Weak real estate market causes tax bill blues

[Charles Brown <cbrown@xxxxxxxxxxxxxxxxx>]

Weak real estate market causes tax bill blues

Many owners say values are inflated


http://www.freep.com/apps/pbcs.dll/article?AID=/20070306/NEWS05/703060306/10
07/

March 6, 2007
BY GINA DAMRON and JOHN WISELY
FREE PRESS STAFF WRITERS
Dave Bean has had it with the more than $18,000 in annual taxes he pays on
his 1946 colonial in Birmingham.
By the city's calculation, his Chesterfield Avenue home is worth about
$900,000, a figure he says is inflated because the city grouped it with
newer, multimillion-dollar homes nearby. He has an independent appraisal
listing the home's value at $665,000.
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Bean, 48, has fought his assessments unsuccessfully for four years, but he
hopes this year to reduce his taxes -- or at least halt any increase -- by
proving that he couldn't sell his home for its assessed value.
"It's frustrating," he said, "especially when you're trying to reduce your
taxes and you're getting nowhere."
Homeowners across metro Detroit have found themselves confused and angry as
they try to reconcile rising property tax assessments in the softest real
estate market in years.
Others in communities where property assessments have declined or remain
stagnant also have seen increases in their taxable value.
Many take their fights to their local boards of review, which hear appeals
from people who say their homes are assessed too highly, inflating their tax
bills. The boards, made up of fellow taxpayers, will meet this month, many
starting today, to hear the challenges.
Several municipalities throughout the region expect a boom in the number of
homeowners seeking relief.
Chances for victory slim
County equalization departments do not track the number of appeals made in
each community, but based on information from several cities throughout the
region, denials significantly outweigh the wins.
In 2006, for example, Southfield's board of review heard 103 residential
appeals and granted relief in 29 cases. And in St. Clair Shores, among 146
residential appeals, 45 were successful.
Though boards hear -- and occasionally grant -- hardship appeals for
fixed-income seniors and others with money troubles, homeowners need
concrete proof of their claims, such as lists of recent comparable home
sales, to sway a board's decision in their favor.
"If they don't come in with data that shows that their assessment is too
high, they, 99.9% of the time, won't prevail," said Rick Vincent,
administrator for the Oakland County Equalization Department.
Take Southfield resident Paul George. He has tried -- and struck out --
three times to challenge his property tax assessment.
The 65-year-old argued last year that the value of his 1,800-square-foot
home should be lower because it's next to an abandoned house and near a
noisy roofing company. He said homes in the neighborhood hadn't been
selling.
The retired maintenance supervisor, who has lived in his Southfield home
near 8 Mile and Evergreen for 42 years, said he'd likely appeal again this
year to try to lower the $1,800 annual tax bill.
Proposal A to blame
In line with the inflation rate, the taxable value of homes will rise 3.7%
this year, which is the largest increase since 1994, when Michigan voters
approved Proposal A, a tax-limitation law.
This year's increase is the maximum allowed under Proposal A, which was
designed to limit assessment increases to no more than 5% or the rate of
inflation, whichever is less, and prevent people from being taxed out of
their homes.
"It seems counterintuitive for most people" that their taxes would go up as
their property values decline or remain stagnant, St. Clair Shores City
Assessor Scott Vandemergel said.
"It's almost as though it's insulting to them," he said.
But with Proposal A, it actually makes sense. Assessed values had been
rising rapidly until recently, when the housing boom ended. Meanwhile,
taxable values were rising at a much slower rate thanks to the Proposal A
caps. But now, assessment increases are slowing while taxable values
continue to rise at the rate of inflation.
Vandemergel said St. Clair Shores -- where home values decreased an average
of 2% -- typically sees about 150 residential challenges over three days of
appeals. This year, that number likely will double, he said.
In St. Clair Shores, Cynthia Molnar may challenge her 2007 property
assessment, which valued her house at $193,300 -- an increase from the
$186,000 it was valued at last year before she won an appeal and got it
knocked down to about $177,000. Still, the 40-year-old said she saved only
about $100 in yearly taxes.
Molnar said she was successful because she presented the board with an
independent appraisal and information on about eight sales of comparable
homes in the previous six months.
Like St. Clair Shores, a higher number of appeals is expected in Birmingham,
where there has been some controversy over methods used by city assessors
for assessing the value of land, said Dan Teahan, a Birmingham Realtor and
member of the city's board of review.
Teahan said the board of review is to begin hearing appeals today and have
sessions on Monday and March 13. Dave Bean will be there, carrying an
independent appraisal showing his house should be valued at about $665,000
-- almost 30% lower than the $900,000 at which the city values his home.
Bean said determining what to take to an appeal has been daunting. He said
that many arguments he -- and his property tax attorney -- thought were
valid were dismissed.
"We still feel many of our arguments are valid and will keep trying," said
Bean, who has taken his 2006 assessment to the Michigan Tax Tribunal, an
administrative tax court where residents and businesses can sue over tax
disputes.
Some success stories
The process has been much smoother for Livonia resident Annette Bowden. The
53-year-old, who has lived in the city for 28 years, was granted a hardship
relief last year after proving that she and her husband, Wilson -- both
disabled -- were struggling to pay their annual $3,300 in property taxes.
The board of review reduced the taxable value on her home by $36,000, a
change that saved the couple more than $1,200 in annual property taxes.
"I was nervous before I went in there, but they were very cooperative,"
Annette Bowden said. "They were very sympathetic, and they shook my hand."
Like the Bowdens, Judy Jividen of Trenton received a break because she works
only part time and is raising her 13-year-old granddaughter. The 56-year-old
received a hardship relief last year.
This wasn't new to Jividen, who had received similar tax breaks in the early
1990s after her husband died. This year, she said all she has to do is fill
out paperwork, mail it to her city assessor and wait for results.
William Porter, 75, of Birmingham said he's worried about how the
assessments will affect housing sales, especially for senior citizens.
"If I go to sell my house -- and a lot of older people such as myself are
thinking of doing that in the next few years -- the new buyer has to pay
taxes at a rate that's wildly more than the house is worth," said Porter,
who has lived in his house since 1961.
That, Teahan said, is why homeowners should challenge or at least check
assessments before selling. Even more so, it's critical for a new homeowner
to try to get relief the first year they buy the property.
"It provides a blueprint" for future appeals, Teahan said. "It's a good
thing."
Contact GINA DAMRON at 248-351-3293 or gdamron@xxxxxxxxxxxxxx Free Press
staff writers Julie Edgar and Korie Wilkins contributed to this report.
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________________________________________
rrieth1

