GOOD NEWS! Property values seemed to have bottomed out in 2012 and have been increasing for the first time since the 2007 Housing Market Crash. When our State Legislature passed Proposal A in 1994, the Legislature did not anticipate an economy with declining property values. Until 2007, Proposal A worked as designed, limiting the increase in taxes to the rate of inflation. There had been a steady increase in the real estate market, which typically was more substantial than the rate of inflation, thus “capping” tax increases to the rate of inflation.
Although property values started the decline in 2007, the rate of inflation caused taxable values to increase (except for 2010). The inflation rate for 2014 is 1.6%. Proposal A limits the increase to a 5% maximum. For more information on how the inflation rate is calculated, go to the State of Michigan Treasury website at www.michigan.gov/treasury, on the left, click on ‘Taxes’, then click on ‘Property Taxes’, then click on ‘Property Tax and Inflation Information’.
Higher property tax, with the prior decline in property values during the housing market crash was a difficult concept to grasp. Neither local assessors, treasurers nor Boards of Review can change the law. Any changes to Proposal A Legislation to address the declining real estate market in relation to property taxes, would involve a constitutional amendment and a vote of the people. You can go to www.michigan.gov/treasury and click on ‘Michigan Property Tax Explanation’ for an informative video presentation.
Assessment Information - 2013 was the last year for the one-year sales study. Since the housing market is on the upswing, the prior practice of basing assessments on a two-year sales study will resume for the 2014 assessment cycle which is 10/01/11 through 09/30/13. Each time a property sells, the sales price (minus land) is compared to the cost to rebuild the structure as it stands today (minus depreciation). The difference is an economic condition factor. The sales of each neighborhood are analyzed and an average factor is determined to apply to the other properties in the neighborhood. This is a mass appraisal system, where the basis is uniformity, treating all properties the same.
For 2014, the residential class saw an average increase of .83%. 2013 saw the residential class overall decrease an average of 1.03%, although some neighborhoods saw an increase based on neighborhood sales data. 2012 saw an average decrease of 1.48%, 2.97% decrease for 2011, 1.43% decrease for 2010, 8.81% decrease for 2009, 1.9% decrease for 2008 and 2.8 % increase for 2007. The commercial class will see an average decrease of 3.27% for 2014 compared to 0.14% for 2013, 2.62% decrease for 2012, 6.97% decrease for 2011, 2.61% decrease for 2010, .36% increase for 2009, 1.7% increase for 2008 and 18% increase for 2007 based on market data.
The Michigan State General Property Tax Act requires properties to be assessed at 50% of true cash value. Proposal A did not change standard assessment practices, but in fact, created another value for your taxes to be based on. Taxes are based on “taxable value” not on the assessed value. A decrease in assessed value will not lower your property taxes as your taxes are based on the taxable value, which will increase 1.6% based on the Consumer Price Index (rate of inflation).
Taxable value is the lesser of either capped value or State Equalized Value (SEV). The capped value is the lesser of 5% or the CPI (Consumer Price Index). The CPI for 2014 is 1.6% compared to 2.4% for 2013, 2.7% for 2012. 2011 was 1.7%, 2010 was -.003% and 2009 was 4.4%. The CPI for 2008 was 2.3%, 2007 was 3.7% and 3.3% for 2006. The CPI for 2005 and 2004 was 2.3%. Other past CPI’s include 1.5% for 2003, 3.2% for 2002 and 2001, 1.9% for 2000, 1.6% in 1999, 2.7% for 1998, and 2.8% in 1997/96. The 2013 taxable value will be limited to the 2012 taxable value times 1.024 (2.4%) or the SEV, whichever is less, plus any new construction. If there was a property ownership transfer, the value will be uncapped and the SEV and the taxable value will be the same. Beginning 12/31/2013 (PA 497 of 2012- Transfer of Ownership); the transfer of residential real property (homestead or non-homestead) is not a transfer of ownership if the transferee is related to the transferor by blood or affinity to the first degree AND the use of the residential real property does not change following the transfer of ownership. Affinity to the first degree includes the following relationships: spouse, father or mother, father or mother of spouse, son or daughter, including adopted children and son or daughter of the spouse. An example of a change in use would be from principal residence to rental property.
When you receive your assessment notice, your taxable value is the figure your taxes will be based on. The assessed value still should be 50% of market value, and does not come in to play until there is a transfer of ownership. When ownership is transferred, the valuation is “uncapped”. The SEV is the new starting point for the buyer and the capping process starts all over again on the property until another transfer of ownership occurs.
