Rising assessments raise questions

When Juneau resident Barb Bonner received her property assessment card from the city last month, she was alarmed by what she saw. The assessed value of her property had risen by almost $50,000, a 12 percent increase over last year.

“I was shocked,” she told the Empire.

She wasn’t alone.

Shortly after the city mailed out assessment cards, homeowners from all over Juneau turned to social media to consult — and in some cases console — each other about their rising property values.

The Juneau Community Concern Facebook page in particular was a hotbed of assessment-related agitation. One commenter called the values “ridiculous” and “freakin’ horrible.” Another suggested that if people were to march on City Hall they should “bring pitchforks!”

Each spring, City Assessor Robin Potter stays away from social media for this reason. If she logs into her Facebook account at all, she does her best to keep a low profile to avoid conflict.

“Believe it or not, I don’t like to be disliked, but that just comes with the job,” she said when she and city Finance Director Bob Bartholomew sat down with the Empire last week for an interview about the assessments.

Bonner didn’t participate in the Facebook banter, but she shared a lot of the same concerns that people expressed there, reasonably or not. The general fear that typically comes with increasing assessments is that property taxes will be increasing, too.

Reasonable though it may seem, that fear is not always founded.

 

Millin’ around

Not everybody’s assessment increased at the same rate as Bonner’s. In fact, Potter said that a 12 percent hike in assessed value is atypical and recommended that anybody with such an increase appeal to the city. Bonner is already working on her appeal.

Some people’s assessments actually went down. Juneau resident Will Judy owns two properties in town, one in the Mendenhall Valley and the other in West Juneau. Each of his properties decreased in value by about $25,000.

Regardless of whether your property went up or down in value, it’s important to remember that assessed property values alone are not enough to determine whether your property taxes will increase, according to Bartholomew.

“It’s not the assessment value that drives the tax revenue,” he said. “It’s really driven by what happens with the mill rate.”

Each year during budget season, Bartholomew recommends a mill rate, which is subject to Assembly approval. This year, for the first time since 2010, the mill rate might drop. Bartholomew has recommended a rate 10.51 mills — down 2.3 percent from the past two years. The Assembly take up the mill rate for discussion at it’s April 27 meeting.

If approved, Bartholomew’s proposed mill rate would mean that a person with a $300,000 home would pay $3,153 dollars in property taxes. Last year, that person would have paid $3,228 in property taxes for a home of equal value.

This is where the assessments fit in. The total property assessment for Juneau rose by about 4.4 percent from last year. That’s the steepest increase in the past five years, but this doesn’t mean that everybody’s assessed property values went up. Rather, it reveals the general trend of property values in Juneau: they’re increasing.

It’s because of this increase that Bartholomew recommended lowering the mill rate. Back in December he planned for a 2 percent increase in assessed property values. If the mill rate remained unchanged, this would have yielded a $1 million increase in property taxes for the city.

When Bartholomew found out the assessed property values had actually increased by 4.4 percent, yielding a potential $2.2 million increase in tax revenue under the old mill rate, he decided to lower the rate.

“We didn’t need that much revenue to balance the budget so we backed off the mill rate,” Bartholomew said. “The average person will see property tax increases, but they won’t be as large as the change in their property values.”

Under the proposed mill rate, Bonner would be paying $406.23 more in property taxes than she did last year if she doesn’t win her appeal. Though $400 is nothing to scoff at, it is about $110 less than she would be paying if the mill rate was the same as last year.

In Will Judy’s case, he’ll be paying much less in property taxes than he was last year, but even if he wasn’t he said he wouldn’t mind. Judy did throw in on some of the Facebook posts, but he doesn’t agree with some of the more cynical commenters, who suggested that the increased property values were a part of a city conspiracy to generate more tax revenue.

“I don’t think there’s some collusion among the assessors to get more money out of people by raising their house values arbitrarily,” he told the Empire. “There’s just an ebb and flow of property values.”

Bartholomew and Potter would certainly agree with Judy.

“We don’t try to say, ‘What’s the most we can get from property taxes?’” Bartholomew said. “It doesn’t drive assessments, and it actually doesn’t drive the mill rate either.”

