Walworth County Government Today: Assessing the situation--should counties figure property values?
I ran out of room in my last column about the newly released state budget to write about one initiative that will have significant ramifications for local taxpayers. Gov. Scott Walker has proposed to shift the responsibility of assessing properties from towns and municipalities to Wisconsin counties.
While most taxpayers focus on the amount of money being spent by local governments, they tend to overlook the second variable used in calculating tax bills — their property tax assessment. The property tax bill you receive in December is the product of the mill rate of each jurisdiction multiplied by the assessed equalized value of your property divided by 1,000. If this seems kind of complicated, you're right. I frequently have conversations with taxpayers who are angry that the county portion of their property tax bill has increased $200 or more over the previous year. The explanation that I give, that the increase is due to their property tax assessment and not county spending, is usually met with skepticism. In fact, Walworth County has essentially frozen its tax levy (the amount of property taxes we collect) for the past four years. Therefore, for every tax property owner whose county tax bill increased by $200, there is another taxpayer whose bill decreased by the same amount.
The above illustration is a simplification but not a big one. Assuming that the aggrieved taxpayer has not made any major improvements that would increase the value of his property, there are only two explanations for the higher bill; either his property has gained in value relative to other properties in the county, or his assessment doesn't accurately reflect the value of his property. To illustrate the first scenario, if my property is located in a community that suddenly has become a popular place in which to live, and a major factory just shut down in yours, most people would agree that the value of my home has probably increased relative to yours. In that case, my share of the tax burden will go up and yours will go down. It is the second scenario, where the difference in our assessments doesn't have a good explanation, that I believe is prompting the proposed change.
Assessing taxable property is currently the responsibility of towns, villages and cities. Statewide, 1,851 jurisdictions assess property. In our county alone, at least 30 jurisdictions determine the value of taxable property. While there is a science to appraising properties, variations can occur.
How much money a community chooses to spend in preparing property tax assessments is a significant variable. Some communities attempt to keep property values up-to-date each year; others don't come close. The Milwaukee Journal Sentinel recently highlighted a practice that happened to me years ago. Let's say I buy a house on the block where the homes are identical and each is assessed at $300,000. The house that I buy had been on the market for one year, and I was able to purchase it for $250,000. Because an arm's length sale is the best evidence of the fair market value of a home, I take my closing statement to city hall, and my assessment is lowered to the $250,000 sale price. While this is good news for me, my neighbors might not share in my good fortune. Unless they are aware of my purchase, contact the assessor and successfully argue that their properties are really only worth $250,000, I will pay taxes on $50,000 less value than my neighbors. If the combined rate of all taxing jurisdictions is $16 per $1,000 of valuation, my property tax bill will be $800 lower than theirs. Assuming that none of the taxing jurisdictions have raised their taxes, not only will my bill go down, but theirs will go up; after all, somebody has to make up for the share of taxes that I am no longer paying.
To keep values across the whole state fair, the Wisconsin Department of Revenue equalizes them through a methodology that I don't pretend to understand. That is why your tax bill reflects an assessed value and a fair market value. The magic formula that they apply should transform oranges and 1,850 other varieties of fruits into apples so the tax burden of all state taxpayers is fair. I always took the equalization process as a matter of faith. It was only when we froze our levy for a period of four years, and taxpayers still called to complain about why the county share of their tax bill had gone up by 10 percent, that I became concerned about the system. I have absolutely no inside information on the subject, but I wonder if state officials have come to the same conclusion and are now proposing to relieve 1,800 jurisdictions of the duty and assign it to counties.
What is truly interesting about Walker's proposal is that it is nearly identical to one proposed by Jim Doyle in 2009. For two men, who could probably never agree on the color of the sky, to come to the same conclusion of tax assessments tells me that there really may be a problem.
In my next column, I will share some concerns that I have about the proposal and highlight some additional budget issues that will impact local taxpayers.
Dave Bretl is the Walworth County administrator. Contact him at (262) 741-4357 or visit www.co.walworth.wi.us.