes,” she said. “He works 14, 15, 16 hours a day. He likes it. That is why he does it. It would be too tiring to do it all if he didn’t enjoy it.”

Manchin later explained how he pulls it off. “People give me energy. I have to get out of the office. It’s the only way to see what is really going on. You meet people face to face. You ask them questions. This is where the rubber hits the road.”

2.00 pm, Unscheduled meeting with protestors, Romney

During his speech outside the judicial center in Romney, Manchin was interrupted twice by hecklers shouting questions about the PATH high-powered transmission line that is planned to crisscross the state from St. Albans in the southwest to Jefferson County in northeast. Both times Manchin stopped and told the protesters he would speak to the “concerned citizen” after his speech, and after the tour of the building.

The governor did meet with the protestors as he had promised, one hour later in a private session with only his press secretary and state trooper nearby. One of the protesters was Ralph Wojtowicz, a financial consultant who recently moved from Northern Virginia with his wife and baby twins to a new $600,000 home in Yellowspring, W.Va. Wojtowicz said he was impressed that the governor met with him, but he was not satisfied with Manchin’s answers. The governor had said the best he could offer was to raise taxes on Alleghany Power, and call for lower electricity prices for consumers. Manchin said he could do nothing to stop the actual transmission lines being built.

I asked Manchin about the PATH proposal. He said that he had looked into the project a year ago, when, he said, he had been told the lines would prevent rolling blackouts on the East Coast. He said he had not been “in the loop” since then. He appeared skeptical of the project, saying that if it was not good for West Virginia he would not support it.

A letter Manchin wrote October 3, 2006 contradicts his claim. Manchin supported the project in a letter to the U.S. Secretary of Energy, writing that he “supported” the PATH project and “encouraged” the secretary to proceed with it as planned.

Wojtowicz is not the only person unhappy with Manchin’s role in the transmission line. Delegate Stan Shaver, Democrat, whose 46 district would be bisected by the transmission lines, had this to say in an email to a resident about Manchin: 

This is typical of how Manchin operates.  He negotiated with the power companies (behind closed doors) to offer consessions [sic] to landowners after all the public hearings were over, but the PSC had not made a ruleing [sic]. The PSC is worthless in WV. How can 99% of the people at these public hearing be opposed to something and the PSC pass it anyway.

Shaver told The Observer how frustrated he was with the process. “I know that the governor is supportive of taxation, but that will not help the landowner. The money will just go into the state’s general fund.” Instead, Shaver said, just as oil and gas companies pay royalties to landowners, he wanted to see the power companies pay royalties to landowners for the amount of electricity that runs through their land. He admitted, however, this was unlikely to happen. So far Manchin has not publicly supported such a proposal.

2.30 pm, Interview with The Observer, Romney

The governor was late. The meeting with the protestors had thrown him off schedule. He apologized as he came into the room, saying that he had been on the phone to Tim Kaine, the governor of Virginia. The same Tim Kaine who Manchin had publically supported as Barrack Obama’s vice-presidential running mate, before Joe Biden was chosen for the ticket.

I asked the governor about Barrack Obama and the primary campaign. Manchin accepted that Obama had been trounced by Clinton in West Virginia, but he didn’t think this was anything to do with the color of skin. “I don’t accept or believe race played a part in it any more in the country,” he said.  When I reminded him of the poll that showed that one in five voters in West Virginia affirmed that race was a factor in their decision-making, Manchin added “Maybe west Virginias were more honest about it.”

Manchin told me that he doesn’t agree with Obama on all the issues, in particular he differs with Obama on social issues: Manchin opposes gun control, abortion and same sex marriage. The governor waived off these differences saying that they are politically irrelevant. Without irony, he argued that social policy did not change significantly under President Bush – who appointed two right-leaning justices to the US Supreme Court and who then proceeded with countless socially conservative decisions – and that it therefore does not matter if you elect a President whose social values you don’t agree with.

Obama was running at least five points behind in the polls in WVa. To win, Manchin said, Obama needed to visit West Virginia more frequently. “The average person, they know me, I’ve been here, I am comfortable with them, they are comfortable with me, when I walk down the street they shake me by the hand. The same is true of Bill Clinton. To win, Obama must be the same. He hasn’t spent the time here.” The Governor told me that he had spoken directly to Barrack Obama encouraging him to come more often to West Virginia. So far the request had not been satisfied.

The assistant in the black nylon dress stepped in, it was time to wrap up my conversation with the governor, “They have been waiting for quite some time”, she said. The governor stood up and walked to his next event.

3.00 pm, Opening the County Heritage Days Festival, Taggart Hall, Romney

There were maybe twenty people standing inside the band-stand next to Taggart Hall. Many were the same people who I’d seen at the other events. It was at ninety-five degrees with high humidity. People waived their hats to stay cool. The assistant and the governor’s security man retreated to the shadow of a nearby oak tree.

The governor congratulated the gathered citizens on the work they were doing, announced the opening of the festival, and once more, took out his sheet of paper with quotations and shared an axiomatic gem with the crowd.

What the governor didn’t talk about was the heat he was getting back in Charleston for stepping into the hottest legal case currently before the state’s Supreme Court. In July 2007 a jury in Harrison County, W.Va., awarded $382 million to thousands of residents of Spelter in a civil case against DuPont. The verdict found that DuPont had significantly damaged the health of Spelter residents by dumping zinc, cadmium, arsenic, and lead from mining operations there. They had been complaining since the early 1920s, and finally their complaints had been heard.

