The City Council is poised to overspend its budget line for tax challenges Monday, as more and more residents prove that their properties are over-assessed.
Mayor Gary McCarthy said the problem may force the city to make “internal cuts” to pay back the taxes of over-assessed owners.
On Monday, the council plans to give more than $80,000 back to the owners of a medical building at 650 McClellan St. The city had budgeted to spend only $75,000 on all tax refunds this year.
If the owners of the medical complex had paid every cent of their tax bills, they would be owed a $97,022 refund. They challenged the assessment of the property from 2007 through 2011.
A city negotiator agreed to drop the assessment from more than $4.5 million to $950,500.
The council will also vote Monday on eight other owners’ tax refunds, totalling $3,250, mostly for private residences that were over-assessed. In each case, the owners filed court documents to prove they could not sell their property for the amount the city said was fair market value. City attorneys recommended settling each case.
McCarthy said the city simply can’t defend its assessments, which were set in 2009 after a three-year study.
“The problem is, the reality of it is the reassessment coincided with the peak of the [housing] market,” he said. “The market has declined.”
That means the city is basing each owner’s tax bill on assessments that might not be accurate. It doesn’t mean owners are paying an unfair share of the taxes, McCarthy said. He explained that the assessments are equally wrong for everyone.
“If your house is overassessed at the same rate mine is overassessed, we’re both paying our fair share of taxes,” he said.
But as some owners challenge their assessments, he said, that fair-share theory falls apart. Once some owners move to the accurate value, everyone must — or those who remain overassessed will pay more than their fair share.
“We’re now at the point where it’s out of whack,” McCarthy said. “The question is, how do we get back?”
A reassessment would cost about $1 million and take at least three years, he said. By that time, the housing market could have changed again — leaving the new numbers just as inaccurate as the current ones.
“The ideal thing is the assessor can update it on an ongoing basis so you can maintain something that’s fair and accurate,” he said.
But since the roll is already skewed by some tax challenges, that job is getting harder.
“It’s a problem that we’re just going to deal with on an ongoing basis,” McCarthy said.
One of the city’s most vocal critics of the reassessment said the city doesn’t need to redo all of its work.
“If there’s been a 10 percent reduction, that affects everyone. Why go screwing around with valuation?” said Robin White, who owns apartment buildings in the Stockade. “The whole city’s gone down. Really, what needs to be done is have a fair assessment.”
White said the problem is that the reassessment was done poorly, creating a situation in which some owners of similar houses had wildly differing assessments.
“What happened in the last reassessment was buildings that had recently sold were [reassessed] based on the sales price, and buildings that hadn’t recently sold were reassessed on a different method. So there was tremendous inequity,” White said.
White produced charts showing the problems when the reassessment figures were announced. He later won reductions in assessments for all of his buildings.
McCarthy has also questioned the reassessment. On Friday, he offered a stinging appraisal of the entire process, which was handled by an assessor who has since left the city.
“Last time, they claimed how great it was, and some of the data was just inaccurate,” McCarthy said. “We were left with a roll that’s on the high side.”
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