What the heck is going on with your property taxes ? ? ? ? The Perfect Storm

If your property tax bill went up or stayed the same this year, even though your property assessment went down—it is not because we raised your taxes.

The City of Milan millage is set at 15.50 mills and has not changed. (Thanks to my predecessor, Mayor Owen Diaz, our tax rate was reduced two years ago by one-quarter of one mill.)

What has changed is our ailing national economy, which has trickled down to affect our local economy as well.

We are experiencing what I think of, economically speaking as,

“The Perfect Storm.”

A virtual swirling mass created by our tanked housing market, the long term affects of Proposal A, and the recession which have converged into one tornado-like vacuum causing our overall economy to shrink rather than grow.

I’ll focus on just the property tax aspect of this storm in today’s blog.

In 1994 the voters of Michigan passed a ballot initiative known as Proposal A; which has, henceforth severed the direct link between taxable value and assessed value. Up until that point, your assessed value was directly linked to your taxable value, (or tax bill.)

This means that now, and since 1994, when you purchase a property, from the date you become the new owner of that property, your taxable value is automatically reset to equal your assessed value, which comes to approximately 50 percent of your property’s market value.

As we all know, our market value is a fluid factor which will increase or decrease depending on the overall economic and market weather conditions.

If the market goes up after your purchase, then your property’s assessed value goes up, and the taxable value on that property would increase as well.

But---add Proposal A to this equation, and things get a little more complicated.

Proposal A places a “cap” on how fast your taxable value can increase.

Your property’s taxable value cannot increase faster than the rate of inflation or more than 5-percent, whichever of these two limits is lower.

If you hold on to your property, this “cap” will over time create a “gap” between your assessed value and your taxable value.

In a market that goes up more than inflation, this gap between your property’s assessed value and a property’s taxable value will continue to increase.

The stickler here is:

The Proposal A law allows your taxable value to go up even when your assessed value goes down, until the two values become equal.

This is a VERY HARD pill for any of us to swallow.

It seems counter-intuitive and unfair.

For many in Milan, this is what happened---and because of this, the City of Milan **Board of Review had more than 50 petitioners (including letters) appeal their property tax bills this year.

**What is the Board of Review? This is a three person board, appointed by the mayor for residents who need to appeal their property assessments, this is the entity they “petition” their “case” to. The Board of Review Petitioner (resident property owner) is notified of the Board's decision in writing. The Board of Review can ONLY change an assessment, NOT a taxable value. The taxable value is driven by what the assessed value does. The Board of Review hears the petitioner’s case, makes a decision then mails it in writing to the resident. State law requires that the notification be sent to the petitioning resident by June 1, 2009. We try to get them out in April. This year they were sent April 15, 2009.**

According to our city assessor, there is new legislation that has been introduced (again this year) to stop the taxable value from increasing when the assessed value decreases.

The City of Milan appraises each property yearly, using “mass appraisal techniques,” according to our city assessor Karen Page.

This is accomplished using factors and values developed through neighborhood sales studies. Moreover, our assessor and other staff from our building and zoning department visit each sale property used.

“Normally the sales study period is a two year study (for 2009 assessments the sale dates would be from April 1, 2006 through March 31, 2008,” Page explained. “In a declining market the State Tax Commission allows us to use a one year study (for 2009 assessments the sale dates would be from October 1, 2007 through September 30, 2008.) For 2009 we did use a one year study.”

In addition, the city assessing department physically inspected over 500 properties in 2008.

Right now this is the most up to date explanation I can offer you on why we’re in this current predicament.

We are definitely in a time of recession right now, which means our economy is retracting or shrinking instead of growing and expanding. According to the economic experts, this current situation is normal and expected in the overall economic cycle of our capitalistic based economy.

In short: things are not great right now because of this “Perfect Storm.” But I am confident that we, as a city, will weather it, and come out of this stronger than we were.