DuPont petitioned the West Virginia Supreme Court to hear its appeal on the case. Unlike many other states which have an intermediate court, there is no automatic right to appeal in civil cases to a higher court. As with the U.S. Supreme Court, a defendant must petition the court to review their case. The court has discretion about which cases it hears.

The same day DuPont filed its appeal, Governor Manchin filed an amicus brief encouraging the Supreme Court to take the case. This was the first time in West Virginia history that a governor interceded in a case to which the state was not a party.

Reacting to criticism against him for stepping into this case, Manchin has said he is not taking sides in the case. He has claimed he wants to ensure that cases involving punitive damages receive a full airing from the Supreme Court, and that he was not weighing in on behalf of DuPont.

But when I spoke with him, Manchin admitted that he became involved with the case because he was concerned that if DuPont lost then it would deter other businesses from investing in the state. “I am worried about people exiting faster than they are talking about leaving. I have whole industries [leaving]. They don’t know what their liabilities are and what they are subjected to. They don’t know if they will get due process. I want to make citizens protected, but the bottom line is same just as I want citizen to have due process I want it to be fair for everybody.”

Attorney General Darrell McGraw has not filed an amicus brief on this case. In an interview with The Observer, McGraw said that like the governor, he had been intensely pressured to file an amicus brief by friends, politicians, and businesses. He said that he resisted because he had seen for himself the situation in Spelter. McGraw described the governor’s intervention in the case as “highly unusual.”  He added that the governor’s admission that he filed the amicus brief in order to promote the business environment was “more accurate” than his assertion that he acted in order to preserve due process.

The case has drawn attention from outside the state. Reporters for the New York Times revealed that Manchin’s secretary had been a community outreach officer for DuPont in Spelter. Manchin’s lawyer had also worked for DuPont. Manchin has said his intervention in the case had nothing to do with either staff member.

Manchin’s critics say the DuPont case is another example of the governor’s cozy relationship with big business at the expense of ordinary people. His supporters, like Scott Rotruck of Chesapeake Energy, say that the governor made the right move because these types of cases with high punitive damages are “perceived as deterrents to business”.

4.00 pm, Marios Restaurant, Romney

Finally, the governor gets to eat. Marios is a small haven of Italian linguini and antipasto, tucked into a little park opposite the new judicial center in Romney. It is easy to imagine that the tastes and the smells were a coming home for the head of West Virginias First Italian Family.  But as with all families, there are times when they bring joy and times when they bring heart-ache.

In 2007 Manchin’s governor’s daughter, Heather Bresch, was awarded an M.B.A. from West Virginia University, despite having completed only 22 of the required 48 credits. In April 2008, following investigative reporting by the Pittsburgh Gazette, W.V.U. rescinded Bresch’s degree.

In a press statement issued May 19, 2008, Manchin said, “It has been extremely difficult for me to watch this controversy unfold.” He added, “At no time would she have asked anyone to either ‘guess’ as to her records or to fabricate grades on those records. As a result, Gayle and I are both angry, in particular, at the fabrication of grades that took place, because it unfairly damages our daughter’s reputation as much as it does the University’s. It was absolutely wrong and, in my mind, completely unacceptable.”

By summer 2008 the provost, dean, and, eventually, the President of W.V.U., Mike Garrison, had all resigned in direct response to this affair. Some wondered Manchin had influenced the decision of W.V.U. or its subsequent investigation.

Bresch is chief operating officer of Mylan Industries, whose C.E.O. is a close friend of Manchin, and who has contributed large amounts of money to Manchin’s campaigns and W.V.U. In various public statements Manchin has said that he did not influence the university’s administration in any way.

By September 2008 the scandal had grown. A Special Investigations Committee of the Legislature was asked to investigate whether W.V.U. or its staff had committed criminal wrongdoing. The proceedings of this committee are private, and will likely take many months to complete. Its report will not be released until after the November elections, in which Manchin is running for reelection.

Jonathan Miller, a Republican Berkeley County delegate to the state house, told The Observer that he was glad that the committee was created, but was concerned about its secrecy. “It is still behind closed doors,” he said. “This investigation should be carried out along with the Judicial Committee, which would be open, allowing people to follow what was happening.”

Delegate Miller also criticized Manchin’s candor in this affair. “I know that the governor has been adamant that he was not involved,” said Miller. “But he needs to provide an alibi. He has yet to give all the information on this matter. If I were in the governor’s shoes, I would try and remove all doubt. I would release all email and phone records during the time period of the Bresch scandal. I would remove any doubt that I had any connection or contact with the administration of W.V.U. or President Mike Garrison. This has yet to happen.”

7.00 pm, Jefferson-Jackson Dinner, Martinsburg

The Jefferson-Jackson dinner in Martinsburg is wrapping up. The governor looks tired. Once more he raises his eyes towards the flag as someone sings the national anthem. Once more he places his hand over his heart as the pledged his allegiance is recited. But he looks far less committed to the proceedings than at the start of the day, less certain, more eager to be done with the pomp and ceremony.

Few doubt that Manchin will be re-elected as governor for four more years. Governor Manchin has over 2 million dollars in his election coffers while his opponent, Russ Weeks, has less than $15,000.  Even Russ Weeks’ campaign advisor Gary Abernathy admits that Weeks faces ‘a big challenge’.

