Comments:

Ypsidixit - 2007-10-25 13:47:07
Wow! Here's a Time article about this very subject!

"IN their desperate search for cold cash, officials of financially strapped cities have lately been offering much apocalyptic prophecy about the impending bankruptcy of municipal governments (see THE NATION). Cities have reached the limit of their taxing powers, they insist, and the Federal Government must rush to their rescue. Touring New York City last week to impress on the public the urgency of their plight, the mayors of eleven cities sounded even gloomier than usual. Said Boston's Kevin White: "Look, we raise 70% of our money with the property tax, but half our property is untaxable and 20% of our people are on welfare. Could you run a business that way?"

"One of the major problems is that municipal governments depend on property taxes, mainly from real estate, for an average of 85% of the money that they raise locally. This year these governments will collect some $37 billion in property taxes, up from $22.6 billion in 1965. But the property-tax system is a mess. Most fiscal experts agree that it is disgracefully administered and unfair to millions of individual taxpayers. Despite the legal requirement that property of equal value must be taxed alike, a Census Bureau study found that the typical homeowner can expect a tax bill that is 20% more—or less—than it ought to be. Some big, rich property owners pay little or nothing at all.

"Erratic Assessments. In greatly differing ways, the cry for changes in the property tax has been picked up by men as disparate in their views as California Governor Ronald Reagan, Michigan Governor William Milliken, former Senator Paul Douglas. Educator Robert Hutchins and HUD Secretary George Romney. Ralph Nader has added the reform of property taxes to his roster of causes, charging that so much business and industrial real estate is undertaxed as to constitute "a national scandal of corruption, illegalities and incompetence." As a result, says Nader, "small businessmen and the owners of houses are paying nearly one-third more in taxes to meet local revenue needs." Prodded by Nader, Maine Senator Edmund Muskie's Subcommittee on Intergovernmental Relations plans to hold hearings on property taxes in several cities this spring.

"Tax assessments are erratic and often unfair, partly because many tax assessors are ill-trained and poorly paid (average: $6,900) political creatures. About half of the nation's 15,000 chief assessors are elected, but few states require any professional qualifications for holding the office. Flouting the law, assessors often appraise properties at widely varying fractions of their true value. The difficulties of challenging appraisals are so formidable that the assessors generally get away with it."
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Y. - 2007-10-25 13:47:52
Link to the rest of the article.
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Unfiltered - 2007-10-25 15:13:28
I know this hasn't been a place for tax talk, but this is my fear about the income tax vote. Ypsilanti may get income tax revenue in the short term, but in the long term it could surpress the property tax revenue, which is the real bread and butter of the city budget.
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Ypsidixit - 2007-10-25 15:19:16
Wow--that is a very good point. I haven't heard it raised before.

Hmm...but, would not the proposed property tax rollback be in effect only so long as the income tax is?
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Murph - 2007-10-25 17:34:54
Michigan's property tax laws were not designed for a down market.

Your property's assessed "true cash value (TCV)" on Jan 1 of any year is based on the previous two years worth of home sales ("comparables"). But the two years doesn't end in December - the two years ends in April, 9 months ago. So if the market was going up for two years, but then started to tank in May, your assessment will still go *up*, because the data that the assessor is required to use is 9-25 months old. Even after the first full year of a down market, assessments can still go up, again based on the data requirements.

We have to get a good long way into a down market before the assessing formula catches up.
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Murph - 2007-10-25 17:49:51
Also, even once your assessed value starts to go down, your taxable value could still go up - this is the double-edge of Proposal A.

Prop A, back in 1994, was sold to the public as a way to prevent poor little senior citizens on fixed incomes from being taxed out of their homes when their property values went up by 10%+ a year. (As our County Clerk/Register Larry Kestenbaum will tell you, it's really a very good trick for shifting tax burdens off of big business and onto homeowners in the long run.) It limits the amount by which your taxable value can go up every year, no matter how much your assessed value goes up.

So, unless you're a new homeowner who just bought your home in the past year or so, and suffered the dreaded "Prop A Pop-up" (when the property is sold, the taxable value "pops up" to the assessed value, meaning that your tax bill goes up a lot from the previous owners), you've probably got a good cushion between your taxable value and your assessed value. And - guess what - Prop A doesn't care which direction the assessed value is going, it just cares about whether the taxable value is below the assessed value.

So your taxable value can go up, even while your assessed value goes down, until that buffer that''s grown throughout the up market is eaten up. Depending on how long you've owned your house, it might be years before your taxable value catches up to your assessed value and starts going back down with the assessed (pessimistically assuming the down market is still on at that time).

Also, I think your bolded note on assessors is not applicable in the immediate case. I know the City has a full-time staff (not elected), professionally trained assessor; my guess would be that the Township does too. Additionally, there's a step in the process, at least in Michigan, called a "State Equalized Value" (SEV). I'm a little fuzzy on this, but I believe that, essentially, the State comes in every once in a while and double-checks the local assessor's work. Communities get an "equalization factor" based on what the state finds, and assessments are adjusted based on that factor (assuming that the local assessor made the same sort of mistake - too high or too low - across all properties).
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Unfiltered - 2007-10-25 18:56:01
Thanks for the education Murph.
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Ypsidixit - 2007-10-25 20:57:36
Murph, your answer exemplifies why blogging is so rewarding sometimes. Thank you for such an informative, helpful, and interesting answer. You made what was rather (obviously) opaque to me transparent, and repaid my ignorance with knowledge. Thank you.

p.s. You are right, that last bolded section about assessors seems to imply suspicion. I was actually just surprised to learn how "loose" the process can be in some other cases.

