New property valuations showing huge decline in area

make no assumptions about your property taxes

Property value notices have been hitting mailboxes across Gunnison County this month. In a region accustomed to growth, the contents have been surprising—particularly at the north end of the valley. Some homeowners in Crested Butte South, Crested Butte and Mt. Crested Butte have seen the value of their property drop by as much as 23 percent. It’s part of a statewide trend in resort towns, and the implications will become clear only over the next several months. But one thing to count on—it doesn’t mean an automatic reduction in property taxes.

The Gunnison County Assessor’s office reappraises property values every even-numbered year on June 30. The valuation notices received this month are based on analysis of sales activity between July 1, 2009 and June 30, 2010. Any sales that have occurred since then will be included in the 2013 valuation.
“The market sets the values,” said county assessor Kristy McFarland. “For example, the folks that are buying property today are contributing to the future values of similar properties by virtue of the price they pay for the real property.”
According to McFarland, the data collected from this year’s reappraisal is still being analyzed, but looking at sales data per calendar year starts to paint a picture of the trends across the valley. The assessor’s office uses this information when it charts trends for property owners receiving value notices.
“When we run these graphs, we typically just use single family residences [SFR] to indicate value trends because it gives a bird’s eye view of the overall picture,” McFarland said.
Overall, the total value of properties in Gunnison County decreased by .8 percent in 2010, but homeowners and landowners up-valley are bearing the brunt of that decline. It is most striking to look at that decline over the last five years. The town of Crested Butte has gone from 27 SFR sales with a median price of $748,500 in 2005 to 19 sales with a median price of $561,500 in 2010. Over that same period, Mt. Crested Butte decreased from 49 sales to 14, with a drop in median price from $589,500 to $446,750. That is quite different from the city of Gunnison, where the median SFR sale price has increased from $193,600 to $227,375 over the same period in spite of dropping from 81 sales to 30.
So far, the county’s analysis of assessed values—so the actual property values adjusted by state-set assessment rates—paints a similar picture. Between 2010 and 2011, the town of Crested Butte has decreased by 20 percent and the town of Mt. Crested Butte has dropped by 27 percent. As the assessor’s office continues to analyze reappraisal data, the staff will form a more detailed picture by considering how SFRs compare to condos and vacant land, which tend to behave differently in the market, and they’ll do so by comparing economic areas.
“The town of Crested Butte is its own economic area due to the historical designation and the stringent BOZAR criteria. Mt. Crested Butte runs with Skyland and Crested Butte South, economic area 6—basically everything north of Jack’s Cabin, excepting Crested Butte,” McFarland said.
For now, what’s clear is that this is part of a statewide trend. The Denver Post reported last week that counties like Pitkin, Summit, Routt and San Miguel have seen home values decrease by 20 percent; Eagle County saw a decrease of about 30 percent for vacant land, home and commercial properties combined.
But while it’s tempting to think that a decline in property value might lead to a decline in property taxes, that won’t necessarily be the case. Property taxes are determined by a formula that is in theory simple and in practice complex, taking into account the property value, the state assessment rate set for each type of property, and the mill levy for each taxing entity. That mill levy, measured in mills—or $1 per $1,000 of assessed value—funds local services, and those services don’t decline with property values.
“If people look at it as services provided to you as a homeowner in this valley—it’s local government and it’s kids and it’s ambulance services and the fire department—they all have a budget… You couldn’t ask the fire district not to buy a fire engine if they need it if values went down. They still have the same number of houses to protect,” said McFarland.
So changes in mill levies vary with the taxing entity—and in the Gunnison Valley, some will have the ability to increase the mill levy whereas others will not. In Mt. Crested Butte, for example, finance director Karl Trujillo is working on a five-year plan that assumes property values will drop 35 percent. While that number could change when the county assessor’s office reports actual assessed value to the taxing entities, that would have a significant impact on the Mt. Crested Butte budget.
“We could lose $250,000 in property tax value in the general fund next year,” Trujillo said. But Mt. Crested Butte doesn’t have the option to increase the mill levy, in 2010 set at 10.378 mills, because the mill levy is already at the maximum allowed under the Tax Payer Bill of Rights (TABOR). “We would have to go to a vote of the people to raise the mill levy. Some of the organizations, like the fire district or the water district have some room to raise the mill levy, but not Mt. Crested Butte.”
The situation could be completely different in the town of Crested Butte, whose total levy is set at 8.395 mills. Town finance director Lois Rozman indicated that the town has not maxed out on its possible mill levy so it has some breathing room to respond to declines in property values. But she cautioned that it is far too early to predict what decisions will be made—the county will not send taxing entities preliminary home values until August. Until then, any thoughts on the mill levy would be pure speculation.
“It’s hard for me to tell, it really is,” Rozman said. “A lot of people think, ‘Oh lower house values, lower taxes.’ But that might not be the situation.”
She went on to emphasize that each taxing entity is a small part of the overall property tax a homeowner sees.
“When a person who has a piece of property pays, let’s say a dollar of property tax, only 17 cents comes back to the town, so we’re a very small piece in the whole property tax puzzle. And that will be different for every entity as well.”
Factor in the county, the municipalities, the fire department, the school district, the water conservancy district and it is clearly a difficult task to understand property taxes at this point in the game. And easy for misconceptions to arise regarding the rise and fall of property taxes with home values.
“One thing that’s important for folks to understand is that when valuations spiked, Gunnison County collection of taxes did not spike,” said Gunnison County manager Matthew Birine. “The new construction definitely had an impact on revenues, but… even though the county is de-Bruced [not subject to TABOR], it is still bound by a statutory limit of 5.5 percent on existing properties. A common misconception is that when property values went up 30 percent [so did county revenues] but they didn’t.”
“We have the ability based on the permanent tax rate to adjust the mill up or down—this year it’s 10.24, last year less,” Birnie continued. “But what we see as property values go up, the county ratchets down the amount of the mill levy.”
So while every public budget is set in dollars, the mill levy and property valuation fluctuate to meet that dollar figure. As property valuations go up, a taxing entity can lower the mill levy. Similarly, as property valuations go down, the mill levy can be raised provided that it doesn’t violate regulations in TABOR.
Before the county or any of the taxing districts can assess the mill levy, the assessor’s office needs to finish the process of valuation. According to McFarland, property owners have until June 1 to protest their property values, and the county has until June 30 to reassess.
“If the property owner doesn’t agree with the assessor’s determination, they can then take their appeal to the County Board of Equalization [which is the county commissioners with a different hat]. If they don’t agree with the CBOE, they can then take their appeal to the state Board of Assessment Appeals,” McFarland said. All in all, it will be August 25 before towns and taxing entities receive official notice of property values.
So far, McFarland says, the assessor’s office isn’t receiving as many protests as it did in 2009, when market values determined on June 30, 2008 did not reflect the economic circumstances homeowners were experiencing in May 2009.
“We definitely have an increase in protests from folks who think their value is too low. Having a low property value on the assessor’s records can adversely affect a sale price, despite that our appraisal date is a date in the past,” McFarland said.
In fact, McFarland and the staff at the assessor’s office encourage property owners to question the value of their home.
“Protesting property value is a spring ritual for many property owners, and we actually encourage it and look forward to visiting with folks we only see every other year,” McFarland said. “The term ‘protest’ denotes a confrontational process, which is not at all accurate. There is nothing adverse about qsuestioning one’s property value. We would like everyone who has any sort of question regarding property value to write, call or stop by.”
For more information go to www.gunnisoncounty.org/assessor, or reach the assessor’s office directly at (970) 641-1085 or [email protected].