Manchin will be 65 at the end his second term. Currently he is chair of the Democratic Governors Association and the Southern Governors’ Association; he’s also president-elect of the Council of State Governments. But approaching 70 years of age after his term, will he take the leap into national politics?

Over the years many journalists have Manchin how he would respond if octogenarian Senator Robert C. Byrd were to die while Manchin was governor — it would be Manchin’s responsibility to name a successor. When I asked him, Manchin gave his stock answer that he would chose the best candidate to replace the Senator. However, he added something new. For the first time, when asked if he would he consider appointing himself, the Manchin said, “No. I would not appoint myself. I do not believe in that.”

Right now Manchin’s focus is on his reelection campaign. In Martinsburg, for one final time on this long day, finally, the governor stands and addresses the crowd in his now-crumpled suit. He repeats many of the lines I have heard all day: “While West Virginians may not rank highest in terms of educational qualifications, they are top of the list when it comes to a Ph.D. in life,” and, “Vote for me for what I will do in the next four years, not what I have done in the past four years,” and, “I’m more proud of you than you are of yourselves.”

At the end of the speech, he takes the now creased paper from his jacket, and reads one last quotation. The crowd applauds politely. They too are eager to wrap the day up. They too have had a full day’s work, and are already thinking about the next.

Joe Manchin III sits down. He drops his head a bit, looking weary. Tomorrow will see another ribbon-cutting at a judicial center, this time in Berkeley Springs, and the opening of a new hotel at the racetrack in Charles Town. 

It has been a long day for the governor of the great state of West Virginia. Tomorrow is likely to be another.

By Thomas Harding

So things are on the up.

According to local realtors we are seeing an extremely active market in the sub $300,000 range, with multiple offers commonplace. We are even witnessing  the return of escalation clauses from buyers, something we haven’t seen since the heady days of 2005 and 2006.

We are also seeing the return of investors, another indicator that we have moved beyond the bottom of the market and that people are wanting to invest their extra cash in real estate before prices go on the rise.

The other good news is that the average house price appears to also be on the increase. In May 2010 the average sold price was  $182,861 compared to $167,499  the year before. This is the first time we have seen an increase in the average May sale price since 2005. See figure 1. This means that a few, and I say again ‘a few’, slightly higher priced homes are selling.  Of course this is a far cry from the $300,000 plus average sale price of 2004 and 2005, but we are in the beginning stages of the recovery.

Better still, the sale price as a percentage of list price was 92% in May 2010. This continues the upward trend that saw buyers knocking off as much as 15 percent on average of list price over the last two years. This shows that buyers are no longer able to beat up on sellers as much as they were and that the balance between buyers and sellers is returning to the market. 

One negative sign in the overall market is that the ratio between homes on the market and homes actually sold, the “inventory ratio”, increased one percentage point from March to April and again from April to May. While this ratio is still relatively low at 10.8, compared to the crazy heights of 20 plus in 2008 and 2009, if the inventory ratio continues to grow it will mean the end to the short rebound in the market we have witnessed over the past few months.

However, the really bad news continues in the more expensive end of the market. Houses over $400,000 are simply not selling in Jefferson County. And the collapse in this market has out-stripped the overall market decline. Figure 2 clearly shows the dramatic increase in the more expensive homes in 2004 and 2005, and then the sharp decline through 2009. This year doesn’t look like it will be any better, with only three homes sold over $400,000 in Jefferson County between 1 January and 31 May 2010. 

The biggest problem for the higher end homes is the lack of buyers looking for such properties. Local home-owners cannot sell their higher end homes and therefore cannot move up the price chain. Equally, buyers from the Greater Washington DC area are not able to sell their homes and therefore not able to purchase their dream house in West Virginia.

To make things worse, even if realtors are able to find buyers and cobble together contracts for these higher priced homes, appraisers are refusing to give them the value they need and therefore contracts are failing to close. This is a self-fulfilling prophecy, as fewer and fewer high-end properties are selling, appraisers are finding fewer comparables they can use in their appraisals.

The solution to this appraisal problem is that either buyers will have to throw more cash down on the table when they go to settlement or appraisers are going to get more creative with their values, perhaps by going further back in time and then discounting according to the general drop in value in the market.

In all probability the bottleneck will only be broken when buyers in the middle part of the market can no longer get what they are looking for and will be forced to move up and purchase in the higher end. This will only happen once there are no longer bargains to be had due to short-sales, foreclosures and motivated sellers, in the lower and middle parts of the market. In the meantime, sellers of high end homes, don’t hold your breath.

Thomas Harding is a broker with Greg Didden Associates.

If I tell you the good news, will you forgive me? Or should I start with bad news, so that you will trust me more when I say that things are getting better?

Okay, here’s the bad news: Appraisers are struggling to find the value that has been agreed by buyers and sellers. This is causing real heartache in the market, and many a decent contract has been tripped up in recent months because the contract value is higher than the appraised value. As soon as sales pick up, which they are, a wave of comp(arable)s will hit the market and the appraisers will get the raw data they need to make everyone—buyers, lenders, sellers, realtors—happy. That wasn’t too bad, was it?

Now for the good news.

You may have heard on the radio that housing starts and the construction of new homes have risen massively over the past month. You may have also read in the news that the sale of existing homes is also increasing, thanks in part to the federal tax credits that run out at the end of April. All this may have put you in a giddy mood when it comes to all things involving real property.

Well, here in the local Jefferson County market, things are also on the up. They haven’t looked so good in, well, years.

