Wall Street Journal
January 5, 2009
By JENNIFER LEVITZ
Support for property-tax rollbacks is building from Arizona to New York, fueled by angry homeowners in some locales who are seeing rising tax bills despite plunging home prices.
Legislatures in New York, Georgia, Oklahoma and Wyoming are considering taking up proposals to curb property taxes in their 2009 sessions. In Indiana, a cap on property taxes enacted last year became effective Jan. 1, and lawmakers are planning to vote this year on whether to put before voters a constitutional amendment that would cap taxes permanently at 1% of a property's value.
In recent months, citizen groups in Montana, Nevada and Arizona have organized to get property-tax-relief measures on state ballots. Florida voters last year amended the state's constitution to increase a number of property-tax exemptions, lowering their assessments.
"We just can't afford these increases in property taxes," said Lynne Weaver, a 59-year-old retired swimsuit saleswoman in Phoenix, who said her investment nest egg "has pretty well been cut in half" by market declines. She is a leading volunteer for Prop. 13 Arizona, an organization collecting signatures seeking a 2010 ballot measure that would roll back home valuations to 2003, before the boom that preceded the bust in home prices, and which would also cap annual property-tax increases at 2% of home value.
New York City boosted property taxes by 7% effective Jan. 1, and other towns in the state are also sending out higher bills, even as Gov. David Paterson and some legislative leaders are supporting a recent report that recommended a 4% statewide cap in property-tax increases. A commission empaneled by Gov. Paterson's predecessor called for the cap in response to concern that the state's levies -- among the highest in the nation on property -- were curbing growth and encouraging migration.
Taxes can go up when prices decline because assessed values lag behind market realities. The values that cities and towns use to calculate tax bills are often based on house sales a year or more before the bills are issued. That means that many recent bills don't take into account the meltdown of 2008, when house prices fell by an average of about 20% across the country.
In addition, cities and towns are facing a barrage of recession-related financial pressures, including cuts in state aid and investment losses. That is tempting many to look for added revenue from property taxes, one of the few revenue sources they control.
That has set the stage for more tension between taxpayers and municipal officials hard-pressed to pay bills.
"It's pretty hard not to institute some increase in property taxes," said Stephen Altieri, town administrator of Mamaroneck, N.Y., whose town board voted Dec. 17 to raise the town property-tax rate in a main part of the New York City suburb to $14.25 per $1,000 in assessed home value, from $10.20. Mr. Altieri said Mamaroneck is facing a "sort of a perfect storm" because of declining investments, and falling revenue from a 1.3% tax it receives on the value of new mortgages. Along with raising property taxes, the town is also trimming its own spending, he says.
In Evans, N.Y., outside Buffalo, October assessments reflected strong home prices through July 1, 2007, and residents were so irked that they picketed Town Hall, started a Web site, and presented the town clerk with a petition calling for the assessments to be thrown out. The town declined to do that, but it says it has been hearing individual appeals.
Parts of the country that felt the real-estate bust early have seen some reductions in property taxes, but some residents in communities that were hit by the downturn later are in shock.
"Disbelief" is how 55-year-old John Kane, a financial adviser, describes his reaction to the assessed value of his home in Hampton, N.H., which soared 55% to $850,200 recently, from $549,300 in 2007. His annual taxes jumped 30%, to nearly $14,000. "We see empty houses, for-sale signs," Mr. Kane said. "And they value our houses like this?"
About 100 Hampton residents formed a group called the Coalition for a Fair Assessment, and staged a protest at Hampton Harbor, waving tea bags in a mini re-enactment of the Boston Tea Party. The group urged local homeowners to appeal their bills -- which many are doing. They also got on the Town Council's agenda on Monday to advocate a reassessment that reflects the real-estate slump.
In Louisiana's St. Tammany Parish, north of New Orleans, tax assessor Patricia Schwarz Core said 15,000 residents have requested a formal review of their 2008 revaluations, compared with 500 in a typical revaluation.
On his Web site, Louisiana state Rep. Kevin Pearson, a Republican, calls the 2008 revaluations in St. Tammany ridiculous and says some residents saw their assessed values jump 150% since the revaluation four years ago. In an interview, he said he is working with other legislators to craft an agenda for the next session that may include limits on increases in tax bills and more oversight of local taxing entities.
In Wyoming, rising property assessments have "stirred up some problems, especially for fixed-income people," said state Rep. Rodney Anderson, a Republican who is chairman of the Wyoming House of Representatives' revenue committee. Last month, Mr. Anderson was part of a joint committee of legislative leaders that endorsed a bill that would exempt part of a home's value from property taxes.
"People are just astounded that this year, of all years," the assessed value "of their property has increased," said Georgia Rep. Larry O'Neal, a Republican and chairman of the Ways and Means Committee of the state's House of Representatives. Mr. O'Neal said he supports a bill that would bar communities from raising taxes by increasing assessed values, eliminating what he calls "the back-door tax increase." If it passes, entities would have to go through the public -- and often difficult -- process of raising rates to increase revenue. He expects the bill will be taken up by the legislature this year.
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