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Saturday, August 19, 2006

Ind. Law - New system of trending to impact property owners

The Lafayette Journal & Courier ran two stories earlier this week on "trending." From the first:

Question: What is trending?

Answer: Trending is a new way of assessing the value of real estate in Indiana. Trending requires assessors to look up the prices that properties in a particular area have sold for during the past two years.

Using that information, assessors then estimate the values of other properties in the same area.

Trending is being used for the first time this year and will first affect property taxes owed in 2007.

Q: How will trending affect my taxes?

A: It's too early to tell, according to Nancy Moore, the county assessor. The last reassessment was done using the values of real estate in 1999.

Trending will use prices for which property has sold in the last two years, which may cause the assessed values of many properties to increase in 2006.

But the taxes owed next year will not necessarily do the same, she said.

That's because 2007 taxes cannot be calculated until tax rates for that year have been set. And that has not yet happened.

State legislation recently passed also is making it difficult to know what property owners will owe next year. For 2007 only, lawmakers increased the homestead deduction from $35,000 to $45,000.

That is the amount that can be deducted from the assessed value of a house that a person owns and lives in, thus lowering his taxes. * * *

Q: How is trending different from the previous way of assessing property?

A: In the past, the assessed values of real estate were adjusted only after a reassessment, which came as far apart as 10 years.

In reassessments, assessors used a formula to set a value on different features of a property.

For example, a square foot of a building is said to be worth so much; a bathroom to be worth so much; a garage to be worth so much, etc.

Unlike reassessments, trending will occur every year.

Q: Why did lawmakers adopt trending?

A: The old way of assessing property would, in years without a reassessment, steadily shift the burden of paying property taxes onto owners of personal property, according to Larry DeBoer, a professor in agricultural economics at Purdue University.

Personal property largely refers to equipment owned by businesses, he said.

The reason for the shift: unlike the values of real state, which were reassessed as seldom as 10 years apart, the values of personal property were adjusted every year, he said.

Hence the values of personal property would gradually increase while those of real estate remained stagnant.

So in successive years without a reassessment, owners of businesses, when compared to owners of real property, would come to pay a larger and larger portion of all taxes owed, according to DeBoer.

Thinking the disparity unfair, lawmakers adopted trending.

Now the values of real estate and personal property will be adjusted every year.

From the second story, by Dan Shaw:
A letter John Thompson recently received in the mail said his house is worth $25,000 more this year than last year.

Is he happy? No, since the county's letter was referring to his home's assessed value, a number that is used to calculate his taxes.

"There's not a lot of evidence that property values are going up in the fashion they are saying," he said.

The assessment raised the value from about $269,000 to $294,000, an increase of about 9 percent.

Nancy Moore, the county assessor, said such increases stem largely from a new system of assessing property, known as "trending." In trending, assessors look at what local houses and businesses have sold for in the past two years. * * *

After receiving them, property owners are allowed 45 days to appeal the assessments. About 150 people from the rural townships have done so, she said.

Thompson, who owns a house in Union Township near Shadeland, is one of them. To contest the assessment, he will likely have to pay for an independent appraisal, a prospect he finds irritating, he said.

"The burden of proof is on me," he said.

This morning the J&C has a story by Dan Shaw headlined "Candidate: Trending drives up property value, tax." The story begins:
A private company is placing too high a value on Tippecanoe County property that will be taxed, says a woman who would be county assessor.

Samantha Steele, a Democrat running for assessor, says local township officials should be assessing local houses, businesses and land. If they were, the values would more closely match what the property could be sold for on the market, she said.

Steele will face the incumbent assessor, Nancy Moore, a Republican, in the Nov. 7 general election.

"We have been over-assessed because we have an out-of-state consulting company doing this work," Steele said at a press conference this week.

The story is accompanied by a useful side-bar on trending and how to file an appeal.

Also today, the Monticello Herald Journal has the first of a two-part report by Kevin Howell, headlined "'Trend' in property tax assessment taking hold: Property Tax Debate - Part 1." Some quotes:

Following a 2002 reassessment in Indiana the state moved toward placing values on home and business properties more in line with fair market values for taxing purposes.

Some taxes went skyrocketing while others fell or held fairly steady.

Since then more information based on property sales values has been entered into databases leading to the next phase of taxing property: trending.

In White County, with its 23 taxing districts, Scott Potts of the Indianapolis firm Manatron has been working in conjunction with the White County Assessor's office to place trending values on property.

"What we're trying to accomplish with trending is to bring the assessments to sales (values) in a more recent time period. During the reassessment we were looking at sales in the 1998-1999 time period and adjusting assessments to match those sales," explained Potts. * * *

Like in White County, Carroll County has also hired an outside firm to work on trending.

"We hired an Indiana company to do it because none of our trustees are qualified to do this trending. I hope it's going to be fair - we see the figures but when you don't know what the tax rate is it's hard.

"We're going to have to do this next year so we saved what we can get - all sales disclosures and we make a copy of property record cards and then we can verify everything that way," said Carroll assessor Doris McLeland.

Brandi Daniels, an employee in McLeland's office, said trending will focus on sale prices in neighborhoods rather than entire townships or taxing districts. * * *

Daniels said there are four different numbers they come up with to determine value but it's easier to look at it as a percentage. For simplification, if those ten sales show an increase in value over a previous assessment by 2 percent, other properties in the neighborhood will be assumed to have risen in value that much as well.

Those who receive Form 11s, and don't agree with the property value, will have 45 days to appeal. But it could take an appraisal or other form of evidence of the correct value.

"The taxpayer has 45 days, and if they feel it's way too high they can appeal, but it will probably take an appraisal this year to change the value," McLeland said.

Posted by Marcia Oddi on August 19, 2006 10:00 AM
Posted to Indiana Government | Indiana Law