Take a look at Figure 1. This shows the number of residential homes that have sold in Jefferson County in the first quarter since 2003. Wow! Home sales in the first quarter of 2010 were way above those in 2007, 2008, and 2009, and almost the same as 2006.

Perhaps the best news of all is that in March 2010, 78 homes went under contract. That is an extraordinary number. The last time we saw this many pending contracts was in March 2006, just after the peak of the bubble. Clearly, the Pending and Sold figures go hand-in-hand. And the trend appears to be currently pointing upwards. But how long will this last?

The fundamentals appear strong in the local economy. Unemployment is stable, and perhaps even declining. Interest rates remain historically low. There has been a continued decline in the number of homes on the market. The month of March was no exception, with only 458 homes listed for sale, and this at the busiest time of the year for real estate. This marks the fifth month in a row for inventory to fall below 500 homes.

However, the federal tax credits for new and existing home-owners expires at the end of April, and this may have a dampening effect on the number of sales. But maybe not. Instead, the momentum that the credits created may have been enough to get the housing sector going and, like a car after a push-start on a downhill slope, now it will run on its own steam. Let’s hope that to be the case.

Another positive indication is that land and more expensive homes are now attracting offers. Indeed three $500,000 plus homes went under contract in March, and local realtors are reporting that buyers are, for the first time in at least two years, showing interest in buying land. That will be good news for all the developers out there, both large and small, who have been perhaps hit the hardest since the real estate market went down the tubes in 2005.

If you didn’t get a contract on your home before the end of April, as it says on the back of the Hitchhikers Guide to the Galaxy:
DON’T PANIC.

There’s plenty of life in this here local real estate market.

Thomas Harding is Broker for Greg Didden Associates and a licensed realtor in West Virginia

http://bdtonline.com/editorials/x537287722/Freedom-of-information-High-Court-must-support-public-s-right-to-know

The case centers on The Observer’s Freedom of Information Act request for the list of petition names collected in support of a vote on the Jefferson County Zoning Referendum, which took place November 7 2009. The County Clerk Jennifer Maghan refuses to release the names, citing privacy concerns, and her decision was upheld by Circuit County Judge David Sanders, who said that any document prepared by a private citizen group and given to a government body was not subject to FOIA.

The brief for the Shepherdstown Observer was written by Charles Town attorney Stephen Skinner of Skinner Law Firm and Patrick McGinley, Professor of Law, WVU.

According to the Amicus brief: “All of the records request in this case are public and should be released by this court under the WV Freedom of Information Act. It is irrelevant whether the public body created the record in the first instance… To interpret the statute as requiring literal physical preparation on the part of the public body would have far-reaching and devestating effects on the West Virginia system of open government and government accountability.” 

The Observer brief described the chilling effect if the Supreme Court upheld the Circuit Court’s ruling : “Interpreting the WVFOIA definition of “public record” as limiting public access to only those documents prepared by a public body would have the absurd result of excluding from public scrutiny hundreds of thousands, if not millions, of documents that have long been open to public examination. Were the circuit court’s interpretation of “public record” to prevail, documents such as deeds, wills, estate records, applications for environmental, business, corporate, voting, election campaign contributions and numerous other records of state agencies and commissions as well as local government bodies, would fall outside the definition of “public record.””

The Observer is a monthly newspaper based in Shepherdstown, West Virginia, circulated to over 25,000 in Jefferson County. It reports on state, local, and national politics, including long-form investigative pieces.

To read the Amicu brief click here: amicus brief

The Observer is asking the court to overturn the decision made by the Jefferson County Circuit Court that upheld the decision by Jennifer Maghan, County Clerk, not to release the names of petitioners who were calling for a referendum on a new zoning ordinance for the county.

The brief was written by Charles Town attorney Stephen Skinner of Skinner Law Firm and Patrick McGinley, Professor of Law, WVU.

To read the brief click here:

FOIA brief April 16 2010 Shepherdstown Observer to WV Supreme Court

by Thomas Harding

This is the second article focusing on the alleged sale of unqualified retirement plans to Jefferson County families. The first article concentrated on the impact on two families, the Kables and the Lloyds. This second article looks at how the scheme impacted five other local families, and provides an update on how the cases are progressing.

Quietly and without much fuss, the largest case in Jefferson County legal history is making its way through the local court system. It involves a small local firm, perhaps as many as 15 local families, and one of the world’s largest insurance companies. Almost every day a servicing agent walks through the tall white-paneled doors of 199 North George Street in Charles Town, waits to be checked at the metal detector by a blue-uniformed bailiff, turns left at the end of the corridor, right into a small hallway, and, at a windowed counter, hands over the latest in a series of complaints, briefs, counter-briefs, and orders. Welcome to multi-case litigation, Jefferson County style.

In 2008, local real estate entrepreneurs Marty and Carol Kable filed a complaint against their financial advisors Jim Nichols, Larry Logan, and George Fisher as well as the insurance company MassMutual. They settled almost a year later for an undisclosed sum. The same year, Charles Town farmers Glendwell and Jo Ann Lloyd filed suit against Nichols and his associates. MassMutual quickly settled with the Lloyds for an undisclosed sum, while the rest of the parties remain in litigation. Documents filed with the Financial Industry Regulatory Authority show that the Kables and Lloyds made claims against Jim Nichols and his associates for $4 million.

