Drops in assessment figures not as steep as in past years

Preliminary information released by the Oakland County Equalization Division indicates assessed residential property values in western Oakland County have continued to fall significantly in the last year — but not as sharply as they did in each of the previous two years. Property values reportedly fell across the lakes area for the third year in a row, according to the preliminary data.

According to preliminary figures provided by Dave Hieber, manager of the Oakland County Equalization Division, residential property assessments fell an average of 8.18 percent in the 11 lakes area communities based on real estate sales between Oct. 1, 2009 and Sept. 30, 2010. Residential property values dropped an average of 17.32 percent by this time last year. The year before that the county’s Equalization Division reported an average decline of 12 percent in assessed residential values in the 11 lakes area communities.

The latest commercial and industrial property assessment figures have yet to be finalized, but will be within the next two weeks, according to Heiber.

Property assessment notices are expected to be mailed to owners by the end of February, if not earlier, according to most local officials. Tax bills based on final property assessment figures for the year — to be reported by the Equalization Division next month — will be sent out in July and December 2011.

Assessment notices typically contain several pieces of information, including a property’s state equalized value (SEV), assessed value, and taxable value. The SEV is half of a property’s market value. A property’s assessed value represents half of a home’s selling price, and should equal the property’s SEV.

Also included in the envelope with the assessment figures is the date and time for assessment appeals in the community, where the local Board of Review will meet, and a number to call to make an appointment for a Board of Review appeal.

Under Proposal A, approved by Michigan voters in 1994, the taxable value of a property can’t grow in any given year by more than the consumer price index (CPI), or 5 percent, whichever is less. However, taxable value is reset at the property’s SEV after a property is sold or transferred.

For many years, properties in western Oakland County would rise in assessed value each year by double-digit percentages. However, under Proposal A, taxable value increases were capped at the CPI or 5 percent. Under that scenario, a large gap between a property’s assessed value and taxable value occurred over time. As such, an owner’s annual property tax bill could continue to rise even if the property’s assessed value declined for the year. Property owners wouldn’t see a drop in their actual taxes until their property’s assessed value dropped below the property’s taxable value — a scenario that’s becoming more common following several years of assessment declines.

An actual tax bill is calculated by multiplying a property’s taxable value by the local millage rate. A mill is equal to $1 for every $1,000 of a property’s taxable value.

Given the third year of significant decreases in assessed values for most residential, commercial, and industrial properties, taxable values are more likely to fall regardless of the CPI, and most communities will see a loss in taxable values and tax revenues unless they ratchet up their millage rates.

According to the preliminary residential assessment figures released by the county’s Equalization Department, Waterford Township once again leads the lakes area communities with the greatest drop in residential property assessments, this year at an estimated average of 14.22 percent. Residential property assessments fell the least in Wixom over the past year, at an average decline of 3.64 percent.

Wolverine Lake’s property assessment figures are collected and incorporated into Commerce Township’s, and Milford Village’s are collected and incorporated into Milford Township’s.

The county’s Equalization Division verifies the accuracy of local property assessments, and also assesses property for about two dozen cities and townships in Oakland County.

Property owners not satisfied with their new property assessments can appeal those assessment before their local Board of Review in March. Those who disagree with Board of Review decisions may appeal to the Michigan Tax Tribunal, a tax court within the Michigan Department of Consumer and Industry Services.

The Michigan Tax Tribunal is a state agency which hears appeals on a state level. It’s the only recourse a property owner has if their municipality denies their assessment appeal at a local Board of Review meeting. Disputes involving properties with SEVs below $100,000 may be filed in the Michigan Tax Tribunal’s Small Claims Department. It uses an informal hearing process to handle such appeals.

The appeals process first requires an appearance before the local Board of Review in March, then an appeal filed with the state, usually by the end of June, if necessary. The tribunal then sends a petition to the taxpayer, who completes and returns it. The case will then be scheduled for a hearing with a referee. Petitioners have the burden of proving their property assessment is incorrect.

Referees hear the case and submit a proposed decision to a supervising judge, who will then review it. Those unhappy with a decision may request a rehearing if a legal or factual mistake was made. If a rehearing is denied, the decision may be appealed to the state Court of Appeals.

The Oakland County Equalization Division works with city, township, and village Boards of Review to assist them in preparation for the review process, and to help determine values for residential, commercial, and industrial properties.