 

Laggin’ behind

One of the reasons Bonner was so shocked to see her assessed value had increased by as much as it had was because she didn’t do anything to improve her home in the past year.

“Nothing has changed,” she said. “If anything, everything is a year older. I don’t see why the value would’ve gone up let alone that much.”

Bartholomew and Potter said that Bonner’s concern is a normal reaction that homeowners have when they receive their assessment cards, which don’t come with much of an explanation.

The city assesses properties using a method called mass appraisal. This approach relies on statistical modeling rather than individual appraisal of properties to assess large numbers of homes more efficiently. Mass appraisal is the standard set by the International Association of Assessing Officers.

“It’s the most fair and equitable way to set assessments on a large number of parcels,” Potter said. That and the city couldn’t afford to hire enough people to appraise every single house in Juneau every year. “They’re expecting appraisal-quality, and that can’t be done. It’s just not practical.”

Mass appraisal is the only way that Potter and her team of six people are able to assess the 13,500 or so parcels in Juneau each year.

Instead of appraising houses in the manner most people are accustomed to, mass appraisal relies on sales records and qualities such as the geography and topography of each lot to determine what it would sell for under fair market conditions.

Judy’s valley property, for example, is located in a Tall Timbers. The city recently discovered, courtesy of the Federal Emergency management Agency, that this neighborhood is in a flood zone. This is why Judy’s property and several others in the area were assessed for less than they were last year.

Mass appraisal is not perfect though.

“Doing mass appraisal, you’re not going to get every parcel exactly right,” Potter said. In fact, if the assessed value of any property matches its exact value, “it’s just by luck,” Bartholomew added.

This is true of mass appraisal everywhere it is used, but it’s especially true here. Alaska is one of six nondisclosure states in the nation. This means property owners don’t have to disclose to the state any information about the sale of their property.

 

Full disclosure

That makes mass appraisal “an almost impossible situation,” according to State Assessor Marty McGee.

Assessors use sales data to determine how to assess comparable homes in comparable areas. If multiple houses in a neighborhood are selling for similar prices, then assessors are able to extrapolate the value of other houses in that area. In a nondisclosure state though, they only have access to sales data that people submit voluntarily.

In Alaska, assessors only have access to about a third of the sales data from the current year. After two years, that number goes up to about 50 percent. This means that most assessors this year are still getting sales data from 2014. Just this week, Potter received information from four sales in 2014 that she didn’t have while preparing this year’s assessments.

This creates what McGee calls “lag.”

“Your assessed value is always looking backward,” he said, explaining that assessments are based on sales that have already happened, not predictions of what the market will do. But without all of the sales data “you wind up in this catch-up position.”

As more sales data become available, assessors are able to see more clearly what the market is actually doing. Due to the lagging availability of these sales data, they sometimes realize two or three years later that their previous assessed values had missed the mark.

This creates situations in which assessors have to adjust assessments to correct earlier mistakes and to account for normal increases, such as inflation. These corrections often cause a whiplash effect for the homeowners affected. One year, their property shoots up by a lot more than they expected, seemingly out of the blue.

This phenomenon was at least partially responsible for what happened in Juneau this year, Potter said.

The International Association of Assessing Officers, of which Potter and McGee are members, “strongly recommends” full disclosure wherever possible, McGee said. Full disclosure would allow assessors to more accurately value properties the first time, and these snap corrections wouldn’t be as frequent or jarring, McGee said.

He gave a presentation about the matter to Alaska lawmakers at the Capitol earlier this legislative session during a “lunch and learn.” He compared the process of assessing without all of the sales data to “working on a watch while wearing a blindfold and mittens.”

Though there is no legislation in Alaska that could bring about such a change, there is in Texas, another nondisclosure state, Potter said. And McGee thinks that Alaska could follow suit sometime soon.

“I think it’s achievable in the near future,” he said. “I’ve been engaged in this discussion for 17 years, and I’ve never heard a single rational argument that says disclosure hurts people.”

Marty McKeown, the broker and owner of Remax of Juneau, doesn’t support changing state law in the interest of full disclosure, but he does recognize that the nondisclosure poses a problem for assessors.

“They’re not as informed as they are in a lot of other states,” he said. “It’s tough. Everyone gets mad at the assessors, but they don’t have all the knowledge.”

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