[Mpls] Inaccurate Property Assessments for Taxes

[Carol Becker]

Christine Viken wrote:



>I've done some scouting through the property tax records because of a

>purchase interest, and it is absolutely shocking what valuation exists on

>some of the buildings that haven't changed hands in a long time. It's

>especially notable in areas that have seen significant improvement over the

>last 10 to 15 years.



>These properties will see a boost when and if they're sold, but meanwhile

>the city is losing much tax revenue. And some property owners are really

>raking it great income, by dint of the same situation.



Historically, property values have changed a couple of percentage points a 
year.  When this happens, the assessment process works quite well.  Values 
are easy to estimate, and there are few disputes.  Homes were only looked at 
every 4 years, with small adjustments across the city made every year. 
Commercial property, especially property downtown, was looked at every year 
because the properties are valued based on the amount of money you can earn 
from them and there was somewhat more variation on this from year to year.



But we have not been in that environment the last 5 - 8 years.  To pick on 
my sister, she bought a duplex in NE six years ago for $140,000.  It was 
appraised at $385,000 this year and I think that is low.  If she had bought 
in other parts of the City (Phillips for example where property has got up 
500%, 600% or more) she could have seen even larger increases.  In this 
situation, it is very hard to come up with accurate assessments because the 
market is in such flux.  It wouldn't surprise me that there are individual 
assessments that are off.



What is the solution?  Once the extremely rapid changes in property value 
slows down and property goes back to its historical growth in valuations, 
things will become much easier for the Assessor and the assessments will be 
more accurate.  Until then, the Assessor is only human and doing the best 
they can in a very rapidly changing market.



What I tell people today is that if you think the Assessor has pegged your 
values too high, challenge it. In the spring you will get a card in the mail 
showing what the Assessor thinks your property is worth.  If that is too 
high, the card will tell you the process for appealing it. 85% of people who 
appeal, win.  If you think it is too low, enjoy it.  It usually catches up.



I would also note that Christine says that the City is losing tax revenue. 
This isn't true.  The way a property tax works is that the City decides how 
much it is going to raise.  It then takes that amount and divides it across 
the various properties based on their taxable value.  If you don't pay up, 
they take your house and sell it for back taxes.  The City ends up taking in 
pretty much almost exactly as much as it levies one way or another.  You 
can't retroactively add to the tax base.  You can, of course, reduce your 
share of the pie by increasing the pie for the future.

I should have also noted earlier that I did put up a short primer on how the 
property tax works and how to intervene in the process on my website at 
www.carolbecker.net if you want to read more.

Carol Becker
Longfellow
Future Member, Board of Estimate and Taxation
Geek