Board of Review Information - If you have any questions on your assessment notice, please contact your local assessor at 989-224-8944 x 222. A phone call may save an unnecessary trip to the Board of Review. The City of St. Johns March Board of Review will be held in the City Offices Conference Room in the Courthouse. Please use the State Street entrance, and check in at the City Offices upon arriving. The Board of Review Schedule is as follows:
- Monday, March 10, 2014 - 9 a.m. to noon and 2-5 p.m.
- Tuesday, March 11, 2014 – 9 a.m. to noon and 6-9 p.m.
Appointments are recommended for the St. Johns Board of Review. Appointments can be scheduled by calling 224-8944 ext. 222. Technically, the Board of Review cannot change a taxable value, as it is determined by Proposal A legislative formulas. The Board of Review could change an assessed value that may in turn require a taxable value to be recalculated. Appeals by mail must be received prior to the close of Board of Review by 9 p.m. on March 11th.
Higher property tax is not a valid reason to appear before the Board of Review. Since its enactment in 1994, Proposal A has reduced property taxes. Prior to Proposal A, the millage rate was 59.5261 on all properties. The 2013 millage rate was 33.9347 for homesteads and 51.9347 for non-homesteads. Please note that an additional 4 mills (for 4 years) will be levied beginning with the summer 2014 tax bill for the street millage. If you have an escrow account, it is recommended that you notify them of the additional 4 mills so you are not hit with an escrow shortfall. Delinquent water and sewer that rolls on the taxes also will be cause an escrow shortfall. You may make payments on your quarterly water/sewer bill; you do not have to pay it all at once.
For a Board of Review Appeal, research should be done with area sales information. The petitioner should be able to present testimony to the Board of Review that their property assessment is over 50% of market value, by comparing similar sales to their property. Showing a comparison between similar sale properties and your property would be most helpful in your appeal. Foreclosure and short sales are not “arms-length” sales and are not included in the sales study as they do not reflect true market value. Sales Studies are available at the City Offices and online, as follows: Current residential sales study and current commercial/industrial sales study.
Homestead Information - When you receive your 2014 assessment notice, please check the percentage amount listed for homestead. If over 51% of the structure is used as your principal residence, it should list 100% as homestead. If you reside in 50% or less or have a business located in your residence, the correct percentage should be listed. For example, if 30% of the house is your principal residence and two apartments are in the other 70%; you would pay a homestead rate on the 30% and a non-homestead rate on the 70%. If you have a home occupation that you claim space on for tax purposes, the percentage claimed as non-homestead should match the percentage claimed on your income tax forms.
June 1st and November 1st, 2013 were the deadlines to qualify for a homestead exemption for the 2013 tax year. To qualify for 2014, you have to be living in the home as your principal residence and file appropriate paperwork prior to June 1 or November 1, 2014 deadlines.
If a property has changed in either ownership or use, please contact your local assessor. An example of a change in use would be if a principal residence was converted to a rental unit, or rental changed to principal residence. If there was not a transfer, the current owner would have to fill out the paperwork. If there was a transfer, both buyer & seller has paperwork to fill out, normally done at closing. Homestead exemptions are filed with the State under the claimant’s social security number(s), so changes must be registered. In the event of a divorce, the spouse that moves to another residence must rescind the exemption on the property. This will allow the spouse to claim a new homestead on another principal residence.
The State cross-references a database to determine homestead eligibility such as driver licenses, voter registration, income tax filing addresses, etc. There are also local checks in verifying homesteads, please keep your local assessor informed. If you receive a correspondence from the State or your local assessor, do not ignore it; please call your local assessor for assistance.
A “Conditional Rescission of a Principal Residence Exemption (PRE)” allows an owner to receive a PRE on their current property and on the previously exempted property simultaneously if certain criteria are met. An owner may receive the PRE on the previous principal residence for up to three (3) years if the property is not occupied, is for sale, not rented/leased, and not used for business or commercial purpose. Contact your local City Assessor for more information at 989-224-8944 x 222.
An “Active Duty Principal Residence Exemption (PRE)” enables a person with an established Principal Residence Exemption (PRE) to retain that PRE while on active duty in the United States Armed Forces if the principal residence is rented/leased for up to three (3) years if: 1) the property is rented/leased to another person and is used as a residence if the owner is absent while on active duty, 2) the dwelling would otherwise qualify as the owner’s principal residence and 3) the owner attests that he/she will occupy the dwelling as their principal residence upon completion of active duty. Contact your local assessor for more information at 989-224-8944 x 222.
A "Disabled Veterans Exemption" Affidavit form is used for an exemption of property taxes for real property used and owned as a homestead by an honorable discharged Veteran or his/her unmarried surviving spouse if 100% service related disabled, is unemployable or receiving pecuniary assistance for specially adapted housing.