The Equalization Division tracks homestead properties, meaning a primary residence, and non-homestead properties. It also reviews existing properties on a regular basis, such as every five to 10 years, to make sure there haven’t been any non-permitted improvements made to the property, whether residential or commercial. Personnel visit all new homes under construction, those having improvements or renovations done, as well as new or improved commercial and industrial properties in order to provide local Boards of Reviews with the most up-to-date information available about property in their municipality.

According to Supervisor Robert Scripture of the Oakland County Equalization Division, there are a lot of different stresses working on property valuation around the county and it’s constituent communities.

“Property assessments continue to decline solely because homes are selling for less than two times their assessed values,” Scripture said. “The factors that may contribute to the low selling prices may consist of high levels of foreclosures, a high supply of homes on the market, or perhaps the state of Michigan’s economy.”

He said the impact of falling assessments on local governments will continue to be smaller budgets. Fully 50 percent of Oakland County’s operating budget relies on property taxes. As property values continue to shrink, so has the county’s budget.

The trend of declining property assessments is expected to continue.

“For 2011, we are expecting residential SEV to change, down 8 percent; commercial SEV down 12 percent; and industrial SEV will go down by 14.5 percent,” Scripture said. “We expect another year of decreasing property tax revenue for units of government.”

In general, market transactions are used by assessors to compare assessed values with actual sales prices for similar properties. Assessed value is based on sales price, or the true cash value of similar properties. Every year, assessors determine the assessed value of parcels of land. The assessed value is generally half of the property’s anticipated sales price, but since the market changes all the time, assessors re-evaluate their ratios once a year through a sales study.

“Oakland County Equalization assesses residential real property using the cost method,” Scripture said. “Primarily driven by square footage, the cost of replacing a structure is calculated using state approved rates in a Computer-Aided Mass Appraisal system (then adding the cost of the land). The sales in the neighborhood then provide the information needed to adjust the values to reflect the market. When changes are made to a property, the assessor typically visits the property to update the property record.”

Many communities have their own assessors and perform those duties themselves, while others contract with the county to get that done. Oakland County performs contract assessing for approximately a third of Oakland County’s communities.

The following is a breakdown of lakes area preliminary residential property assessment figures, and comments from local officials on how the decline in assessments may impact their community’s property tax revenues and Board of Review cases this year.

WIXOM

Of all the lakes area communities, Wixom realized the lowest average residential assessment decline, dropping by only 3.64 percent.

“That’s a good thing,” said Mayor Kevin Hinkley. “Keeping those numbers low isn’t easy for a community, but it’s a strong indicator that Wixom attracts a well-diversified workforce and an increase in demographics.”

Assistant City Manager Tony Nowicki also credits the community with maintaining property and making the city a desirable place to live.

“My sincere belief is that these numbers are based on the community as a whole — the residents, the services provided, the maintenance of the structures, and our balanced tax base of residential, commercial and industrial (land uses),” he said. “All credit must go to the residents who protect and maintain their properties, which commands a higher value for our housing stock.”

Hieber said overall taxable values in the city could drop by 9 percent given the commercial and industrial property assessments.

“The taxable value is estimated based on assumptions, and there’s a lot of industrial and personal property in Wixom,” he said. “The city is required to file their personal property report by Feb. 20 so that too will be another factor.”

Finance Director Kevin Brady said he’s reluctant to estimate how much tax revenues will drop given the new property assessments.

“Twenty percent of our tax roll is personal property,” Brady said. “We don’t have the figures for each sector available so I don’t want to start speculating. That’s not productive. We’ll wait until after Feb. 20.”

Brady said Oakland County’s numbers are more favorable than what had been estimated through a five-year trend.

“We estimated a 12 percent reduction overall, but that 20 percent in personal property can significantly alter the overall reduction of taxable values,” Brady said.

For residents seeking to question their tax assessments, the city’s Board of Review holds two dates for appeals. In 2010, 33 people appealed their tax assessments, compared to 54 in 2009, according to Assessing Clerk Debe Barker.

ORCHARD LAKE

The preliminary 2011 residential assessment figures for Orchard Lake are down an average of 5.09 percent.
According to City Clerk Janet Overholt-Green, it remains unclear how much tax revenue the city will lose due to the falling assessment figures. She said the revenue figure will depend on whether the City Council moves to increase the city’s operating millage.

“A decrease in value is only half of the equation,” she said. “If we reduce the taxable value but raise the millage rate we could collect more or the same tax. If they reduce (the tax rate), then there’s less revenue. Council has the authority to levy more operating millage than they are now, and we are taking in less than most communities.”

