Pros & Cons of Annual Property Tax Reappraisals
A bit ago… a county property tax official allowed in coversation that there were three good reasons to be for annual property tax revaluations, and there were three good reasons to be against. I thought that sounded like a great blog post and said, ok, I’m game, why don’t you get back to me on that.
So here we go, courtesy of a county property tax official…
Pros of annual property tax reappraisals.
Fair market value on any piece of property tend to change from year to year. It can move up or down, depending on the free market and economic cycles. The state constitution requires property to be assessed in proportion to value and Title 40 of the state code requires that on each October 1 all property gets appraised at fair market value. Thus it only makes sense to do this on an annual basis.- Annual revaluation brings Alabama in line with the overwhelming majority of states that already do this.
- Annual reval gets county appraisals closer in line to private sector estimates of property values. Taxpayer protests to the county boards of equalization decrease.
- Since property values in general tend to remain stable and usually increase to varying degrees each year, local and state governments benefit from incremental increases in revenue.
- The state of Alabama already reappraises utility-owned (Class I.) property and counties annually reappraise tangible business assets/property on annual basis. To reappraise some taxable property annually while others get reappraised less frequently creates inequity in the ad valorem process.
Cons of annual property tax reappraisals.
- The Alabama Revenue Department re-created unfairness in ad valorem by phasing it in over a four-year process. They ordered some counties (like Shelby, Jefferson, Lee, Autauga) to begin annual reval first, ahead of other counties like Clay or Tuscaloosa. ADOR should have given all counties three years to ramp up for annual reval then implement it in all 66 counties at the same time. (Montgomery County voluntarily began annual reval in the mid 90’s)
- Annual reval means higher tax bills for taxpayers, and it will hit the elderly and fixed-income taxpayers the hardest. The homestead exemptions, as provided in Title 40, Section 9 of the state code, have remained unchanged since the late 1970s & 1980s with no adjustments for inflation. Unless the state lege amends those laws, these exemptions will continue to diminish in real dollar value to all homeowners. As more people approach retirement age and begin drawing pensions, fewer taxpayers will remain qualified for extra homestead exemptions based on age & low income.
- It is unnecessary. There is no legal requirement to reappraise property annually. The code and the constitution are silent on how frequently to reappraise.
- Rural counties such as Randolph do not have adequate real estate volume annual to create a sample big enough for a meaningful sales study. Without enough sales, you cannot reappraise property fairly or properly and achieve equalization. Rural counties need at least 2, perhaps 3, years to get enough data.
Of course, the relevant question is, “Will legislation pass that takes us back to revaluations every four years instead of annually?”
“As long as Hubbert allies chair the relevant $$$$$$$$$$ committees, then any & all such proposals are gonna die a quiet death.” (Which fits with what I heard earlier this month.) So says the property tax official.
AP’s Phillip Rawls has a story this week on the lack of progress in rolling back the property tax reappraisal to every four years.
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With the downturn in the housing market, Alabamains may come to love annual reappraisals.
Comment by Susan — April 27, 2007 @ 10:16 am
Just kidding, but the relevant observation is that the ‘three good reasons for’ were reappraised to five, and the ‘three good reasons against’ were reappraised to four.
Thanks to the county property tax official for contributing.
Comment by Reactionary — April 27, 2007 @ 10:57 am
Property taxes are one of the few taxes that I feel are fair– at least to those who are not elderly and fixed-income. I hate seeing old people who own their homes and have no mortgage get kicked out of their homes because they can’t pay their ever-increasing property taxes. We’re also talking about rising costs because the area that they live in has risen in value. There aren’t any improvements to the home. Still, it remains my favorite way to pay for school systems.
Sales tax is another matter entirely.
Comment by ALmod — April 27, 2007 @ 11:28 am
Blame Riley. He ordered annual reappraisals. He changed it w/o the legislature. Let him change it back.
Comment by lm — April 27, 2007 @ 1:58 pm
Ouch, Susan. Maybe true.
Too funny, Reactionary. I noticed that, too. While the original comment was, “I can give you three good reasons to be for it, and three good reasons to be against it,” I guess our county official is an overachiever. Like you, I really appreciate the official taking time to think this through.
AlMod, have you seen It’s a Thick Book about our state’s constitution? There’s a good piece in there about which taxes are more logical and less logical to use to finance schools and other neighborhood/city services.
lm, I am willing to give Riley a break on this. My take, right or wrong, is that Riley’s job is to enforce the law, and he is enforcing it the way he understands it, which may or may not be right. Seems like if he was incorrect in his understanding, that there would be a successful court challenge at some point.
Comment by Danny — April 27, 2007 @ 3:09 pm
Another factor to consider is that the AEA will react poorly to any effort to reduce the tax revenue they help spend. Any legal challenge to annual reappraisals will meet well financed opposition.
Comment by walt moffett — April 28, 2007 @ 1:35 pm
[…] Also, fyi, several a months ago a county tax official outlined the pros and cons of annual property tax revaluations for the Political Parlor. […]
Pingback by 4 Year Property Appraisals Not That Easy » Doc’s Political Parlor — September 28, 2007 @ 10:04 am