JonM.

You state: The disparities that now exist are due wholly to local millages
that supplement the state's funding.

Reply: Local school districts are not allowed to run milages to raise
incremental funds for anything other than building and infrastructure costs.
There is a minimum per pupil spending amount (the $7,000 you indicate and an
initial override amount that previousley existed which is not even indexed
for inflation). That is it period. Proposal A resrticts additiona milage
activity. This is very clear in Prop A.

You state: You're contradicting yourself. How do yuo expect the State to
ensure minimum funding if the State doesn't control school funding?


Reply: The state collects various taxes from us in a variety of different
ways (sales, income, PPT, SBT, property,gas, liquir....). Part of their role
is to provide funding for those districts who have inadequate funding
(rural, depressed area) from these tax $. They do not need to control local
school district funding to the degree they have under Prop A. If a local
school district wishes to fund their local neighborhood school in a manner
the exceeds the state minimum level via local tax dollars they should be
allowed that option. I do not see the contradiction the you raise, so please
help me out.

You state: Wrong. The State has established a minimum amount of spending.
It's called the foundation allowance. This year the foundation allowance was
a little over $7,000 per pupil. The State guarantees that districts will
receive at least that amount per pupil. Hence, it is not a cap

Reply: You are incorrect. The per pupil minimum is correct. The local school
districts ability to raise excess funds thru local actions is in fact
limited under Prop A. Please do your research.

You state: Not at all. In fact, it is State representatives like Rick Jones
(R-Grand Ledge), Paul Opsommer (R-DeWitt) and Brian Calley (R-Portland) that
would require equal funding for all school districts beginning in the 2018
school year, not Prop A.

I could live with a set amount of per pupil funding as mandated by the state
of MI (say $7,000 per student) if we were to change to a flat property tax
per household (i.e. every household pays a flat and equal amount). The
current Robin Hood plan does not work and is not sustainable.

Posted: Tue Mar 06, 2007 1:17 pm
________________________________________
JonM.

rrieth, "* Not sure the breakdown of sales tax vs. property tax."

Thanks for acknowledging that.

"When a homeowner experiences a Pop-up in taxes like the Birmingham guy ...
the windfall does not stay in the local community in which is was collected
it goes to the state."

How do you know this?

