If you read the paper, watch the television news, listen to the radio or check the internet you’ve inevitably read about plunging property values around the country. In the past couple weeks I’ve heard from some folks wondering whether their property taxes will go down. While I try to avoid equivocation the answer, in this case, is a definite “maybe.”
We live a sound-bite culture and one such comment about which I have grown fond is, “plagiarism saves time.” Not that I’m inclined to take credit for other’s ideas, but I am happy to admit that I can learn from others. Given that, below are excerpts from two e-mails I’ve received on the topic of property taxes:
Has anyone raised the issue now on the decrease of assessments for the next Budget cycle? With homes selling for ten to twenty percent less in the past year, are you preparing to have a budget that will at least cut the assessed values and therefore the taxes next year?
What will happen to my property taxes when the housing market reacts to the events going on in our country? I have already seen a drop in local house prices (before Wall Street) and am wondering when I will see that reflected in my property taxes? How often do they assess property and house values?
In my efforts to be a good public servant I replied to both inquiries. Readers will likely be unsurprised to learn that Sharon Weddleton, MOA‘s Chief Financial Officer, provided a better and more complete answer which, in keeping with my affection for the above-mentioned quip, is posted below:
Thank you for the opportunity to discuss assessed valuations and the impact valuation changes have upon property taxes.ValuationsReal estate values are adjusted every January based on local market data. The assessor uses sale prices and other information such as listed prices, foreclosure activity, and employment data to follow the local market for homes and other real estate. All of this information is taken into consideration in the annual assessment for property tax. The value of all real estate does not move in the same direction at the same time. While most real estate values increased in 2008, some did decline. We are watching the market closely at the present time and will reflect what has happened when we set the assessed value in January, 2009.AssessmentsProperty taxes do not change in the same way as the assessed value. Rather than being based on assessments, taxes are allocated on the budget required to run local government. The budget is changed based on all sources of funds including revenue from the State, with the tax rate being set by the Assembly each April. Assessed values are used to distribute total property tax to all property owners based on the relative value of their property.What this means is that generally, if assessments were to drop overall, the approved budget would be spread over less valuable properties. Thus, the mill rate would increase and property taxes would be effectively unchanged.
Property assessments will be among the many factors we need to consider in crafting the next municipal budget. Other items will include increased utility costs, increased fuel costs and overall inflation. The “Alaska Economic Trends” report released in August will be one of the many data sources I use to help inform my thinking on appropriate revenue projections.
There is certainly a possibility assessments may come down a little, though some segments of the market are actually up and I’m not enough of a real estate expert to ascertain how that will balance out. It’s also important to keep an eye on where we (the Assembly) set the mill rate. A lower assessment coupled with a slightly higher mill rate would land you in roughly the same place.
As we delve further into the budget I’ll try to keep you updated. In the meantime if you have ideas for saving money or focusing on important municipal functions I welcome your suggestions!
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