Taxing Times: Assessment, Market Differences Hit Home When Bill Arrives

RISMEDIA, Jan. 30, 2007-(MCT)-Brenda Boyce is frustrated. Her tax bill assumes her house is worth thousands of dollars more than anybody seems willing to pay.

"Our townhouse in Wauwatosa, on the market for eight months, was reassessed at $391,000 last summer," Boyce said. "Our asking price, after being lowered twice, is now $349,900 and still we have not received any legitimate offers. Assessments are completely out of whack with values."

Boom conditions ended abruptly last year, sapping value from many properties. Yet the latest crop of tax bills is based on assessed value as of Jan. 1, 2006 — which may have been the finale of the 2000-'05 housing price run-up.

That's bad enough in theory. Homeowners trying to sell are hard-hit when assessments collide with harsh market realities.

"After trending up, trending up, for five years straight, suddenly we reached the top and now we're cresting down a little," said Steve Stiloski, president of the Appraisal Institute's Wisconsin chapter and owner of Commercial Property Consultants Inc. in Jackson.

Some local assessors, especially those who rely on mass valuations of residential properties, "may be overshooting" housing values, Stiloski said.

Dipping home values could set the stage for lowered assessments across Wisconsin this year. If the change in values is broad, it could reduce homeowners' share of Wisconsin's property tax burden. If so, commercial and industrial property owners would pay more. Wisconsin's total property tax stands at $8.1 billion, billed last month for payment in 2007.

The last drop in Wisconsin's residential property levy, aside from the 1996-'97 massive change caused by an infusion of outside aid to schools when the state assumed two-thirds of all school costs, was in the global recession of 1973-'74, reported Dale J. Knapp, research director of Wisconsin Taxpayers Alliance.

House values rose an average of 10% in 2005, the boom's peak, according to the state Department of Revenue. As house prices spiraled upward — faster than any other kind of property — homeowners' share of state property taxes grew and grew.

In 1982, homeowners paid 57.7% of total property taxes. This year, they're paying 72.5%, Knapp's group reports.

Unwinding the spiral
Now, that pattern appears to have ended. Last year's sales estimates from Multiple Listing Service, which reports Realtor-brokered transactions, suggest that prices have leveled off. It's likely, Knapp said, that the downturn left some overvalued housing in its wake.

"It's not that big of a deal for the most part because probably everybody is valued higher. But to the extent that one area is declining more than the others, you might get distortions. Those residents might be overtaxed slightly," Knapp said.

Milwaukeean Jim Gehl puts himself in the unhappy camp of those whose homes wound up overvalued and are paying more than their fair share this year.

He and his wife, Kim, are selling their 2-year-old east side condo, asking price $249,900, because of a job transfer. Despite no offers in six months, Gehl said, "I'm in no mood to sell for a lower value than I paid, especially after paying taxes from a city that says my assessment is $12,000 higher than what I purchased it for. The city needs to look at the real value of properties."

William D. Harmer of Fond du Lac isn't worried about getting shortchanged on a sale- he's not moving-but about being overtaxed.

His city revalued property in 2006, "which will peg value at a peak in the falling real estate value market," he said. "That's one way of getting more money out of us-and they can say the tax rate is going down."

History not written yet
Assessors don't know yet exactly what happened to state housing values last year.

"Most assessors probably won't be able to give you this information until March or April," said Peter Krystowiak, the City of Kenosha's deputy assessor. His office is waiting for information on November and December property sales.

Kenosha's 2006 revaluation showed an 18% rise in property values since 2004. "We'll definitely not be in that range this year," Krystowiak said.

The City of Milwaukee, where residential values showed a 12.35% jump on last year's annual assessment, recorded a 5% to 6% house price appreciation rate through last summer, said Assessment Commissioner Mary Reavey.

"I wouldn't be surprised to see a fourth-quarter dip, but I don't think it will be enough to pull down the whole year," Reavey said. "Do I think that there are individual neighborhoods that maybe have gone down in value? Yes. It would be the first time that's happened since 1996, and I expect it to be sporadic."

Bills are what they are
There's no correcting 2006 assessed values, revenue officials say. The challenge process, which follows a spring-summer timetable, is closed to those who didn't speak up in time.

"Assessments, and our equalized values (to put all communities at fair-market value) are based on the prior-year sales," said Audra Brennan, executive assistant for the state Department of Revenue, "so you'd see any adjustments the following year."

By April, most assessors will affix 2007 values to properties. That affords a new opportunity to tailor property values to post-boom market conditions. In cases where the assessor balks, however, it will take recent sales data of comparable properties, and possibly expert help, to prove a home's diminished value.

"It may be asking a little much for a consumer to cull the sales data," said appraiser Donald J. Moore, president of Houses.com. "But my gut tells me it will be up to the individual property owner to see that their assessment is lowered. Those who take the opportunity may be rewarded. Those who don't-well, you'll be paying for the guy who did."

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