Thanks again.
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sleepy in ypsi - 2007-10-25 21:53:49
Both here and on Mark maynard's web site Murph is doing a great job of explaining arcane city business in understandable terms, with considerable intelligence and clarity.

In doing so he changes peeved city residents to mollified and appreciative ones. The city should take note.

Someone give this gentleman a 30-year contract please.
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BVos - 2007-10-25 22:32:14
Murph would likely gladly take it given the uncertain future his current position holds.
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Mr. Botox - 2007-10-26 00:57:45
It should also be noted that that Time article is from 1971!
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Ypsidixit - 2007-10-26 01:09:55
Well, I'm from 1967, myself, but I fancy I still have a few relevant things to say. :) The CNN article serves as a springboard from which to examine the contemporary local role of property tax assessor.
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Murph - 2007-10-26 07:53:52
Thanks - I do what I can, and I'm glad people appreciate it.

I hadn't even noticed on first glance that the article was from the '70s (I kinda assumed "former" in front of Reagan and Milliken, et al). I think there have been some big steps in terms of the professionalization of government since that time (no doubt motivated by problems such as the ones noted).

The election of assessors mentioned in the article reminds me of the odd mish-mash of officials we have in Michigan. (Generalizing quite a bit here...) In Washtenaw's cities, ranging in size from Ann Arbor to Ypsi to Chelsea, elected officials set policy for a professional city manager to execute. Similarly, the County Commission / County Executive. The Townships, though, elect their executives - Supervisor, Clerk, and Treasurer - who are also part of the policy body. The County elects Clerk/Register, Sheriff, and County Prosecutor, all of whom have significant policy and executive roles in their realms. And, hey, the Drain Commissioner? If there's any doubt that Michigan's local governmental system was set up for an agrarian society, the elected position of Drain Commissioner should clear it up.
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Ypsidixit - 2007-10-26 08:21:11
Absolutely, Drain Commissioners were important in early MIchigan history. Historical-minded kind readers know that Michigan Territory was a malarial swamp before the vital drainage that rendered it farmable. Tidbit:

"Don't go, to Michigan, that land of ills;
The word means ague, fever and chills."
[ague = malaria]

"So ran a popular chant of the 1830s. The pioneers who fanned out across the southern parts of the peninsula in the 1820s and 1830s to carve homesteads out of the wilderness counted wild animals, loneliness, lack of creature comforts and backbreaking labor among the least of their worries. It was the ague (pronounced A'gue), what we have come to call malaria, that they feared the most.

"Few, if any, escaped a bout with the disease. Lenawee County pioneer F.R. Stebbens remembered that during the fall of 1838 there were three persons sick with "chill fever" to every one well. Anson Van Buren, who settled in Calhoun Count y in the 1830s, described two brothers who were the last ones in the settlement to get the ague. They had begun to boast that they were immune to the disease when they both came down with an especially severe case. Martin Mapes, according to Van Buren, shook so hard that "the dishes rattled- on the shelves against the log wall." Another account tells of workmen scrambling down from a roof they were shingling because the ague-ridden inhabitants shook the cabin so.

"Frontier vernacular termed the disease the "FevNag," the "Ag-in-Fev," the "Shakin Ager," or simply the "Shakes." Whatever they called it, pioneers quickly learned its symptoms. First came yawnings and stretchings and the fingernails turned bluish. Then, as Van Buren recalled, a cold sensation "crept over your system in streaks, faster and faster, and then colder and colder in successive undulations that coursed down your back." Following cold chills that set the patients's body to shaki ng came warm flashes that increased into burning fever. In a few hours, or sometimes several days later, the fever broke in a sweat.

"Some patients experienced the cycle every day, others every other or third day, in a predictable pattern. The disease was so widespread that pioneers accepted it as part of life in Michigan territory and they learned to work around its disabling symptoms by dividing their calendars into "well days" and "ague days." Ministers, lawyers, judges and doctors scheduled their appointments so as to accommodate the "shakes." Housewives planned their washing, ironing and baking around times when they expected to be down with the "fits." According to Van Buren, beaus who "went sparking" on their well nights were sometimes disappointed to find their beloved chattering with the ague."
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One more historical note - 2007-10-26 08:25:50
To give some idea of how swampy it was in this region, here's a tidbit concerning the Black Swamp southwest of here in northern Ohio:

"The impassability of the swamp became an obstacle during the so-called Toledo War (1835-36), when the Michigan and Ohio militias were unable to find each other, and thus were unable to battle."
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Unfiltered - 2007-10-26 13:28:28
The politically correct word for swamp is wetland. I for one am glad there were no environmentalists around back then to prevent draining the swamps.
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The Forager - 2007-10-26 13:36:31
We currently have 232 Swamps in our database located in Michigan (MI).
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Ypsidixit - 2007-10-26 13:55:49

Some interesting things have occurred in Washtenaw County swamps.
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