Why is my property assessed higher than I can sell it for?
The relationship between property values and taxes.
In March of each year, townspeople get to vote on a host of expense items to run both the town and the school. The operating budgets and any money desired for other specific purposes are listed on the ballot. Voters decide what they want to spend. This sets the town and school budgets, and officials are not allowed to spend over this total amount.
How do we pay for these expenses? The town and school do have some revenues. The money you pay the Town Clerk to register your car, for instance. Or the money we take in from selling the items you recycle at the Transfer Station. These and other revenues are deducted from the gross amount of approved expenditures. What is left to be funded is paid for via property taxes.
At its most basic, the net amount of expense for both the town and school are added together, the total is divided by the combined (or total) assessed valuation of all town property to arrive at the tax rate, set by the state Department of Revenue Administration. That tax rate (set per $1,000) is then multiplied by the assessed valuation of each property in town, determining the tax liability owed by the owner.
For example: The tax rate is $15 and your property is assessed at $300,000. Multiply $15 x 300 = $4,500 tax bill.
How is the value of your property determined?
State law gives this responsibility to the Selectmen. Most towns, like New Boston, hire an independent professional assessor to perform this important function. Properly and fairly determining “value” is a complex process that requires a lot of training and experience.
In theory, the value the assessor determines should closely approximate what your property would sell for on the open market as of April 1st of each year. Thus, if you made no improvements to your home between last April and this April, the assessed value shown on your tax bill would be unchanged.
But with real estate values dropping over the past few years, many have asked why the assessed value of their property remains unchanged. The state constitution requires towns to re-establish baseline values every five years. In 2006, a town-wide valuation update was completed and all assessments were adjusted to market value as of April 1, 2006.
These assessments are then used until the next town-wide revaluation. Any new homes constructed after April 1, 2006 and before the next town-wide revaluation will be assessed based on the 2006 baseline year and any improvements to current homes will be valued likewise.
In other words, it doesn’t matter how much a home can be built for or sold for, the town-assessed value will be based on the criteria of 2006 that was used for everyone. This way, fairness and equity is maintained between all town property owners.
We really wouldn’t want the assessed values to fluctuate up and down with the real estate market each year. At a cost of approximately $200,000 to perform a town-wide revaluation, this is not an expense any town wants to incur on a yearly basis.
The key is to remember that in an economy like the current one, it is not just your home that is decreasing in value. Practically everyone’s home would sell for less than the appraised value.
Your tax bill would still be the same!
Let’s say we decreased everyone’s assessment this year by 20%, bringing them more in line with the current real estate market. Instead of your property being assessed at $300,000, it’s now $250,000.
For this example, let’s assume our town and school expenses for this year remained exactly the same as 2008. But now, the total town valuation is determined by town-wide assessments that are 20% less.
How do we raise the same amount of money when assessments are down 20%? The tax rate goes up 20%.
Let’s assume the tax rate was $15 per $1,000 valuation when your property was valued at $300,000. Your tax bill for the year was $4,500. We still need to raise the same amount to cover expenses, but your property (and all others) have been reduced by 20% and is now assessed at $250,000. The tax rate would need to rise to $18 to cover the same costs, but your tax bill is still $4,500.
So while your assessment is down, the tax rate went up and your tax liability has remained the same.
Since New Boston’s last revaluation was in 2006, we are now preparing for a town-wide reassessment in 2011 (voters have been approving smaller amounts for several years to cover the anticipated $200,000-plus cost). In preparation for this revaluation, house inspections will begin in 2009 and be completed in 2010. Assessments will then be updated to market value as of April 1, 2011. There will be an opportunity to meet with the assessor in the fall of 2011 if you have questions or concerns on your new assessment.
The 2011 assessments will then set the property valuation standard for the next five years, regardless of what the actual real estate market does over that time.
We occasionally hear complaints that the assessor “wants to increase values so the town and school can get more money to spend.” Hopefully this explanation has dispelled that erroneous assumption.
Spending is determined by what townspeople vote for on the town and school ballots each March. Property values are based on market value in the year of the previous revaluation, not on how much money needs to be raised by taxes.
Property valuation or assessment is the mechanism by which we determine each taxpayer’s fair share of the cost (determined by voters) to run the town and school. It in no way affects how much money will be spent. That decision was made at the ballot box.
--Burton Reynolds, Town Administrator
George Hildum, Town Assessor
| 
