The tax man cometh? No, it's just the assessor
Friday, Yavapai County Assessor Pam Pearsall sent Notices of Assessment to all county property owners.
Most will find that their property values declined, some dramatically, since last year's notice. She says many people often look at the lower valuation and think, "That's great, now my taxes will go down!"
Hold it right there.
Pearsall advises you take a good look at that notice and make sure it adequately reflects the value of your home and property as of Jan. 1, 2011. You now have 60 days to appeal the notice and seek a correction.
"When the tax bill comes, it's too late and they can't appeal anything. If the house was measured wrong or there was another mistake, it is too late."
"I am the property assessor. I value properties. I don't have anything to do with taxes," Pearsall said, "But my values can absolutely affect those taxes."
The assessor explained that the long trend of escalating valuations in Yavapai County and Arizona has reversed itself.
"It makes my job a little bit more challenging. The silver lining is that housing is getting a lot more affordable. It was so unaffordable before and it brings it back in line. But, I am hoping that we are near the bottom, because from what I am seeing, it looks like we will be declining next year too."
She shows a graph showing the increasing value of property during a long period from 1995 through 2010. When the values for all of the United States begin to level off, the prices in Arizona are still on a nearly vertical acceleration. When the cycle broke in 2007, the median price of a single-family home soared nearly $60,000 more than the median across rest of the country.
The trend line plunges as precipitously as it rose. Today the median price across the country is about $190,000, but the median Yavapai County price continues its fall below $170,000.
Pearsall explained how her job is done in this declining market.
"We do three things in the assessor's office. For an owner-occupied house, we are looking at the sales around you, even the foreclosed ones. We are looking at those also. We didn't always while markets were increasing, but foreclosures are kind of setting the market now."
"One thing is important about foreclosures, though. If they are torn-up inside, because many times cabinets and things are stolen, we do an upward adjustment to bring it back to compare with a livable residence."
So we are using all that market data. When you sell your house, you sign an affidavit of value. And that is where we are getting our information."
"The second thing we do is use Marshall and Swift, a blue book for what it costs to build a house. We calculate what it would cost to buy the land, add improvements and build the house, less the depreciation."
"We also do a market decline, because you can't build a house for what you can buy one for so we subtract a market index to that to bring it back in line with the market and that is because we are in this declining market."
The assessment you are receiving, though, doesn't affect your taxes until about September 2012. The tax statement you will receive in 2011 is based on the assessment last February and March.
But, she warned, don't expect your tax bill will decline accordingly with the assessments.
"The unfortunate thing is that it is not likely to affect your taxes at all, because if the taxing jurisidictions do not cut their budgets, you are likely to pay exactly the same amount in taxes."
"If the values have declined, those taxing agencies often will raise their rates to bring in more money. In an increasing market, you can lower the rate and still bring in the same amount of money."
That is where people get confused, because they hear, "great, they lowered the tax rate, my taxes will be lower. But, not if the markets have increased and not if they raised their budget. You just have to look at the budget and see what they are doing."
How much has the decline been?
"It is really hard to say how much the market has declined. Some markets will get hammered harder than other markets. So while one market may have declined about 40 percent over the last five years another market may have declined only about 10 percent.
Pearsall warns that this is not the time to take advantage of the Senior Freeze, the Senior Property Valuation Protection Program, which locks in an older property owner's valuation, for those who qualify. In a declining market, a higher valuation would be locked in when the home is likely to lose more value over the next year.
See the Assessors web site for information about exemptions for widows and widowers and for those with a disability. The site also provides other helpful information.
How to read the Notice of Value Limited vs. Full Cash Value
There are two sets of values on your notice. The first set of values is the Full Cash Value and Secondary Assessed Full Cash Value which be used to determine the secondary property taxes. Secondary taxes fund bonded indebtedness and all voter approved districts and overrides.
The Full Cash Value is the value of your property determined by my office. This value is derived from construction cost data and comparable sales information.
The second set of values on your Notice is the Limited Property Value and Primary Assessed Value calculations.
These amounts will be used to determine your primary property taxes. Primary taxes fund the operation and maintenance budgets for state, county, city, school districts, and community college districts. The Limited Value is based on a calculation prescribed in Arizona Statutes and was developed to limit the amount of value increase due to inflationary factors. This value cannot be appealed. The Limited Value will never exceed the Full Cash Value.
Classifications and Assessment Ratios
All property in Arizona is classified according to its use. Currently there are 9 classes of property with 48 sub-classes.
Each class of property has an assessment ratio that is determined by the Arizona Legislature. The nine property classes are:
1. Commercial/Industrial/Utilities/Mines/Telecommunication. 2. Agricultural/Vacant/Default. 3. Owner-Occupied Residential 4. Rental-Residential 5. Railroad/Private Car/Flight Property 6. Non-Commercial Historic/Foreign Trade Zone/Enterprise Zone 7. Commercial Historic 8. Rental-Residential Historic 9. Athletic/Recreational/Entertainment/Artistic/Cultural/Convention on Government Property.
If the property is not classified correctly, or if you disagree with the classification of your property, you may file an appeal by April 26th, 2011.
The assessed value is determined by multiplying the Limited Value or Full Cash Value by the assessment ratio as determined by the classification listed above. The assessed value is the amount used to calculate primary and secondary taxes.