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Five years ago, the average single-family home in Virginia Beach was valued at $199,700 for tax purposes. Then the real estate boom hit full-bore. Assessments jumped an average of 12 percent that year, then 22 percent, then 23 percent, then 21 percent before leveling off last year at 1.3 percent.
Looking at the tax rolls, you'd think that house - assuming it had appreciated at the average rate - would sell for around $400,000. But you'd be wrong, because these days, in these parts, assessed value doesn't necessarily equal market value.
Part of the problem is that home sales have stalled. Assessors are having a hard time finding comparable sales from the past year to affix accurate values. But that doesn't mean cities should be using data from 2007 to figure out the value of homes in 2009.
Assessments are supposed to be updated "to keep that value consistent with what the property is worth on the open market," Virginia Beach's Web site notes. In other words, market value that is fair - and current.
In the past year, the median price for homes in South Hampton Roads has dropped 7.4 percent, the Virginia Beach-based Real Estate Information Network reported, and nationally, sales prices have plunged more than 15 percent. In contrast, Virginia Beach's average residential assessment dropped only 4 percent this year. Chesapeake declined 1.8 percent; Suffolk, 1 percent; Portsmouth, a fraction of 1 percent.
Such results lead to inflated tax values. One Virginia Beach broker told The Pilot in January that every home he sold in 2008 was for less than assessed value. That should not be happening.
Inflated tax values also typically result in elected officials reducing the tax rate to compensate for the rise in assessments. In 2005, for example, the Virginia Beach City Council cut the tax rate by 17 cents to compensate for the average 22 percent assessment increase. The property owner of the average home still paid $89 more in taxes.
It seems like a way for the city to game the system - for a while. Politicians can say they cut taxes, even though higher assessments mean they have more money to spend.
But eventually the system comes back to haunt them. Real estate revenues make up between one-quarter and one-third of a city's budget. With a reduced tax rate, and the value of homes dropping significantly - prices are down about 28 percent from their peak in July 2006 - Virginia Beach will be hard-pressed to sustain its budget if and when assessments finally catch up with sales prices.
South Hampton Roads' cities owe residents a better system of assessing property. They owe residents an open, transparent process that ensures accountability. Property owners are never likely to jump for joy when they receive their tax notices, but they should be able to trust that they accurately represent the fair market value of their homes. Right now, they can't.
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no solution under current law
The current system is unfair and frequently abused, and obviously there's no perfect way to determine the market value of a home that isn't on the market. So don't. Change the state law so that homes are taxed based on the last sale price, and that assessment is predictably locked in until somebody moves, renovates, or dies.
Of course it will never happen because if the cities actually know what their means are, the voters might actually start expecting them to live within them.
I kills me to admit it but,
I kills me to admit it but, I have to agree with Mr. Barrett on this one. In my opinion, there is nothing wrong with the current method of assessment other than the inherent assumption that people will not be too lazy to even try to understand it. If you don't agree with your assessment, appeal it. Still not happy, take it to the Equalization Board. Do it every year if you want to; it's well within your rights. You're always going to lose if you don't understand the rules of the game and only after you understand them, can you work to change them. Otherwise, you are ignored.
"The judges of the circuit court shall annually appoint a board of equalization ... Such board of equalization shall have and may exercise the powers to revise, correct and amend any assessment of real estate and to that end shall have all powers conferred upon boards of equalization by general law." -VB City Charter
http://dls.state.va.us/lrc/charters/VABeach.pdf
It's not all that boring.
Here's another fact for ya
Here's another fact for ya all to ponder. My family has lived in the same home for 42 years, my parents house that I grew up in. Their property taxes are not much more now than they were the day they moved in to the house. The property taxes do not change much until the home is sold. Once sold, it is taxed at the value it is sold for. They see yearly increases of no more than one or two percent. the problem with our system is that when we have soaring values families are slammed with huge monthly increases in taxes. Not everyone has an extra $150.00 per month to pass on to the city to squander. Yes, mine went up in 2006, 2007 $150.00. The city then spends their new found riches, and when values go down they are unable to reduce assessments. They now need the money. Kind of like what Kaine is about to do with the unemployment funds in the so called stimulus bill. When the two years are up. We'll have to replace that money. Duh.
