Lower values don’t mean lower taxes

Process to determine next tax bill under way

(Last week we looked at why the property tax bills arriving in the mailbox probably won’t be smaller than last year’s. This week we’ll look at why the next round of valuations might make for a different outcome in January 2012.)

The valuation, assessment and taxing process is a pretty complicated series of calculations—conducted by more than one member of the county’s staff—that affects every property owner in the county. So while it can hurt to think about the assessment, it helps to know what’s happened to get you the bill you’re faced with.
Property taxes in Colorado are billed at varying rates, depending on what type of property is being reviewed, making it a mental leap for some right out of the gate. So while taxes on residential property are assessed at 7.96 percent of the property’s appraised value, other types of property, including business and commercial property, is assessed at 29 percent of their value.
The formula used to calculate the amount of tax paid by residential property owners in 2011 “is [the] assessed value, times the mil, divided by 1,000, to get the revenue,” explained Gunnison county finance director Linda Nienhueser. “So if your home has an actual value of $200,000, the assessed value is $15,920 (7.96 percent of actual value). If the county mil levy is 10.24 (this year’s rate) the county tax is $163.02.”
Less than a quarter of an average local property tax bill is going to go to the county. The other taxing districts, like the school district, apply separate mil levies to the tax bill, and you have your property tax liability. The county element is set by the board of county commissioners by December 10.
But there is a clear limit to the amount that county property taxes can be raised. State law limits the annual tax increase to no more than 5.5 percent, plus the tax on new construction. The Taxpayer’s Bill of Rights (TABOR), which was adopted by the state in 1992, was “de-Bruced” by county voters three years later but still has an impact on the amount of revenue the county can keep. “De-Bruce” refers to an exemption from the requirements of Douglas Bruce’s TABOR. County voters passed a second ballot measure relative to TABOR in 2000.
 “In 1995, Gunnison County voters approved a measure to allow us to ‘keep and spend for County services any excess revenues from grants, fees, interest, sales tax and all other revenue sources without being limited by the restrictions of Article X, Section of the Colorado Constitution (commonly known as …TABOR)… without any increase in County tax rates.’” Nienhueser says. “That year our mil levy was 17.075, so that became our permanent mil levy. We can’t levy anything over that number without a vote.”
Nienhueser explains if voters hadn’t approved the measure to de-Bruce, the taxing district might have to maintain a constant mil and face declining revenues.  
The mechanism used to determine property tax is the same one that has been used by the county since 1995 and, she says, it “assures that property taxes don’t spike when assessed values increase dramatically (as in 2007 when they increased 51 percent).” But the statute doesn’t stop a slide in the other direction. Taxes can drop as low as the budget will allow, but county assessor Kristy McFarland warns, “There is a misconception that when property values go down, property taxes also go down.”
And after a long period of rising property values and sales volume (many of which hit their peak in the 2007 reappraisal. As McFarland points out Crested Butte South “for example shot up to $195,000 per lot in 2007 and 2008, then dropped to $100,000 per lot in 2009 and 2010.”), the trend has started to turn the other way recently, says county senior appraiser George Lickiss. Because sales volumes have been so low, the assessor’s office has to reach deeper into its records to find comparable sales to make a good analysis of where property values are currently.
Lickiss says the assessor’s office uses “multiple regression analysis,” working off a rule of thumb that every variable in a property’s value (like location, architecture and amenities) is compared against other similar sales.
McFarland adds, “Because sales volume has been low and by law we must have a certain number of sales in each category of property, we’ll likely analyze four years of sales this reappraisal.
“All qualified sales that occurred in the 18-month (minimum) to 60-month (maximum) time frame before the reappraisal date of June 30 are considered in each revaluation,” McFarland continues. ”With that said, if sale prices are declining within the sales study period (or increasing like they did in 2007 and 2009), then the sales are adjusted downward (or upward) to reflect the market conditions on June 30, which is the appraisal date. To avoid pushing property values artificially in one direction or the other, the assessor’s office uses an adjustment known as time trending.”
The first tax statement to go out based on the upcoming valuation will be in January 2012.
“We haven’t gotten into the final numbers yet, so I don’t want to give out anything concrete,” Lickiss says. But chances are, if you live in the north end of the Gunnison Valley, your property’s valuation will change a year from now… and that could be good news for those people hoping to see a change in their tax bill.
In the meantime, you should have, or will receive shortly, this year’s tax bill in your mailbox.