Since these first two suits were settled, five other Jefferson County families have filed complaints against Jim Nichols, his associates, and MassMutual. They include Todd and Eddie Hough, owners of a 1,300-acre dairy farm in Charles Town; John and Linda Kilroy, owners of ERA Liberty in Charles Town; Dr. Ray Vanderhook, who runs a well-known orthodontic practice in Charles Town; Philip McDonald, who for 27 years has owned and managed Rock and Tile, the stone and masonry store in Charles Town; and Irwin and Carol Asam, who run the popular Bavarian Inn on the banks of the Potomac River in Shepherdstown. The plaintiff attorneys representing all these families are West Virginia firm Hammer, Ferretti & Schiavoni  and Virginia firm Charapp & Weiss.

These seven Jefferson County families make very similar allegations: that they were encouraged to purchase insurance products to fund a 412i retirement plan by their trusted accountant Jim Nichols and his associates, that the plans he set up did not qualify according to the IRS rules, that Nichols and his associates never told them he and the others were making commissions on the sale of the insurance products, and that they were not told that the 412i plans came with serious penalties if abused.

When asked about Jim Nichols, Irwin Asam said, “We worked with Jim Nichols for 29 years, and after so much time you hope to establish a very good relationship and trust. Somewhere along the way we were failed and misled. We are very disappointed.”

John Kilroy, who filed his suit in October 2009, says that he is not persuaded by Nichols’ defense that he didn’t know any better, and that he was relying on others for their expertise, particularly Bethesda-based Larry Logan. “We trusted Nichols. He was the expert. He recommended these products to us. We had no idea we didn’t qualify.”

Eddie Hough, who filed suit in March 2010, agreed with John Kilroy. “I would like to think that Nichols was hooked liked the rest of us. But he is too smart for that. He should have known something was fishy. He should have dug into it and protected his clients.” Hough added that he had done business with Nichols for over 30 years, but that now, “I would not trust him as far as I could throw him.”

It is likely that more families will file suit. During testimony in court on May 19,  2009, Nichols said that he had sold insurance products for 412i plans to 15 local individuals or families, and that these were all clients of his accounting firm Nichols Dehaven.

The Smoking Gun(s)

On October 1, 2009, Nancy Major, a pension administrator for West Pensions Solutions, was deposed by attorneys representing the 412i families. Major said her company realized that there were problems with the Jefferson County plans as early as 2006. She gave the example of the Asam family’s plan, which was run through the “Asam Family Trust,” an entity which she claimed did not, in fact, exist. Such “issues” caused such concern that a letter was drafted informing the Jefferson County clients of the problems. However, she said that, after objections from Larry Logan and George Fisher, this letter was never sent out.

The next smoking gun came in the form of a memo. In early 2008, Nichols’ lawyer John McCuskey wrote to Steven Robey, an accountant with the Charleston firm Arnett & Foster, asking for his opinion on the 412i cases. McCuskey wanted to see how bad the damage could be. It turned out to be very bad.

Robey wrote back on March 20, 2008, and included many of the findings that were later reiterated by the Kables, Lloyds, and the other families. Robey said the families may “lack suitability” for 412i plans, and that characterizing the sale of land as earned income was “problematic.”

More damning, Robey questioned the ethical behavior of Nichols and his associates:

 “The Lloyds filed an amended return in 2005 in which, among other changes, $210,000 was re-characterized from capital gains to earned income . . . The capital gain resulting from the installment sale was originally assumed to constitute earned income for purposes of funding 412i plan contributions. Under IRC 412c2c, earned income would appear to exclude the gain resulting from the installment sale of the farm.

It is our understanding that the accounting firm did not disclose the receipt of remuneration derived from the placement of the 412i plan. This is likely to be a violation of accountancy ethics provisions.”

The Robey memo was withheld by McCuskey for many months on the grounds that it was confidential client/ accountant correspondence. But McCuskey made a mistake. When the memo was shared with another of the defendant’s witnesses, tax expert Robert Teal, it lost its protection. At the start of Teal’s deposition in February 2010, McCuskey finally handed over the Robey memo to the plaintiff families’ lawyer. At last the families had the smoking guns they had been looking for.

The Scale of the Problem

In 2004 the IRS found that 412i plans were being misused across the county by financial planners to provide their clients with illegal tax shelters. They announced a ruling that the plans would be characterized as “listed transactions.” As such, their risks must be disclosed to each client. One consequence of the 2004 ruling was that individuals and companies participating in 412i plans had to report their involvement each year on a Form 8886. The fines for not submitting these forms, called a “6707A Penalty,” were staggering: $200,000 per company per year and $100,000 per individual per year. Worse still, even individuals who had no knowledge that they were taking part in a listed transaction were still liable for the 6707A penalties—even if they were misled by their financial advisor. There were to be no exceptions or appeals.

A major problem facing the Jefferson County 412i families is that it appears that their accountant failed to report 8886 forms at all. If true, this would expose the families to the mandatory penalties.

According to John Truban, a Winchester-based accountant working with many of the 412i families, the IRS penalties could quickly add up to enormous sums. In a letter dated February 23, 2010, Truban told the Lloyds that their estimated total losses—including the income tax, estate tax, and penalties due because of the 412i plan—could be more than $4 million. Using similar assumptions this could mean million-dollar-plus losses for each of the families.