The city’s Finance Committee convened in early January and discussed the issue. It plans to reconvene in late February when it will present a financial plan including recommendations on a tax levy.

“The Finance Committee usually presents a plan with three scenarios including worst case, optimistic, and recommended. Council then decides the millage rate to pursue,” Overholt-Green said.

According to Hieber, Orchard Lake can expect taxable value to drop between 3 and 5 percent overall.
“There is some commercial and industrial (properties in the city) so I’d estimate a decline between 3 and 5 percent,” Hieber said.

If the estimates hold true and the city’s operating millage remains unchanged, Overholt-Green said the city would realize a loss of about $62,000 in tax revenue.

“For FY 2009-10, the loss in taxable revenue was $171,000, so we took a harder hit last year,” she said.

With property values continuing to drop, although not as sharply as in other communities, Overholt-Green said she’s unsure how many appeals cases will go before the city’s Board of Review.

“It could go either way,” she said. “There could be a decline in cases, but I think people think their tax assessment should decline more than they are. However, the city is limited to changing them once a year.”

She added that there has been a spike in the number of Michigan Tax Tribunal appeals filed by city property owners, and those cases must first appear before the local Board of Review.

In 2010, the Board of Review held four hearings, compared to the five in 2009. The city had 67 appeals filed in 2010 compared to 66 in 2009.

WALLED LAKE

Homeowners can expect an average drop of 12.57 percent in assessed value, according to the county’s most recent statistic. However, realistically, Hieber said the overall assessment decline will end up closer to between 8 and 10 percent.

“That’s an estimate given the residential, commercial and industrial taxable value,” he said.
According to Treasurer/Finance Director Kathy Kercorian, declining property assessments has already caused the city to cut 20 percent from its $5 million annual budget.

“Given the county’s estimate, the city would lose $275,000 in a year,” Kercorian said. “But to keep it in perspective, we’ve lost about $900,000 cumulatively since 2009.”

The city’s Board of Review typically holds two meetings in March, dates which are scheduled by the Oakland County Equalization Division; but, the city will hold more if need be.

“We meet as much as required to hear the appeals,” said Board of Review Member Tom Langan. “If we get more, we add more time.”

According to Langan, generally people who come before the Board of Review must be prepared and not attend just to vent their complaints about taxation.

“While we empathize, there’s not much we can do if they don’t do their homework,” he said. “People need to be prepared and have good, valid comparable (property) sales (figures) to support their argument because the county does a pretty good job in assessing properties at 50 percent of their true cash value at the end of the year.”

As to whether the number of assessment appeals will increase this year, Langan said he’s uncertain.

“I can’t say if there will be an increase or not,” he said. “If they go down we may see less than in the past few years.”

WEST BLOOMFIELD TOWNSHIP

According to the county’s preliminary figures, residential property assessments are down an average of 8.04 percent in West Bloomfield.

Township Assessor Lisa Hobart said she was still making calculations, but she estimates a possible 9 to 10 percent reduction in overall taxable values this year.

She added that the township board used a 10 percent reduction when putting together the township’s 2011 budget.

Hobert said she doesn’t have enough information yet to determine if there will be an increase or decrease in Board of Review appeals this year, but that the number should stay the same as in 2010, adding that there were approximately 1,100 appeals filed last year.

MILFORD TOWNSHIP AND VILLAGE

Preliminary county figures indicate property assessments in Milford Township and Milford Village have declined an average of 6.38 percent in the last year.

Hieber said he estimates about a 7 to 9 percent decrease in total taxable value in the communities if their tax rates remain the same.

Township Supervisor Don Green said the township based its 2011 budget on the county’s actual taxable value, the first time that the township has ever done so.

Ruth Ginsberg of Milford Township said the township had at least nine total Board of Review meeting days in 2010.

Green said he doesn’t know if the township will see an increase in appeals this year, but that officials are planning for around 300 assessment appeals.

“It all depends on if people are going back to work and assessments and taxes go down,” he said.

COMMERCE TOWNSHIP

Commerce Township and Wolverine Lake will see an average drop of 6.47 percent in residential property assessment values. Supervisor Tom Zoner said the taxable value of the entire township has gone from $2 billion in 2007 to just more than $1.6 billion today. In terms of the township’s operating revenues, that’s about $500,000 a year less to provide services for residents.

