D -- if you do and D-- if you don't

Tuesday, May 17, 2005

My back yard was a mess last year. I decided that before this spring, I would have some dirt hauled in and spread over the washed out spots. I would then plant new grass seed. Everything went just fine until this unusual spring weather came along. Between early frosts and a lack of rain the grass looked terrible and needed a lot of water. I did water a little, but I was afraid that if I began to water the grass it would grow and need more water. If I left it alone, ... well I just didn't know what would happen. In the end I decided to water a little every few days and try to save the grass until the rains came.

Last week I received a letter from the Vernon County Assessor's Office telling me that there was a change of value in the appraised value for my home. I soon heard that I was not alone in receiving one of these letters.

Not knowing the reason why these changes were happening, I decided to call Cherie Roberts, Vernon County Assessor, for her explanation. After our talk, I had the same feeling about the taxes in our county as I did about the grass in my yard. We are damned if we do and damned if we don't.

First let's lay out some general facts. I will try to explain this in terms that I understand. After I talked to Cherie, I realized that the tax system is very complicated and not very plain in it's explanations.

In Missouri by state law, property taxes must be reappraised in the odd numbered years. This "Change of Value" reappraisal can shift the value of your property and thus your taxes. The three main reasons are listed on the letters you and I received.

The most obvious would be if you had done something to improve your property or expand it in some way. New construction for example requires the new addition to be assessed. This one is not too difficult to understand. If you add to your property, new property taxes will follow. Most of you who received the letters of change did not, however, build or add to your properties. The second reason for change is a little harder to understand. The law requires a change in assessment if there is a shift in the supply and demand-desirability of homes in the area you live. What that really means is simply that a nice neighborhood will get taxed at a higher rate because the home is deemed to be worth more because of the desirability of where it is located. The third cause is a correction in market trend from two years ago. As I understand this, it means that the sale of homes like yours has changed in the overall market place. The idea here is that even if you have lived where you now live for some time, and you do not plan to sell anytime in the near future, your tax evaluation will change based on what the market says the home is worth.

The last two causes require that the assessor make index changes every two years to adjust the values of homes for taxes. This is not new for us.

Here are the index increases for the past odd years. In 1999 the index was 1.66, in 2001 it raised to 1.70, in 2003 in went to 1.76, and finally this year the increase for the index was to 1.85.

If you apply this index over a period of years it breaks down something like this. If you had a home worth $50,000 in appraised value in 1999, in theory it would have increased to a value of somewhere around $55,500 by 2005. Over a period of, say, 50-60 years, the property would double in appraised value.

In reality, homes actually have increased in market value at a much higher rate than the appraisal rates over the same time period.

Ms Roberts told me she has been trying to meet state law in the reassessments, and still keep our increases as low as possible. Again she and we are damned if we do and damned if we don't. The State Tax Commission wanted her to raise the index at one time to 1.92, but she managed to avoid that. We are not out of the woods on that issue, however. The state commission has the power to come in and check her figures on the assessment raises. If they determine that we have fallen 5 percent below what the State feels is the correct market value of properties, they can withhold all of our state funds. These funds would include money for many programs such as roads and schools. Roberts said while we are feeling the pinch here over the reassessment changes, places in metropolitan areas such as Kansas City, have had their rates almost doubled in the same time period.

One final item she asked me to look at and consider was the appraised and assessed values listed on the letter for my home. Appraised value is what your house is supposed to be worth. Assessed value is the residential value at which your home is taxed. Residential homes are taxed based on 19 percent of appraised value.

What we should really look at is the appraised value. If you think you are being ripped off, ask yourself if you would sell your home for what the State says it is worth, the appraised value. I think you will find that in most cases the appraised value is less than what the home is actually worth on the market. We are damned in both ways when it comes to property taxes. We do need to have taxes assessed based on the the natural increases in real values of property at a given time. The problem is that in the end it is people who do not live here who have the final say about our property values. Ms Roberts and we are walking a fine line just like I have done with my grass.

We keep raising the values every two years to try and stay ahead of what the State thinks we should be doing.

The bad news is that someday I will get plenty of rain on my yard and the grass will flourish and grow without me needing to water it.

Not so for property owners. Even if the State's financial fortunes get a lot better they will not lower their expectations for our property taxes. The only way there will ever be any change is if the voters change the people running the state government.

You already can guess the chances of that happening.