Luckily, the IRS has recognized what has become a nationwide problem of abuse by financial advisors. In December 2009, the IRS imposed a moratorium on the 6707A penalties. This moratorium has recently been extended until the end of June 2010. According to Floyd Williams, director of the IRS Office of Legislative Affairs, Congress will soon change the law so that “the penalties for families that have been duped by accountants [selling 412i plans] will be dramatically lessened.” He said that he expected the new rules to become law sometime later this year. The impact of these IRS rule changes on the Jefferson County families is uncertain.

The Net Widens

The first suits were targeted at Jim Nichols, Larry Logan, George Fisher, and MassMutual. Recent suits have included staff at Nichols DeHaven including Julie Dehaven and Kelly Parsons, individual employees of MassMutual, and agents and officers who work for West Financial Group.

West Financial Group (WFG), based in Bethesda Maryland, was managed by Alexandria West. It was through WFG that Nichols, Logan, and Fisher sold insurance products to the Jefferson County 412i families. Yet according to the West Virginia Insurance Commission, WFG is not licensed to sell insurance products in West Virginia. And, according to the Secretary of State’s office, it is not registered as a business, and therefore paid no taxes. The complaints filed by the 412i families also allege that Alexandria West owed over $1 million dollars to the IRS for tax liens and other civil judgments, which “compromised her duty to place her client’s interests above her own.” Yet she continued to sell insurance products for MassMutual until mid-2009.

If Jim Nichols was the guy who made the introductions to A-list clients in Jefferson County, Logan was the person who could make the pitch. Lawrence Hugh Logan became licensed in 2003 to sell insurance in West Virginia. He was working as a general agent for WFG, and sold insurance products under MassMutual. In its response to complaints brought by the families, MassMutual has admitted that it was aware there had been many consumer complaints made against Logan, and that the company had placed him under special supervision in June 2007. Yet until Logan’s termination by MassMutual in April 2009, it was Logan that Alexandria West trusted to sell the 412i plans to the unsuspecting families in Jefferson County.

MassMutual is a huge company, more than capable of defending itself against farmers, store-owners, and realtors from West Virginia. In September 2009, MassMutual laid out its defense to the West Virginia Insurance Commission: 412i plans are created, designed, and administered by a third party administrator (TPA), and MassMutual is not a TPA. But a jury might find this attempt at distancing hard to stomach. MassMutual’s marketing materials show it promoting “business alliances” with TPAs through an “integrated service model.” In addition, in a March 2009 press release, MassMutual claims, “The TPA market is a key element of MassMutual’s growth strategy and we are fortunate to be in a strong financial position that enables us to continue to invest in helping TPAs and intermediaries.”

In an email to The Observer, Mark Cybulski, a MassMutual spokesman, said, “With respect to the lawsuits filed regarding alleged retirement plans established under Internal Revenue Code Section 412(i), it is important to emphasize that there are no allegations that MassMutual has failed to honor the terms of existing insurance policies or annuity contracts. We believe that the allegations against MassMutual are without merit and we intend to vigorously defend ourselves.”

As the case develops, and the stakes grow higher for all concerned, inconsistencies are starting to emerge between the defendants. While MassMutual states categorically that Nichols and Logan were not their statutory employees, Logan and Nichols have contended in their suits that they were. Similarly,  MassMutual states that Marie Ann Chio at WFG was the supervising officer in charge of Logan, but Chio says that she was not the supervising officer. She was, she says, merely “assisting” in the supervision of Logan.

It is not clear what, if any, penalty will be meted out to MassMutual as the families bring their lawsuits to a close. But if judgments are made against MassMutual, there is plenty of money in the piggy bank. According to their 2008 report to the West Virginia Insurance Commission, MassMutual made over $8 billion in profit and held assets of over $114 billion.

West Virginia Commissions

Four Jefferson County families have sent complaints regarding Nichols and his associates to the West Virginia Insurance Commission. Two of these complaints were made over a year ago. At the close of March 2010, the commission has not sanctioned any of the parties involved in the alleged 412i scam. When asked if they are conducting an investigation into this matter, Victor Mullins, associate counsel for the West Virginia Insurance Commission, said that as a matter of policy they do not disclose whether they are investigating any complaints, and that the lack of a decision either way should not be read as an indication of the final result.

This softly, softly approach may come as a surprise considering a statement by Jane Cline, president of the National Association of Insurance Commissioners and West Virginia Insurance Commissioner. At a meeting of state insurance regulators earlier this year, she said, “Providers who engage in fraud, waste, and abuse should be decertified, and insurers must adopt antifraud plans under the guidance of state regulators.”

Meanwhile, the West Virginia Board of Accountancy, whose members are appointed by the governor, is actively looking into the allegations. Jo Ann Walker, the board’s executive director, said that at least four Jefferson County families have filed complaints regarding the sale of 412i plans by Nichols and his associates. She confirmed that the board has now opened an investigation into the matter, and will deal with each of the cases as a group if it is found that the matters are related. When asked how long the investigation would take, Walker said, “I really don’t know. These cases are different from any we have ever seen before in terms of magnitude and number of complaints. It is therefore hard for us to say how long it will take to complete the investigation.”

On April 22, 2009, Logan was terminated by MassMutual. In May 2009 Fisher and Nichols were terminated by MassMutual. In the summer of 2009, Alexandria West’s license to sell MassMutual insurance products was terminated. Larry Logan (#426429), Luther Jim Nichols (#200067), Alexandria West (#426750), and George Fisher (#95789) are still licensed to sell annuities and insurance in West Virginia.

