Property Tax Assessment Limits

1. Property Tax Assessment Limits David L. Sjoquist Georgia Municipal Association Revenue and Finance Committee Meetig January 25, 2009 Atlanta, Georgia

2. HR 1 • Limits increases in assessed value • Lesser of 3% or inflation rate • Applies only to real property • Applies to both residential & nonresidential

3. HR 1 • Start with valuation for 2010 • Additions or improvements added at FMV • Property that is sold or transferred • Implemented by general law • Correct factual errors in valuation

4. HR 1 • Existing floating homestead exemptions • Columbus-Muscogee • Millage rate cap

5. Issues • Treatment of centrally assessed property • 3% becomes the annual target • Transfer or sale of property • What if market values fall?

6. Example 1 2010 AV = $100,000 2015 AV = $115,000 2015 AV-FMV = $125,000 2016 AV-FMV = $121,000 2016 AV = $118,450 (=$115,000 + 3%)

7. Example 2 2010 AV = $100,000 2015 AV = $115,000 2016 AV-FMV = $110,000 2017 AV-FMV = $121,000 What assessed value to use: $118,450 (=$115,000 + 3%) or $113,300 (=$110,000 + 3%)

8. Implications • Reduce the growth in the base • Growth in property values • New construction • Turnover of property

9. Estimated Property Tax Base Reduction (2005 to 2007)

13. Real Property Assessment Differential (Florida)

14. Implications • Local Government Budget • Higher millage rates • Cut services • Find alternative revenue sources • Look to the state -- strings attached • Changes the distribution of the tax burden • New owners • Frequent movers • Slow appreciating property

15. Example

16. Example

17. Implications • Lock In Effect • Owners with substantial tax savings • are reluctant to move

18. Benefits/Appeal • Predictable Tax Levies • Ability to pay • Revenue Stability

19. Assessment Limits: 20 states Differ by: Coverage (all but 4 are statewide) Eligible property Parcel value vs. aggregate assessment (all but 2 are parcel based) Treatment upon sale (most limits removed on sale) Allowable increase

20. Thank you QUESTIONS?