District Attorney General Russell Johnson has confirmed his office, in conjunction with the Tennessee Bureau of Investigation, is investigating allegations Doyle Arp gave developer Mike Ross a “developer’s discount” on appraised property in the Rarity Bay development. This allegedly occurred in 2005 when Arp was the county’s property assessor; he is currently the county mayor.

“There is an investigation going on that issue, and on other issues that have come up as a result of it, by our office, being assisted by the TBI,” Johnson said. “But it’s a fairly involved process with the information we’re getting. So it’s not anything I would expect a resolution on any time soon.”

Johnson said his office is also looking into other possible irregularities at Rarity Bay properties where there are allegations the company inflated the values of its lots on the deeds and/or possibly some forgery of documents and changing values of lots on deeds. “That’s giving us concern,” Johnson said, adding the investigation into the allegations of forged documents was a direct result of the original investigation. 

Speaking of the allegations against Arp, Johnson said, “The question is if he treated similar property differently” to give a friend a leg up or in exchange for money or favors “which would clearly be illegal.” He also noted the case is not as clear cut as some may think, citing three lots in Rarity Bay that he discovered had a sandbar which prevented the owners from having a dock, which in turn devalued those lots by 20 percent.  Johnson also noted that investigators have not even spoken to Arp yet to get his side of the story. He added that since Arp is so well known to him, other investigators would conduct the interviews with him. 

Johnson cautioned that the investigation is very complicated and involves he and the TBI having to look at almost every lot and pulling those deeds in order to judge if an assessment is unreasonable, a task made even more difficult by the very nature of appraising property.

“Appraisal is not an exact science,” Johnson said, using the example of a divorcing couple with each having an appraisal of their house only to discover two appraisers find something different using the same information. 

In any event, Johnson is bound by the law, which reads that the property assessor is the final decision maker when determining an appraisal.

“Arp was the property assessor and he is the one ultimately charged with making the assessment,” Johnson said. He noted that while appraiser Jane Smith was “the person on the ground doing inspections,” even if Arp went back and changed it “he was her boss” and the final decision was within his discretion.

Johnson said he had traveled to Nashville to meet with the TBI to discuss the matter and determine a strategy on how to proceed. He said a lot hinged on what can be proven - if Ross asked Arp to lower the assessments, if Arp’s son being an employee of Ross’ influenced Arp’s appraisals, or if money changed hands - all things that are difficult if not impossible to prove. Johnson said unless one of the parties confessed such a thing or there was a witness or some documentation found, even though it might not look good there is little to prosecute.

“There has to be a paper trial, or some sort of proverbial smoking gun — we haven’t found it yet,” Johnson said, adding it was still very early on in the investigation. 

There also appears to be very little that can be done in the way of penalties. “He [Arp] is no longer the property assessor so you can’t use the statute that provides for a hearing before the board of equalization where they could assess a civil fine or they could even withhold his pay as property assessor,” Johnson explained. 

Johnson noted the alleged incident happened in 2005 and any charges would be an E-felony and since E-felonies carry a one-year statute of limitations, it is too late to charge Arp or anyone else. Johnson said he was getting a lot of phone calls, including calls from county commissioners, about what his office was going to do about the situation. “We’ve got to follow the law,” he said. “Official misconduct can only be charged by a grand jury.”

Complaints from an unhappy property owner led to the original controversy. Loudon County Property Assessor Chuck Jenkins said his office began looking into the situation after Frank Renkel, a Florida man who owns a lot in Rarity Bay, contacted his office questioning why his land was assessed at $800,000 when other lots in the upscale subdivision - lots located on the same peninsula and some featuring more water frontage - were assessed at only $500,000 in 2005. 

According to Jenkins, after researching the lots in question, he discovered approximately 178 lots were owned by Ross or companies associated with Ross. Jenkins said Ross’ lowered appraisals totaled more than $11.6-million. 

Jenkins said records in his office show the majority of the lots, still owned by Ross’ Tellico Lake Properties, which had not already been sold to an individual owner, had been appraised at $800,000 in April 2005 but those appraisals were reduced to $500,000 weeks later. He also said any such reappraisals should have been conducted by the usual process and should have the proper documentation to justify the change, none of which is on file in his office. According to Jenkins, the changes were made in May of 2005 after the original appraisals were already completed. Jenkins said the way the changes were done in a single day and the lack of proper documentation made these transactions appear irregular. 

Arp has said the reappraisals were done on a case-by-case basis and many were requested by individual property owners. He also said he took into consideration the level of completion of the subdivision including whether or not the roads were paved at the time of the assessment. Jenkins said that while there were still some unpaved roads in the subdivision, the majority of the infrastructure was complete at the time of the assessment and should not have affected the appraisals to such an extent. 

Jenkins said he contacted the state comptroller’s office for advice on how to proceed and he was advised that his only recourse was to fix the incorrect appraisals his office had found for 2008 or wait for the 2009 reappraisal year. He said he decided to re-appraise the properties to recoup as much of the amount as possible. 

According to Jenkins’ calculations, approximately $11.6-million in total appraised value was cut from the 178 lots in Rarity Bay. These cuts saved property owners — including Ross — more than $132,000 in property taxes that cannot be recovered, Jenkins said. The office has been able to straighten out the appraisals and now has them corrected for the 2008 tax bills, Jenkins added.