Now that the real estate bubble has burst, or in our case, is bursting, and the economy and markets are in a downward spiral, quite a few people are questioning the increased property assessments they received a couple of months ago. A lot noticed a pretty hefty increase in their assessed values.
How does the Bossier Parish Tax Assessor arrive at these amounts?
From their website:
Different states use different levels of "fair market value" to arrive at an assessed value. One state may use 100% of value while another may use 50% and still another may use 30%. Some states even use different levels of assessment for different types of property. Louisiana uses the following levels of assessment:
Residential Improvement 10%
Commercial Improvement 15%
Personal Property 15%
Public Service 25%
The guidelines for assessment in Louisiana are set forth in the State Constitution and the Revised Statutes of the State of Louisiana. The criteria for determining fair market value can be found in RS 47:2323.
Property tax is an ad valorem tax, which means that a tax levy is apportioned among taxpayers according to the value of each taxpayer's property. The value is determined by three different approaches:
The Cost Approach – Cost to replace new less years of depreciation.
The Sales Comparison Approach – the value that similar properties of similar construction and of like age are selling for.
The Income Approach – the present worth of future benefits arising from the ownership of a property.
Data is gathered throughout the parish to assist the assessor's office in determining all three approaches to value. For example, sales of homes in your neighborhood are collected and compiled for future use. Likewise, cost to construct new homes is collected and compiled. On income producing properties records of income and expense are gathered and compiled. The size of your house and the year it was constructed, plus many other factors, are on record in the assessor's office to assist in placing a value on your property.
To be more specific, this is what RS 47:2323 says:
(1) In utilizing the market approach, the assessor shall use an appraisal technique in which the market value estimate is predicated upon prices paid in actual market transactions and current listings.
(2) In utilizing the cost approach, the assessor shall use a method in which the value of a property is derived by estimating the replacement or reproduction cost of the improvements; deducting therefrom the estimated depreciation; and then adding the market value of the land, if any.
(3) In utilizing the income approach, the assessor shall use an appraisal technique in which the anticipated net income is processed to indicate the capital amount of the investment which produces the net income.
Fair market value is one of the criteria on which your assessment is based. What do you believe the market value of your property is today, more or less than it was at this time last year? Where do you think it will be a year from now?
The Bossier City Council addressed the increases in August when they agreed to rollback the city's millage rate from 23.37 Mils to 21.69 Mils in a move to offset an increase in property assessments. The rollback means property owners will pay approximately the same amount of property taxes this year as they did in 2007. Had the City Council chosen not to rollback the rate, property owners would have had to pay an addition $1.7 million in total taxes this year due to the rise in property assessments. This gave some financial relief, but did not address the basic question.
Since a lot of the economic problems, although foreseen, did not come to fruition until very recently, there may not be a lot that can be done about assessments until next year.
This is also addressed in the Assessor’s website: Each year during the last part of August and the first of September the assessment rolls are open for inspection and for discussion of the assessment with the assessor's office. This is the time to discuss your assessment. It also is the time that the taxpayer can legally file a protest to the assessment if we cannot settle our differences as to assessment. Several taxpayers wait until the tax bill is sent around the first of December to discuss their assessment. We will discuss your assessment at that time but you cannot legally file a protest at that time.
Hopefully the economy will rebound and this will not be a question in 2009. If, however, market values decrease it will be interesting to see if the assessor makes adjustments accordingly. It will also be interesting to see if local governing bodies seek to increase millage rates to account for the difference in revenue if that does occur.
A lot of people have seen their IRAs and other retirement plans lose value in the past month. That, on top of decreasing property values and increasing assessments, combined with overall financial anxiety, has a lot of folks worried.
While we are pointedly not criticizing the Assessor for doing his job, perhaps he and some of our other public officials will address these questions.