"However this disparity should never have existed. It is the states
responsibility (in my mind) to make sure that school districts are funded at
a certain minimum level."

The disparity was hardly a surprise given that property values and tax
levies varied widely between districts. Hence, whether it should have
existed is quite irrelevant.

The State cannot ensure a minimum level if school funding is based only on
property tax levies. The State now is ensuring a minimum per pupil funding
level for every district. The disparities that now exist are due wholly to
local millages that supplement the state's funding.

"* Control over schools meaning funding."

Now you've confused me. At the same time you're arguing that the State
should ensure a minimum amount of school funding for districts (which the
State now can do under Prop A), you're bemoaning the fact that local control
has been ceded because funding is not determined locally. Which is it?

"It is restricted by the state under Prop A."

How so?

"There are ways to control annual increases thru caps and indexes."

Which is what prop A was...a cap and/or indexed to inflation.

"Caping taxes for some while significantly elevating taxes for others is no
solution."

It's a solution to the problem of out-of-control property taxes where the
State must ensure that property taxes keep up with increasing assessments.

"Prop A with the Pop-up taxes is in second place. Talk to your friends and
neighbors who have moved in the past 4-5 years."

I guess...if you say so. And I already commented that I know several couples
who took into consideration the pop-up in taxes and rather than buying the
biggest, most expensive piece of property they could afford monthly mortgage
payments on, they bought smaller homes knowing that the pop-up would affect
them. The pop-up ain't depressing the state's real estate market to the
degree you think it is. The state's economy is the primary driver, period.

"* Loss of control in the schools. Again local schools have no control over
how they are funded."

You're contradicting yourself. How do yuo expect the State to ensure minimum
funding if the State doesn't control school funding?

"The state under Prop A has imposed a per pupil cap."

Wrong. The State has established a minimum amount of spending. It's called
the foundation allowance. This year the foundation allowance was a little
over $7,000 per pupil. The State guarantees that districts will receive at
least that amount per pupil. Hence, it is not a cap.

"Funds beyond that cap amount cannot be raised even if the local taxpayers
wish to fund more."

That's increasing, because Jefferson schools in Monroe County has $11,396
per pupil and the Bloomfield Hills school district in Oakland County has a
foundation allowance of $12,220 to work with. I wonder where that additional
money came from...

"Prop A will drag all of our schools down to the lowest common denominator,
whith the beurocrats in Lansing holding the checkbook!"

Not at all. In fact, it is State representatives like Rick Jones (R-Grand
Ledge), Paul Opsommer (R-DeWitt) and Brian Calley (R-Portland) that would
require equal funding for all school districts beginning in the 2018 school
year, not Prop A.

Posted: Tue Mar 06, 2007 12:35 pm
________________________________________
RyeToast

"Elneenya, I would consider having your May '06 appraisal updated. The
comparative sales in your area have likely gone down since then, and the
company who did the appraisal should be able to plug in the new numbers and
fresh date for a nominal fee. But beware, even if the numbers look like they
will help you out now, appraisers are calculating SEV's working from market
values two years past. You may not get any relief on your first go-around
but don't let that stop you."

all in all not bad advice.

That being said, yes Assessors typically utilize a 2 year sales study as
mandated by the STC/Assessors Board - however, many have the option, and
have elected to utilize a one year study instead, which typically would
assist the property owners in a declining market such as we have now.

Also, one should be aware, that while the Assessors in preparing their
analysis have fairly strict guidelines to adhere to with respect to how they
conduct their mass appraisal/analysis - the local March Board of Review's
responsibility is Market Value as of "Tax Day" - that is December 31st. IF
an appellant has access to information, including for sale by owners, etc.
or more recent sales (including early January sales that could be
back/date/adjusted) the local Board of Review SHOULD consider those facts as
well.

Given the "home rule" nature of this state - there are obviously some Boards
that are influenced heavily by their local assessors - whilst others are/can
be quite sympathetic to their tax payers. (many boards also have real estate
professionals sitting on them, and they are aware and able to pull current
listings/sales from their MLS system as well)

One thing that wasn't mentioned by anyone, is that not only are you
cautioned about not wasting $300 on an appraisal to save $1-200 in taxes,
but one should consider the gap between taxable and assessed.

Should the existing gap between taxable and assessed/SEV be so large, that
it may prove fruitless to spend the time/effort to appeal.

