by Walker Davidson
In September, the Union County Board of Commissioners set the date of the next property revaluation for Jan. 1, 2012.
However, the “new majority” consisting of Jerry Simpson, Todd Johnson, and Jonathan Thomas on the county commission may reverse the decision of the previous board. The board has until March 1, 2011 to decide on the issue.
Why would two different groups who have been provided with the same information make different decisions? Here is some background on the issue.
The state requires counties to perform revaluations at least every eight years. The recent cycle in Union County has been every four years.
The most recent revaluation took place in 2008. It was called a “revenue neutral” revaluation/budget process. The number of total tax dollars collected by the county for property tax was basically the same as it was in 2007. More of the tax burden was shifted from properties with a lower price appreciation rate to those with a higher price appreciation rate. The process resulted in a tax increase for some and a tax decrease for others.
Revaluations are done to ensure that the most accurate data is used in calculating everyone’s property taxes so that everyone pays their “fair share.” The reason revaluations are not done every year is because it costs the county about $220,000 in administrative costs.
But when does the data become inaccurate enough to justify spending $220,000 to do a revaluation?
There is an industry standard that measures assessment accuracy called Sales Ratio. The sales ratio for an individual property is the assessment of the property divided by the sales price. The Sales Ratio for the county is the median of the sales ratio for each property sold during the specified time frame. A revaluation can be triggered if the Sales Ratio is outside the 85 percent to 115 percent compliance level. The Sales Ratio for 2010 is 111 percent and therefore does not trigger a revaluation.
There is another industry standard that measures “equity” called the coefficient of dispersion. COD is a statistical measurement that attempts to determine the cumulative differences between the county’s current assessed value of each property and the current comparable market value of each property.
A revaluation can be triggered if the COD exceeds 20 percent. The latest COD presented to the Board of County Commissioners by county staff is 17.96 percent. However, the county staff’s concern over a lack of comparative sales data suggests the 17.96 percent number may be too low. It looks as if prices would have to fall further to generate enough sales to provide more reliable comparative sales data. As the prices fall the COD is likely to rise.
I don’t know what triggered the 2008 revaluation. The minutes from the March 12, 2007, county commission meeting state that the board wanted to improve “equity.” This leads me to believe that the COD was the triggering factor.
The former board chose to move forward with a revaluation in 2012 because the 2008 revaluation was done near the height of the real estate market. The 2008 valuations were calculated under a different set of circumstances. In many markets in Union County, the demand for housing was greater than the supply. Families were moving to the greater Charlotte area (many of them came to work for banks), and credit was flowing freely. In many cases, credit flowed too freely. We later found out many of the real estate loans should have never been approved.
I believe that the revaluation is warranted. I believe that a COD of 17.96 percent combined with a low level of sales data demonstrates that there is indeed “inequity” in our county tax system. It is worth the $220,000 to correct this inequity. I don’t think that county commissioners should be concerned with who the revaluation will affect. The revaluation will have the same objective result as it had in 2008. More of the tax burden will be shifted from properties with a lower price appreciation rate to those with a higher price appreciation rate.
While I do believe the revaluation is warranted, I also realize that the new commissioners have a dilemma. Their campaign promises include lower taxes. County staff estimates that a revaluation will result in a 14 percent drop in the county’s real estate base and would require a tax rate increase of 8 cents to remain revenue neutral. Some citizens might consider this a tax increase.
If the commissioners allow the revaluation to take place, they will, in effect, raise taxes for some of the citizens. If they stop the revaluation, they will, in effect, prevent a tax decrease for some of the citizens. Stopping the revaluation would also indicate the new commissioners support the continued use of an inequitable county tax system.