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Another way to keep taxes in check



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This is a hypothetical situation Linn Town Chairman Jim Weiss used to explain why his municipality is doing an interim market update. Also, this would concern only the town of Linnís portion of oneís tax bill. Portions of the total tax bill also go toward the state, Walworth County and local school districts.

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December 31, 2012 | 01:02 PM
LINN — Say there are two similar homes in the town valued at $100,000 each. The home owners each pay $1,000 in annual local property taxes.

Let's suppose the home values were prior to the market's decline in the last decade. Let's suppose some more and say one of these homes recently sold for $50,000.

What happens is the new owner of that home, which sold for half of what it once was worth, pays $500 to the town. In this hypothetical situation, the town loses $500 in property tax revenue.

The thing is, this really can happen.

And in Linn, it did.

Rather than increase the tax rate — which has held at $1.29 per $1,000 of equalized value since 2010 — Weiss said the town simply accepted a 1.18-percent loss in property tax revenue.

"In a theoretical world, the total property tax revenue wouldn't change, just the distribution of who pays what may change," Weiss said.

To keep this situation in check, the town would have its assessor conduct a revaluation. Now, there is a less costly way to achieve this goal — an interim market update (IMU).

Recently, the town hired Associated Appraisal Consultants to conduct the IMU for $111,900.

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"In the town of Linn, a full revaluation was conducted in 2007, and since that time, the assessor has been visiting properties that have sold or have changed," stated Dean Peters, of Associated Appraisal, in a Dec. 14 email. "Therefore, an interim market update is an appropriate assessment option. The interim market update will result in updated assessed values for all properties in the town of Linn based on recent sales and market data."

He stated that the state Department of Revenue recommends municipalities conduct a full revaluation at least every 10 years to keep records current and ensure assessed values are based on accurate property data.

If these records are accurate, an IMU can be conducted.

"The advantage to conducting an interim market update is cost," Peters stated. "Since a full revaluation involves physically inspecting all properties, there is a significantly higher cost. By utilizing existing assessment records, a municipality can cut the cost of a reassessment by approximately one-half and still obtain the desired result of accurate, updated assessed values."

In the 2013 assessment year, assessors will visit properties that have "physically changed" since Jan. 1, 2012, such as new homes, additions or remodeling projects, Peters stated.

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"We will also visit all recently sold properties as well as any properties that have had changes to land, such as splitting or combining property, or changes of land use," he stated. "Interior inspections will be done only for those properties that have changed, or for any other properties whose records are deemed to be outdated or incomplete. This will be only a very small percentage of homes."

And it's already begun.

Peters stated assessors have identified which properties have sold, and have had building permits in the past year.

"We will conduct field visits in spring, beginning in January and ending in April," he stated. "In the meantime, we will be working on analyzing sales and building valuation models for rural property, lakefront property and various other types of property."

He stated once this phase reaches completion, "all property owners will receive a notice of assessment in the mail."

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The notice will show new assessed values and the net change in assessment from 2012, as well as include instructions on how to meet with the assessor at an open book meeting and how to contest the assessment at the board of review.

Equalizing

As for that hypothetical situation, it was devised by Weiss, who was a professional banker for 23 years, to help illustrate why he and other town board members felt it was a "prudent" expenditure.

He said himself and fellow board members believe it will level the playing field.

If there are two similar homes, and one is worth $100,000, but the other sells for $50,000, one taxpayer is paying $1,000 — and the other $500 — for similar property.

"That's the disparity," Weiss said. "So, what will happen is, the (IMU) is not going to change the overall taxes for the town of Linn, but it's going to change the contribution per individual, to make them more equalized for similar homes."

He progressed the hypothetical situation even further.

Suppose after the IMU, both homes are valued at $50,000. Does this mean both homeowners pay $500 in town property taxes?

Not necessarily. Weiss said the tax burden would remain at $1,500.

The tax rate could change so that both homeowners would each pay $750.

Hypothetically speaking, of course.

"Some of these people may receive some of the burden, absolutely," Weiss said. "But again, what we're trying to get at (is) two homes that are of similar value are taxed at an equal amount."

So, will some be upset, others happy, when it's all over?

"Yeah," Weiss said, "but you have got to treat all taxpayers equally."

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