What infuritates me is that
What infuritates me is that all the cities in Hampton Roads, spent, spent and spent some more. Even if our assessments are lowered to reflect the actual value of our homes, our "leaders" will find another way to squeaze our remaining pennies out of us. Case in point, Chesapeakes new trash fee of $16.00 per month. I'd guess that that new fee is approximate to what the city is loosing as a result of our whopping 1.8% real estate value reduction. Anyone with half a brain should have known that these values were not sustainable. I for one could not understand how people were affording these homes. There are two in my neighborhood just sold at auction. Five more are empty. My rate was reduced 1.6% Yippee!!! I agree Bob, I'm about ready to let those thieves have it.
Accessments should be no more than what city would pay for prope
I believe that anyone should be able to sell their property with no questions asked to the city for the amount that the city has accessed their place. A law should be enacted that says that the city would have to buy any property immediately from any landowner who request it and pay the full price of accessment for that said property. If they think it is worth that much, they should have no problem selling it for that much. I bet that would keep accessments in line real quick.
Missed the Point
Well of course Al, the editorial had nothing to do with how much or how little the budget should be; it was about assessments. My point to you was that if a new responsive system is adopted, it goes up and down. Of course, you will be the first to howl if the assessment goes up immediately, and the first to howl if it does not go down fast enough. You can't have it both ways. I think the current system, when considered in the context of council setting a higher or lower tax rate to compensate for increased or decreased assessments works quite well for the overwhelming majority of property owners, and for the few who believe they are not treated fairly, they can appeal to the assessor, and if they are not satisfied, to the Board of Equalization. It really is a fair and equitable process. My problem with the editorial is they discussed all the issues, but never professed to know of a better system. Why then write the editorial at all?
Assessments Were City Windfall
The budget will have increased by a staggering $821 million since 2000 under the City's new budget proposal. That budget hike is incomprehensible, particularly, since VB's population has slowed to a crawl. Throughout this mirage Residents are the one's who received a massive shortfall! So for starters Mike, I am not sure what your point is. Are you saying assessments should not be questioned or appealed? Please tell me why would you suggest the notion that the editorial staff deep six their very thoughtful conclusions. Clearly, this editorial was adopted with much thought and reflection. Assessments dropped by less 4% in 09/10 while the residential community received assessment hikes of 120% and over. lowering a families tax burden is a vital initiative. It genuinely helps increase a households disposable income and equally important, an increase in ones disposable income can dramatically help mitigate the needs of the clobbered retail community.
faster is not better
Well yes, Al, they sure are, so that when assessments start going back up again, the taxpayer can have his assessment increased as well. That is what I mean by being careful about wishing for a new and more responsive system. In the heyday of 20% increases per year, you would have gotten that bill a lot faster.
wonderful article - long overdue
A City Council is responsible to institute methodologies that assure that an City Assessor will strive for an analysis that will always determine fair market value. Some cities are much more committed to determine that appropriate threshold. . .Take Arlington, Virginia who posts all Comp sales for 2-3 years within a neighborhood; a review of properties by trademark are available on line and the historical record goes back to 1997. VB allows a historical window of 4-5 years on line. Also note how Arlington deals with refining their sales comp analysis below.
"Late in the year, statistical testing of the market value models developed for single-family neighborhoods and condominium projects is conducted using sales that have occurred after June 30, 2008. These analyses are used to test the predictive accuracy of the assessment models and to identify those that may require refinement". Yup, the assessors door is never shut and stakeholders are assured a level playing field in Arlington, Virginia
Statistics
"And most likely, less chance of being murdered (looking at the crime statistics)"
It's easy to sound authoritative by throwing around comments and citing statistics without actually providing the numbers or the source of those numbers. The cities noted (Raleigh, Durham, and Austin, relative to Hampton Roads) have a spread of murder rates (any number other than zero is too high, of course). Easy to check on the www.city-data.com if you have an interest. If you look at the average from 2000-2007, the rankings from highest/worst to lowest/best would be Norfolk, Durham, Raleigh, Austin, Virginia Beach. Since "Hampton Roads" was referred to in the post, you need to look at more than just Norfolk (just like there is a pretty wide spread between Raleigh and Durham), and cities in Texas, like everywhere but Virginia, have huge swaths of suburbia within their city limits due to annexation that is prohibited for cities (not towns) in the commonwealth.