“The only salvation for the township is that residents passed the special assessment districts for police and fire service in August,” Zoner said. “We’re also fortunate that Commerce is a bedroom community. We’ve only had about 250 home foreclosures a year. That’s less than other communities.”

The other thing that will help Commerce weather the storm is conservative budgeting. The more than 6 percent loss in residential property valuation was expected to be closer to 7 percent when township officials sat down to plan the 2011 budget. In the end, the supervisor and his department heads budgeted for the year based on a 10 percent valuation loss when they actually put the budget together.

According to Zoner, there have been between 300 and 350 Board of Review appeals filed in recent years. He said the largest number came in 2009 and he expects there to be fewer this year.

“I hope the banks turn around,” Zoner said. “I hope they get more money into circulation and people can at least work on their own homes if they don’t actually buy new ones. The money has got to start moving.”

The supervisor is also holding out hopes that newly elected Gov. Rick Snyder will be able to get the gears moving in Lansing. He said the administration of former Gov. Jennifer Granholm was decidedly anti-business and it looks as though her successor will be better for the state’s business climate.

WATERFORD TOWNSHIP

Waterford Township is expected to experience a 14.22 percent average decline in residential property assessments. It’s a steep drop, only slightly less so than last year’s 15 percent drop. Supervisor Carl Solden said township officials knew another decline was coming.

“We envisioned that 2012 was going to be a problematic year,” he said. “It’s the same thing we’ve been hearing — a 10, 12 or 13 percent decline. We were hoping it wouldn’t be that bad. We’ll deal with it as we go, but it’s ugly.”

As the mortgage lending crisis gained steam in 2008 and 2009, Solden said the number of residents asking for relief from the township’s Board of Review rose dramatically. At one point, he said, there was a line of people outside township offices that prompted the addition of several extra days of assessment appeals hearings.

The big year for the Board of Review in Waterford was 2009, when 862 cases came before the panel. That number dropped to 521 in 2010, and 500 is the expected number for this year.

As for what will happen to the township in the wake of such a steep decline in valuation, Solden said he keeps a good sense of humor about the future.

“We’re fortunate this is not a cliff area or people might be jumping off of them,” he joked. “We’ll deal with it. I don’t know how we’ll deal with it, but we’ll deal with it.”

WHITE LAKE TOWNSHIP

According to the preliminary residential property assessment figures for 2011, White Lake Township is facing an average decline of 8.06 percent. However, township officials are unsure how much they expect to lose in tax revenue as they haven’t finished setting all the assessments yet, according to Jeanine Smith, the township’s assessor.

“Some properties need to be increased while others need to be decreased, which makes it hard to determine,” she said. “The previous couple of years we’ve seen no increases at all, but some properties actually increased in value in 2010.”

Nevertheless, the White Lake Board of Trustees took a conservative stance when preparing the 2011 budget, anticipating a 10 percent drop in property values.

While the township Board of Review heard 374 appeals in 2010, Smith said she would rather not speculate on how many appeals will be filed this year.

“It’s really hard to say based on the fact that some values are going up when the overall township is going down,” she said. “We will probably have some people wondering why their assessment went up, but I don’t know how people are going to react.”

HIGHLAND TOWNSHIP

Highland Township is facing a 9.2 percent average decline in residential property value, according to the preliminary figures provided by the county.

However, Clerk Mary McDonell said the Board of Trustees anticipated this drop and planned the budget accordingly.

“When we did the 2011 budget, we budgeted for the property taxes for 2010. We planned for $400,000 in property tax revenue, and the actual revenue was $466,000. We adjusted our numbers ahead of time knowing the cuts were coming,” she said. “We were very conservative (with our property tax revenue estimates), and it paid off because we took in more than projected.”

McDonell also acknowledged the difficulty in predicting the revenue from property taxes when putting together the budget.

“It’s pretty much a guessing game,” she said. “It used to be pretty firm. You knew based on what property revenues and taxable rates have been what the property tax revenue would be. That’s not the case anymore.”

While Highland had 346 assessment appeals filed with the Board of Review last year, McDonell said she believes there will be fewer this year.

“Last year, there was a spike in them, and they should settle down this year,” she said. “The taxes are going down for people. That doesn’t generate as much interest in coming to the Board of Review because taxes are already on the decline.”

Staff writers Alex Lundberg, Angela Niemi, Leslie Leslie Shepard-Owsley, and Michael Shelton contributed to this report.