"Preliminary assessments show housing values declining in all municipalities in Washtenaw and Livingston counties, the second consecutive year that the figures have fallen broadly.
"The city of Ann Arbor ... is down ... 5.8 percent. The city of Ypsilanti is down 11.9 percent."
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Falling values may bring a tax break
ReplyDeleteSaturday, February 14, 2009
BY JOHN MULCAHY
The Ann Arbor News
Preliminary assessments show housing values declining in all municipalities in Washtenaw and Livingston counties, the second consecutive year that the figures have fallen broadly.
While the decline - which is steep in some areas - may be bad news if you are trying to sell your house, the silver lining is that some local homeowners are going to see their property taxes go down.
The biggest assessment drop in Washtenaw County was in York Township, where values are down 22.9 percent compared to last year. Milan is down 22.7 percent and Ypsilanti Township, the second biggest municipality in the county, is down 15.6 percent.
The city of Ann Arbor, meanwhile, is down a comparatively modest 5.8 percent. The city of Ypsilanti is down 11.9 percent.
In Livingston County, the biggest drop was 16.1 percent in Conway Township. Assessments in the city of Howell dropped 12.6 percent, and in the city of Brighton the fall was 9.9 percent.
The preliminary assessment report is done by the county equalization office. The final assessments go out later this month or early next month.
That's when property owners will learn whether their taxes are going down or going up, depending on the rather complicated relationship of assessed, market and taxable values for a piece of property, and how that relates to state tax laws.
Here's how it works. Your home has a market value, an assessed value and a taxable value. Since 1994, the yearly growth in taxable value has been capped at 5 percent or the rate of inflation, whichever is less. That means that during the housing boom years, your tax growth was limited even if the market value of your house soared.
Now that housing values are falling, however, your taxable value doesn't automatically fall with them. In fact, if your assessed value - set at 50 percent of market value - doesn't fall at least to the previous year's taxable value, your taxes still will go up by the rate of inflation, which is 4.4 percent this year.
Taxable value will fall only when assessed value dips below the previous year's taxable value.
That's happening more and more.
Ypsilanti Township Assessor Sharon Frischman expects 70 percent of residential properties there to have lower taxable values this year, compared to about 40 percent last year and only 7 percent in 2007.
"I would imagine that if this trend continues, maybe everyone would have a tax decrease next year.'' Frischman said.
York Township Supervisor Joe Zurawski expects a widespread drop in taxable value in his township this year.
"I would be surprised if there are any residential parcels that aren't going to get a reduction,'' Zurawski said.
Zurawski attributes York Township's decline in assessed values to the many large, expensive houses that were built in the township in the closing years of the housing boom. When the bubble burst, many of them had very little gap between their assessed and taxable values, so taxable values began to fall with assessed value.
In Milan, where assessed values are down 22.7 percent, Interim City Administrator Ben Swayze said 1,230 of a total 2,502 land parcels in the city will have lower taxable values this year compared to last.
But in Ann Arbor, Mayor John Hieftje doesn't see an overall drop in taxable value this year despite a 5.8 percent drop in assessed value.
"This year, we look for taxable values to be flat and we expect them to go down next year,'' Hieftje said.
Dropping tax values, while usually a boon for the homeowner, create problems for municipalities that then collect less revenue.
On Feb. 4, Washtenaw County Administrator Robert Guenzel, in a report to county commissioners, sounded the warning signal about what that means for providing county services. According to Guenzel's report, the county will spend $2.6 million to $7.3 million less in 2010 than the $104 million the county is spending this year, with more cuts to follow in succeeding years.
The county still may have to cut up to $1.2 million from this year's budget.
In Ann Arbor, Hieftje said he is asking city departments to propose 15 percent reductions in their budgets, though he expects about a 10 percent or 11 percent cut in the city budget spread over two years.
Individual homeowners won't have to wait much longer to find out how they fared on assessments this year. Many will be getting their 2009 assessment statements later this month or in early March.
Those statements must be to the property owners 10 days before the first meeting of the local Board of Review, where homeowners can seek a change in assessed value. Board of Review meetings this year must take place between March 9 and April 6.
John Mulcahy can be reached at jmulcahy@annarbornews.com or 734-994-6858.
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