Part 1: The Mystery of Property Assessments
Carol Smith believes she should be paying more in property taxes. And she’s not alone.
Smith, a retired county health nurse, and her husband Kyle have lived in Rockdale for more than four decades. During that time, they’ve seen the value of their two-story home in the Hidden Acres subdivision grow as they tended their yard, made improvements, even added an in-law suite.
But this year, they were notified their assessed value has been nearly halved - from about $148,000 to $79,000.
And that worries her. Not for herself, but for the county services that her tax dollars fund.
“That is scary,” said Smith. “I’m really concerned for the funding of our government.”
“With this devaluation the county government is going to get the shaft. The services are going to get the shaft,” said the 76-year-old. “We should pay our fair share.”
She knows many are happy simply to have a smaller tax bill. But others in her neighborhood have expressed similar concerns.
Most have seen the assessed value of their homes drop by 40, 50 percent this year.
At a recent Hidden Acres homeowner’s meeting, many homeowners agreed their assessments were too low.
Kathy Voshall saw her home assessment drop from $123,000 to $62,000. She said two of her friends in the neighborhood will have property tax bills in the single digits.
Jim Crutchfield was one of the first to purchase his home in the subdivision in the 70s and saw his assessed value drop to about what it was worth when he first moved in.
Mary Ellen Krueck, a retired Rockdale Latin teacher, saw her Horseshoe Springs home assessment go down by about half.
This drop in assessment has made a significant splash in the agencies that depend on property taxes to fund services such as law enforcement, firefighting, education and more.
The dramatic drop in tax digest sent the city, county and school board scrambling to make cuts and find ways to balance the budget.
Rockdale had enjoyed a steady, decades long boom where the tax digest, or total amount of taxable property value, increased year after year.
Even during the downturn, starting in 2009, the tax digest decrease was in the single digits, about 5 to 8 percent.
However this year, the digest dropped about 15 percent in the county, 13 percent for the city, and the school’s tax base drop by more than 15 percent.
For the school system - which depends on local taxes for about half its funding and was hit with the lower local tax revenue after several years of deep cuts from the state - that means fewer teacher positions, furlough days for staff, and a shortened calendar for students.
Like many things in life, it’s a matter of timing, said Rockdale Tax Assessor Lamar Sims.
Sims, who has been in the field for more than two decades, said Rockdale lags behind the metro Atlanta counties in what it is experiencing. “A lot of the larger counties saw the foreclosures coming in more quickly than we did.” Larger metro counties like DeKalb, Gwinnett, and Cobb have already gone through the process of dealing with the influx of foreclosures.
But several state laws put in place a few years earlier are now being felt. One is the requirement that short sales and foreclosure sales be taken into account when determining the assessed value of a home. Previously , they were not considered a fair market sale and were not included in determining the assessed value.
Another is a new requirement that when a sale is made, the home keeps that value for one year.
These laws, plus the unusual nature of the market over the last five years have made it difficult for assessors, who are required by law to keep assessed values within a certain range for similar properties.
This makes assessment nowadays almost more of an art. “There’s a lot of different things. There’s no exact science, because you have to use what you have.” Common sense is one the most important elements to use, said Sims.
Sims points out the sales that occur in a year apply to the tax bills for the following year.
“The good thing is we're at the lowest. The only thing now we can do now is start going up,” Sims told the Rockdale County school board back in May. “I’m thinking in the next two years, you'll see actual increase because we're starting to see more sales at the beginning of this year which dictates the values of next year.”
Signs of a thaw in the real estate market are growing.
Local realtors in Rockdale and Newton say the market for homes in below $100,000 and between $100,000 to $200,000 has heated up significantly in the last six months. Large investment firms and hedge funds have recently come through the area, snapping up cheaper properties to rent out and eventually turn around. This is making it difficult and very competitive for first time buyers and others in the market for a home of a certain price range, who find it hard to compete with a cash offer.
Part 2: The Art of Assessments
Property assessments lie at the very heart of a functioning local government since important public services such as law enforcement, firefighting, and education depend in large part on local property taxes for funding.
But for many homeowners who open their tax bills and see valuations that leave them scratching their heads, the process is a mystery; a blackbox that spits out a number. The economic recession of the last several years and distressed markets haven’t helped, turning what were anomalies into the new normal.
To help break down that process, we took a look at what would normally happen in an appraisal process and what factors are in play now.
It’s important to remember that tax assessors are always working with numbers that are a lagging a year behind; it is last year’s sales and values, as of January 1, that apply to this year’s tax bill.
Appraisals can be done looking at fair market sales of similar properties, looking at the value of the materials that make up the property, and the income that is derived from the property.
The purpose of a property appraisal drives the process, explained Burt Manning, former Fulton County assessor who now heads the Georgia Department of Revenue’s assessor certification and training programs.
“An appraisal is an opinion of value,” said Manning. “If a person is trained and licensed, it’s going to be relatively similar.”
Appraisals can be done for homebuyers, home sellers, insurance companies, banks or for getting a mortgage loan. These would all be appraisals of an individual home with an in-depth, detailed examination. The aim is to get the most accurate snapshot of that individual home’s value at that time.
In a mass appraisal, the goal is not necessarily to get the most accurate snapshot of the individual, but to get a good enough snapshot that is fair to the individual and accurate to the group as a whole. For a county tax assessor, the aim is to get a picture of the total value in the county.
Appraisals for the purposes of taxing will most likely be a mass appraisal, since most county offices don’t have the time and resources to closely examine each home out of the thousands of properties in the county. In Rockdale, there are more than 30,000 parcels of property, including residential and commercial. Rockdale Tax Assessor Lamar Sims said his office, which as four assessors, tries to examine each property at least once every three years. That might not mean physically visiting a property, since assessors can also use tools such as aerial photography and other data gathering.
The mass appraisals for taxing purposes are required to be within a certain range of each other and the median and are subject to statistical tests. In Georgia, they’re required to be within 10 percent of the median level of assessment. The state Department of Audits tests each county’s digest and sets what is the acceptable level.
If the mass appraisal fails the statistical test, the assessor then has to go back layer by layer – areas, neighborhoods, subdivisions, streets – to figure out where the values are that are throwing off the tests and adjust them until they pass the statistical tests.
Although the tax assessments have always lagged behind what was happening in the market, most part homeowners didn’t care while the values were rising year after year, said Manning, because that meant they were able to pay a little less than they would have for the current value.
“Prior to 2008, taxpayers weren’t upset if I was behind the curve,” he said. “By January 2009, every property said ‘you can’t be behind the curse when values are falling. You have to be ahead of it.”
With the changing curve came many more appeals in the property values, although Sims said in May the percent of properties appealed was still in the single digits.
A few new laws have come into effect that are the requirement that foreclosures, short sales and other bank sales now have to be considered as fair market sales.
“We now amend formulas that help mass appraisers weigh bank owned sales versus individual to individual sales to come up with a fair and uniform value for properties, “ said Manning.
Nowadays, common sense, experience and networking with other assessors are also important tools to use in getting to an assessment, said Sims.
What may have affected Rockdale’s markets last year are that foreclosures are being processed more quickly now, observed Sims. Typically, foreclosures could take a long time to reach an actual sale. “In the first couple years (of the recession), we weren’t seeing a whole lot of foreclosures,” said Sims. “Not all the listings in the newspaper actually happen.”
“A lot of this is timing,” he said. Rockdale is experiencing what some of the other metro Atlanta counties have already gone through and have been able to address, such as Clayton, DeKalb, and Fulton.
While many say the markets are showing signs of turning around, the real test of that will be when builders find it profitable to begin constructing new houses, say real estate experts.