My home is an example of that. My taxable value is relatively low (not much
higher than my August 2000 sale price) and while I feel that my Assessed/SEV
is marginally too high based on recent sales, the gap is so large, that it
is not worthwhile to spend the time appealing (for me)

Posted: Tue Mar 06, 2007 11:17 am
________________________________________
rrieth1

JonM

* Not sure the breakdown of sales tax vs. property tax. When a homeowner
experiences a Pop-up in taxes like the Birmingham guy where the prior
homeowner may have been paying say $7,500 in taxes and it elevates to
$18,000, the windfall does not stay in the local community in which is was
collected it goes to the state.

* Prop A closed the funding disparity between well funded and poorly funded
districts. However this disparity should never have existed. It is the
states responsibility (in my mind) to make sure that school districts are
funded at a certain minimum level. They should not fund this thru a funding
scheme like Prop A that creates "Unequal Taxation" in other areas. Create
one problem to fix another.....

* Real estate in many MI communities has not been booming thru 2004. In
addition, the impact of the Prop A has sort of a lag effect. Many people
were not aware of the Pop-up and found out 12 - 18 months later. Sure they
should have known and their realtor should have told them.... If realtors
had been more proactive on this subject, the impact would have been more
swift and immediate. Another factor is that when the local auto economy is
doing well, people are less sensitive to this Pop-up in taxes. They don't
like it but may tollerate it.

* Control over schools meaning funding. Local school districts can only
raise excess $ for buildings. Meaning under Prop A schools get "X" dollars
per stundent for funding. If a local district wants to pay for more and
better programs in say special ed, foreign language, smaller class sizes,
etc... they cannot, even if the local residents want to pay for it. It is
restricted by the state under Prop A. Curriculums is a different story all
together, which the state has done a dis-service to. All they do is raise
the standards which no mechanism or plan for how to improve.

* Before Prop A assessments got out of control. That is why a change was
initiated. There are ways to control annual increases thru caps and indexes.
There are ways to keep taxes affordable for seniors thru credits etc.
without having a system like Prop A (which places a bandage on one area
while creating numerous problems elsewhere). There is no need to go back to
the pre 1994 days. There is a need for reform to Prop A.

* Prop A was one way to cap tax increases for some. It is not an equitable
solution. Caping taxes for some while significantly elevating taxes for
others is no solution. Why should homeowner "A" pay $4,000 in property taxes
on the same street in a similar value home with the same city services while
homeowner "B" pays say $9,500? This "Unequal Taxation" occurs in nearly
every community in MI today. Prop A moves the tax problem from one group to
another..

* The auto industry downturn is the main factor for a downturn in MI real
estate. Prop A with the Pop-up taxes is in second place. Talk to your
friends and neighbors who have moved in the past 4-5 years.

* Loss of control in the schools. Again local schools have no control over
how they are funded. Unfortunately, most everthing you wish to do in a
school district requires funding. The state under Prop A has imposed a per
pupil cap. Funds beyond that cap amount cannot be raised even if the local
taxpayers wish to fund more. Of course I am sure the guy in Birmingham who
is paying $18,000 in property tax is willing to pay more (even if the guy
next door to him is only paying $9,500). Prop A will drag all of our schools
down to the lowest common denominator, whith the beurocrats in Lansing
holding the checkbook!

Posted: Tue Mar 06, 2007 11:17 am
________________________________________
RyeToast

One reason why one might consider Prop A un-equitable in terms of shares of
property tax burden, is that it is now no longer "ad valorem" based.

Quite simply put, two identical houses, side by side (and let's face it,
that happens in many tract type neighborhoods in SE Michigan) may not pay
even close to the same portion of local/school taxes based upon one simple
reason. One was transferred at a different time than the other.

As for "awake" - you clearly slept through the portions of your appraisal
training/course work that dealt with "mass appraisal". You obviously also
have no earthly idea how local government is run/financed/budgeted.

re: the comments about the real estate market. One reason attributed to the
"bustle/boom" mentioned is that mortgage rates were at or near historic
lows. It's no secret that people were shopping for housing based upon their
perceived monthly mortgage payment - quite similar in fact to how people car
shop these days - many never look at the bottom line number, they're only
interested in the monthly payment amount (typically a lease). In essence,
the availability of cheap financing, combined with a partial ceiling on
property taxes led to people being able to "afford" more than they probably
should have.

Many folks made purchase decisions based upon what they could afford
monthly, with the intention of selling/flipping and/or other short term
influences

Posted: Tue Mar 06, 2007 11:09 am