According to one of the assistants working in the Jefferson County Circuit Court’s office, there are already over 55 green legal folders piled up in the court’s vault on George Street in Charles Town. “Every day it seems an attorney brings another file in to us,” she said. “When taken together, this is the largest case we have ever seen.”

Seven families have now filed; others may well file soon. For the moment, at least, more servicing agents carrying briefs and complaints related to the 412i cases are likely to walk through the doors at 119 North George Street. The work of the county clerk’s office doesn’t appear to be coming to an end any time soon.

Editors note: Until 2009, Jim Nichols and Nichols Dehaven provided accounting services to The Shepherdstown Observer, Inc., and to the author of this article. Despite repeated requests, with the exception of MassMutual, none of the defendants nor their lawyers provided statements for this article.

To read the first part of this article go to Alone-in-the-end

Key

412i – A tax-qualified, defined benefit pension plan for business owners and their employees that must be funded with a combination of life insurance and annuities, or annuities alone.

8886 Form – An IRS form that families involved with 412i plans must report each year

6707A Penalty – Substantial penalties imposed on people who don’t file 8886 form when they should

Jim Nichols – CPA and insurance agent in Charles Town, West Virginia

Nichols Dehaven – Charles Town accountancy firm run by Jim Nichols and Julie Dehaven

Larry Logan – Former President, West Pension Solutions, and agent for West Financial Group, Bethesda, MD

George Fisher – Jefferson county insurance agent who worked with Jim Nichols

Alexandria West – General Manager, West Financial Group

West Financial Group – A Bethesda based company through which insurance products were sold.

West Pensions Solutions – set up by Larry Logan, sold to Alex West in 2006, acted as a Third Party Administrator and managed the 412i plans.

MassMutual – Giant insurance company who sold insurance products through West Financial Group in WVa

Hammer, Ferretti & Schiavoni – West Virginia attorneys who represent 412i families

Charapp & Weiss, LLP.  – Virginia attorneys that represent 412i families

Photos by Seth Freeman

By Thomas Harding

This month I intend to overwhelm you with data . . . so strap on your seatbelts and let’s go for it.

First, let me introduce a new statistic to my loyal readers: the ratio between homes sold (“solds”) and homes on the market (“inventory”). Let’s call this ratio the sold/inventory ratio.

This ratio is often used by economists to determine the health of the real estate market. As you can see from Graph 1, the sold/inventory ratio was incredibly low in the months leading up to spring 2005. For every three homes on the market, one home sold. Those were pretty good odds for sellers and it made for a strong seller’s market.

Graph 1: Inventory/ Sold ratio in Jefferson County

Then Katrina hit in August 2005 and all hell broke loose in the real estate market. The actual moment can be clearly seen on this graph. The sold/inventory ratio spiked suddenly in August 2005, and kept rising through January 2009, when it reached its height: an incredible 25 homes on the market for every one that sold.

The good news is that the sold/inventory ratio fell in 2009, particularly just before the first-time homebuyers federal tax credit deadline in November. By that time the ratio fell below one home sold for every eight on the market. The ratio rose again in January 2010, but this should not cause great concern because the ratio always increases at this time of year.

With the extension of the federal tax credit for first-time homebuyers and a new credit for existing homeowners—properties must be under contract before April 30 and close by 30 June to qualify—combined with the better weather, I anticipate that the sold/ inventory ratio will fall again this spring, creating a chance for a more balanced market between buyers and sellers.

Another piece of good news from the historic data is that the worst is behind us. If we focus only on the number of solds that occurred over the past few years, we can clearly see that the market took a plunge after 2005. We can also see that the real estate market was far better in 2009 than in 2008 (see Graph 2). To me this looks like we are firmly in the upswing of a classic real estate recovery.

Graph 2: Jefferson County “solds” 2003-2008

So how were the sales in January 2010? Again we see more good news: a 50-percent increase in the number of units sold compared to the same period the year before, and a 22-percent drop in the number of days it takes for a house to go under contract.

Pending sales are significantly up, which should result in increased sales in February and March, and there was an increase in the percentage of sold price to list price from 87 percent to 93 percent. All signs of an improving market.

Table 1: Jefferson County real estate information January 2010

The bad news is that at $154,000, the average sold price in Jefferson County is now at its lowest level since January 2002 (see Graph 3). This really is an extraordinarily low figure, considering the average sold price back in January 2006 was $317,000.

Graph 3: Average sale price in Jefferson County

As I have said before, this is not cause for panic. Part of the reason for this dramatic fall in average sold price is that the lower-end home sales continue to dominate the market. But that is not the whole story. Home values have dropped over the past few years, especially because of the downward-price pressure resulting from all the short sales and foreclosures. Even Jefferson County’s typically conservative county assessor has recognized that values have fallen dramatically. She said that home prices in the county came down on average 17 percent in 2009.

So what does this all mean? With the warmer weather soon to be upon us, interest rates continuing at historic low levels, house prices falling, and, for a short time only, the federal government doling out wads of tax credits for home-buyers, the Jefferson County real estate market will be hot and happening in spring 2010.

Thomas Harding is Broker for Greg Didden Associates, Shepherdstown West Virginia: www.Greg Didden.com

Another year, another round of political battles in West Virginia. The filing period for the 2010 political races is now closed, and there are many interesting matchups. Here are a few of them.

