October 29, 2008
After failing to resolve last week whether Mecklenburg County should delay a planned property revaluation scheduled to start in January, commissioners are slated to tackle the issue again next month.
The county board's Republicans are pushing to kick the revaluation back a year, arguing that the process will yield higher tax values, and hence higher property tax bills, for the majority of homeowners during an economic downturn. On top of that lurks concern that housing prices could drop even further and a revaluation this year could leave homeowners stuck paying taxes on values higher than what their homes would actually be worth.
Democrats on the Board of Commissioners contend the revaluation should move forward as planned, arguing that thousands of homeowners – many in high foreclosure neighborhoods – have already seen their home values plummet since the county last held a revaluation in 2003 and are currently paying too much in property taxes, while other homeowners, who saw their property values skyrocket during the housing boom, aren't paying their fair share.
It's an interesting dilemma, but one that misses a main element. The key to keeping property taxes down across the board doesn't rest as much with the question of revaluation, as it does with what commissioners would do with the actual tax rate moving forward, revaluation or not. If the Board of Commissioners, which will likely be controlled by a Democrat majority when it comes time next year to set the property tax rate, can keep that rate revenue neutral, the question of revaluation becomes relatively mute.
Delaying it by a year will still yield higher property values for most homeowners than what is currently on the books from the 2003 revaluation, and with it would still come higher tax bills unless commissioners vote to reduce the tax rate. Even then, some homeowners might not escape unscathed.
Commissioner Bill James, a Republican, reminded his colleagues during last week's board meeting what transpired when the county held its two most recent revaluations. In 2003, when Republicans held majority control of the board, commissioners set the tax rate at 2.5-cents below revenue neutral, James said. The net result, he said, was that about 50 percent of homeowners got hit with a tax increase.
"When the public hears the word 'revaluation,' they grab their wallets," James said. "They know revaluation is a money grab."
But contrast the 2003 reval, James said, to the 1998 one, when a Democrat-controlled board promised to set the tax rate at revenue neutral to compensate for revaluation. The board ended up setting the rate at 3.5-cents above revenue neutral, James said, and about 80 percent of homeowners got hit with a tax increase.
"It was horrific," James said. "There was blood all over the reappraisal forms."
James said if Democrats retain majority control of the board, taxpayers could expect a similar scenario to play out when commissioners set the tax rate next year. A double-whammy of revaluation and a non-revenue-neutral tax rate, he said, would be devastating.
All four of the board's Republican members have said they would vote to set a revenue neutral tax rate in the wake of a revaluation. The Democrats? At last week's board meeting, Commissioner Dumont Clarke said if the county did a revaluation, commissioners would significantly reduce the tax rate. Well, maybe.
"Our goal should be to have a revenue neutral tax rate," Clarke said. "But I'm not enough of an ideologue to say I'm going to promise a revenue neutral tax rate today based upon when I'll be adopting a budget eight or nine months from now."
Commissioner Norman Mitchell, a Democrat, said regardless of whether there was a revaluation and/or a revenue neutral tax rate, homeowners should be willing to pay it.
"I cannot for the life of me understand why people often talk about taxes knowing that the taxes you are paying are services that are returned to you," Mitchell said. "You want your schools, you want your libraries, you want fire protection and police protection, yet you're still complaining about paying your proper taxes."
County officials estimate that property values, on average, have increased about 20 percent since Mecklenburg's last revaluation in 2003. Yet in some areas – think south Charlotte, uptown, Dilworth and Plaza-Midwood – property values have skyrocketed, with homeowners still paying taxes based on 2003 valuations. At the same time, some 30,000 homeowners are paying too much in property taxes based on those same 2003 valuations, according to Mecklenburg Tax Assessor Garrett Alexander.
His office has already begun the revaluation process for this year, Garrett told commissioners, and to delay it would cost the county about $300,000 in staff time to review another year's worth of sales information. State law requires counties conduct property revaluations at least every eight years, but Mecklenburg has tried to stick to a timetable of every four years.
Clarke said the county has already deferred it two years from that four-year target cycle, and that more delay would be a mistake. He used himself as a prime example. Clarke said his home was valued at $375,000 during the 2003 revaluation and that his property taxes roll in at about $3,150. But Clarke said his neighbor, who did a tear down of a small duplex and built a house almost exactly the same size as his, is paying taxes that are almost double.
"I'm being subsidized by that neighbor, basically," Clarke said. "It's just not fair. I really think that to some extent deferring [revaluation] for a year is sort of protecting the special interests in the community, and that is people who have seen significant increases in the values of their properties since 2003 and have essentially not been paying their fair share of the property tax burden for some time now.
"I'm arguing against my own self-interest here," Clarke said.
Commissioner Karen Bentley, a Republican, cautioned against conducting a revaluation when housing prices could still tumble, leaving homeowners with assessed values that were upside down relative to a true market value. That prospect, she said, prompted the Cornelius Town Board of Commissioners to unanimously approve a resolution supporting deferring revaluation.
Cornelius Commissioner Jim Bensman, a Republican, told commissioners that there is a two-year inventory of unsold homes in Cornelius.
"I submit that it is impossible to set a fair appraised value using historical data in a declining market," Bensman said. "Appraised values set now will be in effect for several years, guaranteeing that people will be overpaying for years to come."
Commissioner Parks Helms, a Democrat, said people too often mistakenly think the ramifications of a revaluation would automatically equal higher property taxes.
"We're simply talking about equalizing the value of property upon which taxes are assessed across the county," Helms said. "Some people may see their property taxes increase. But the likelihood is that some, many are going to see their property taxes decreased."
Helms, it should be noted, chaired the Board of Commissioners in 1998 when the revaluation, coupled with a non-revenue-neutral tax rate, sparked a massive tax hit for homeowners.