You know those tax values that some property owners, particularly in and near downtown, have complained about after seeing their home values and corresponding tax bills double, triple and in some cases quadruple?
Well, Durham County officials hope to reduce that kind of sticker shock (along with the nearly 6,931 property tax appraisal appeals) with a recent vote that pushed up the property tax reappraisal process to three years instead of eight. The next reappraisal will be Jan. 1, 2019, which is five years sooner than the previous process.
You’re not alone if you’re thinking the county is just trying to collect more of your hard-earned dollars. Or if you still don’t understand how your property taxes increased so much even though the county’s rate was “revenue neutral.”
So we asked Durham County Tax Administrator Kimberly Simpson to explain why she recommended the move to reappraisals every three years.
(Actually she said she wanted to move it to two years, but her staff said it’s too much work to do on the ground reviews of Durham 110,000 parcels in that time period.) Here are her edited answers.
Q: What is the advantage of doing the assessment every three years versus eight?
Simpson: It isn’t necessarily an advantage to the county like people think. Any time you have that cycle, when it’s too far apart it, it affects the distribution of the tax burden. Think about where Capitol Broadcasting just purchased property near American Tobacco for almost $29 million. All the information we had prior to Jan. 1 of 2016, put about a $9 million value on the property. So you can see in a matter of nine months what is happening just downtown. The biggest advantage is that we are able to recognize the market within a shorter cycle to reduce that sticker shock per se, and it is fairly dispersing out the tax burden.
The example I give is Northeast Central Durham, where properties were valued in 2008 at $60,000 to $70,000. They were being sold as unrenovated property for $110,000. And then they were renovated and sold for $340,000. So the folks have renovated properties that are worth $300,000 and more, but up until 2016 the tax value was still $60,000 to $70,000. But homes in northern Durham had a 30 percent reduction in values. So they were, in essence, overpaying taxes, and Northeast Central might have been underpaying.
Q: What is so negative about sticker shock? Beyond the initial increase, doesn’t it also mean they avoided paying higher taxes for a few years?
Simpson: All of a sudden you get this tax value that has increased by 300 percent. And you don’t understand why 300 percent just happened. And you feel like you are not going to be able to pay the taxes because of that increase. Most of the counties in North Carolina that have moved to shorter cycles see their citizens get more educated on the market. They understand the reappraisal process better. They understand the distribution process a lot better, and the appeal rate actually goes down.
If you go back to 2001 and look at the 37 percent increase in the tax base that happened in 2001, and then from 2001 to 2008 that market stayed pretty high. We sent notices out right at the peak of 2008. Shortly after that the recession happened. We had more people appealing and upset with us.
They were going to get refinancing at the bank, but their property value had depreciated drastically. The bank value was less than the amount they were paying taxes on.
We could not change their value until the next reappraisal. So they were actually overpaying during that time period, and didn’t understand why can’t adjust the value. We had to look at the value as of 1-1-2008.
Q: Is this so the city, county can collect more money?
Simpson: Most think that. And that is part of the education process too. (The property tax assessment sets the taxable value of the property, but the City Council and county commissioners set the actual tax rate.) When we give the value to the county, they actually have to show the public what the revenue-neutral rate would be. The revenue-neutral rate is the tax rate that would generate the same amount of revenue as before the revaluation.
Simpson: Revenue neutral doesn’t mean your taxes will be revenue neutral. It means the county’s coffer of money is revenue neutral. It doesn’t necessarily mean that your taxes or my taxes are going to go down too. It’s the overall county as a whole.