West Virginia Supreme Court

Just over a year into his first term, Circuit Judge John Yoder is running for West Virginia Supreme Court. Yoder will run against in a special election incumbent Thomas McHugh, who was appointed interim Justice by Governor Manchin in 2008 after the death of Justice Joseph Albright.

House of Representatives

Democrat Virginia Lynch Graf of Charles Town will try to unseat U.S. Representative Shelley Moore Capito. A former nun and educator, Graf will have no competition in the Democratic primary. On her website, Graf says, “I’m sticking out my neck for WV, and ask WV voters to do the same for me.”

County Commission

In the Shepherdstown district, Commissioner Jim Surkamp has two formidable primary opponents in the Democratic primary: former federal prosecutor and Ruth McQuade and Paul Taylor, a Martinsburg lawyer. In 2008 McQuade was a candidate for Jefferson County prosecutor attorney. The Repubilcan candidate from the Shepherdstown District is Walt Pellish.  In the Charles Town district race, current Commissioner Dale Manuel does not appear to be facing any opponents at this time after challenger Derek Lambert filed a pre-candicacy but chose not to file his candidacy by 30 January 2010.

Jefferson County Clerk

County Clerk Jennifer Maghan has a surprising foe on her hands: Ronda Lehman. Maghan, who is also vice chair of the West Virginia Federation Young Republicans, may face a tough battle against Lehman, the organizer of an impressive grassroots petition drive to force a zoning referendum last year.

WV Senate District 16

Senator John Unger faces an challenger in Craig Blair, a four-term West Virginia Delegate from Berkeley County. In March 2009 Blair introduced House Bill 3007, which calls for random drug testing for recipients of federal-state assistance like food stamps, state assistance programs, and for recipients of unemployment compensation

House of Delegates

No Democrat filed to run against Delegate Tiffany Lawrence in the state’s 58th district. Blake Thompson was the sole Republican filed in this district. In the race for the 57th District seat, incumbent Delegate John Doyle has a primary challenger. Lori Rea, who is currently head of the Gateway New Economy Council told The Observer she had already raised considerable campaign funds and had formed a team of campaign volunteers. In the GOP, Elliot Simon will run against Donny Jones for the GOP nomination.

School Board

Five candidates have filed for school board: Laurie Ogden and Karan Townsend for the Harpers Ferry district, Mariland Dunn Lee and Scott Sudduth for the Middleway district, and Pete Dougherty for the Kabletown district.

Each New Year the Jefferson County Assessor sends notices to local property owners informing them of any increase in their real estate assessments. This year’s letters have been mailed, and they bring with them good news for most homeowners. Of the 30,000 parcels in the county, only 800 will see an assessment increase this year. The vast majority, perhaps as much as 80 percent, will see a dramatic decrease.

 Angie Banks, in her second year as assessor, says it has been a tough few months. “It has been a lot of work,” she said. “Some neighborhoods have seen many sales. Our assessors have found it shocking to see how much prices have come down in some of the communities.”

Banks says that the average drop in home value countywide was about 17 percent. Moreover, 171 of the county’s 222 neighborhoods saw a reduction in property assessments. The top three communities with the most reductions in values were Spruce Hills, Deerfield, and Mission Ridge, where homes values have dropped by more than 30 percent since a year ago.

The 2009 assessments are determined by comparing homes to properties that sold between July 1, 2008 and June 30, 2009. Banks said she expected continued falls in property assessments next year, given the data she has seen in the local real estate market.

What is the biggest reason for the drop in assessed values? For the first time, the assessor’s office has included foreclosures and short sales in their evaluations. This is a dramatic shift from previous years when staff refused to permit the inclusion of foreclosures, arguing that they were ‘distressed sales,’ and therefore not good comparables. This change in policy follows new instructions from the West Virginia State Tax Department, which has for the first time advised county governments that they can include foreclosures in their assessments in markets where foreclosures dominate the market—as is the case in Jefferson County.

“We were always told in the past not to use foreclosures,” said Angie Banks. “But now most of our market is foreclosure real estate sales. We have started including some of these, but not always. Sometimes they just don’t fit.”

The final tally of property values in Jefferson County will be made after the Board of Equalization has done its work in February, but Banks says she anticipates that lowered assessments would result in at least a $5 million dollar drop in total revenue generated from real estate taxes (if the levy rates remain the same as last year). This would result in a $600,000 hole in the county budget.

“We will have no choice but to increase the levy rate,” said County Commission Frances Morgan. “The state code says that we must maintain county revenue at 101 percent of the previous year’s value. We do this by increasing the levy rate.”

But not everyone agrees with this view. Commissioner Jim Surkamp believes that the commission has discretionary powers regarding increasing the levy rate.

Mark Schiavone, the interim county budget head, is also not sure that levy rates must automatically be increased. He says that the tax department says that the commission can choose not to raise the levy rate. “We know that there is a cap,” said Schiavone. “If we had to increase the county levy by seventeen percent this year to make up for lost revenues we would not hit that cap, but we might in future years if the drop in real estate values continues.” He added that the county portion makes up only 14 percent of the real estate taxes paid, so even if the commission increases the levy, most people should see a drop in taxes— so long as the school board does not raise its levy.

Property owners in Jefferson County can appeal their assessments even if they do not receive a letter from the county assessor and even if their values remained the same or fell from the prior year. Applications for review must be submitted by noon on 12 February 2010.

Thomas Harding is a licensed realtor in West Virginia and broker for Greg Didden Associates, Shepherdstown.