For the past four years, real estate values have experienced a steady increase and we have seen an improvement in overall market conditions. As the economy improves, the inventory of existing homes for sale has been reduced and values have steadily increased. The increase in value does not necessarily translate to an increase in your property tax. The increase in taxes is a direct result of the decision of the taxing authority.
The market value of a property is determined by one of three approaches to value. The most common being the sales comparison approach. This approach compares a piece of property to other properties with similar characteristics that have been recently sold on the open market. Once we determine the value of a property based on current market conditions, we then apply any applicable caps and exemptions to determine the property’s taxable value. It’s important to note that we do not determine the market value of a property. Previous sales determine the market value. We reflect what is happening in the real estate market only after it takes place.
There’s a common misconception that property values drive up ad-valorem taxation. This couldn’t be farther from the truth as both items, while similar in nature, have a very different meaning.
The Property Appraiser’s Office certifies the preliminary tax roll every year to each taxing authority. It is the taxing authorities (i.e. County, School Board, City, Water Management, etc.) who levy their millage (tax-rate) based on their financial needs. Using the scenario that property values increase, the taxing authority has one of three options.
1. Maintain the same tax-rate as the prior year and bring in additional revenue.
2. Increase the tax-rate and bring in more revenue.
3. Opt to use the Rollback rate and maintain the same revenue as the prior year.
The Rollback rate calls for a change, typically a decrease, in the tax rate to fund the same level of service as the prior year’s budget. This in fact prevents a tax increase for property owners, even though your property’s taxable value may have increased. Taxing Authorities, like the County, are calculating rates based on aggregate changes in taxable value. The change to the taxable value of an individual property could be different for each owner.
Always remember – it’s the Property Appraiser’s job to appraise your property to a fair market value each year. If you feel your property is not assessed correctly, call us, we are more than happy to discuss it with you. However, if you feel your taxes are too high, call your Commissioners. I’m certain they will be happy to discuss their tax rate with you.
As always, if you have any questions, please do not hesitate to call. Thank you for the opportunity to serve as your Property Appraiser. It truly is an honor and privilege.