Thursday, October 9, 2008
The Tax Man Cometh
This week's Oconee Enterprise has a front page story on the tax assessor's office and the 640 protests it received that defies belief. Check out this quote and the excerpt that follows:
"People thought that with the economy on a downslide, their taxes would go down. Only house values have held, so taxes have remained much the same or edged up," Skinner explained. These days it is possible to buy a house in Oconee, which many could not afford before, because developers are reducing the prices on new houses considerably and homeowners, eager to sell their property, are reducing prices." In other words, Oconee County houses are holding their value.
What? The story just said that in the market, prices are being lowered, and this is obvious to anyone who is looking at new homes in Oconee. The only one who sees the value holding is the government.
A quick look at the handy Q-public site shows that the houses that are selling are indeed doing so for more than they were a few years ago. This makes sense. Only someone who is desperate is going to sell their home for less than they paid for it.
But overall, sales are down (according to the Enterprise, which cites this as one of the slowest years for real estate sales in a long time) and that is the key. There is nothing that I can find in the assessor's office methodology that measures how many people either 1) choose not to sell because they don't think they can get the value out of their homes 2) have to leave their house on the market for a long time to get the value out of it or 3) put their homes on the market and never sell it because they can't get the asking price.
Here's my example. Earlier this year, a rental property I own in Watkinsville was reassessed aggressively for the second year in a row. The first year it was understandable -- I had made significant improvements to the property, particularly inside. The housing and rental market were strong.
The second year, I had done little to the house and there was noticeable softening in the local market. I sent a letter of protest referencing the busy street it was on, an abandoned home next door, and the lack of comparable product. The tax assessor's office promptly sent someone out to look at the property and guess what -- they "discovered" a patio that had been there since the home was built more than 30 years ago, and they actually increased my assessment. Unbelievable -- I was punished for protesting!
When I talked to the assessor, he asked if I thought I could sell it for the assessed value. The year before, sure. Now, with tight credit, conservative banks, etc? I told him I doubted it.
Look, as a city councilman I understand the pressure on local governments in a very real way. The state is basically abandoning local governments at almost every level, whether it is education, infrastructure, etc. The latest target is transportation, where the GDOT board has decided that rather than lay off any of its bureaucracy, it would rather abandon the Local Area Road Paving (LARP) program, which is critical for local goverments. Thank goodness legislators are declaring that idea DOA.
In short, the pressure on the board of education, county, and city to maintain a certain level of service is tremendous. But the assessments in Oconee, in my opinion, are out of control.
The most plausible reasoning I have seen for holding the line on assessments was in the Dallas Morning News last spring. Their point is that the impact of declining property values runs about one year behind because assessors pull previous years comps to establish values. These lower prices are then reflected on the next year's assessments.
But I don't think we'll see lower prices in Oconee. I think we may have a market that stays quiet until prices come back. And this should be taken into account in assessments. It isn't about what sells, it's about what isn't selling.
Local leaders -- or state legislators if need be -- need to consider a change in methodology to account for a lack of buyers in the market, or expect an even larger taxpayer revolt -- next year, 640 protests may be a drop in the bucket.