Frustrated with your late assessment notice from the Bannock county Assessor’s office? Here’s some things you need to know:
- State Law actually requires the county assessor to have your assessment notice to you by the first Monday in June. If you’re like me, you didn’t get your notice until after the appeal date had already expired. (My notice was sent on the 24th, with an appeal date of the 24th). I received it on the 27th. Classy move Bannock county. See state statute Title 63, Revenue & Taxation, Chapter 3 Assessment of Real and Personal Property, Section (2) Line 4. I don’t know what kind of legal recourse you have as a property owner against Bannock county, but talk with your attorney about any options that may be available.
- The argument that all property values rise simultaneously is a fallacy. If everyone were to list their homes simultaneously, the values would plummet as a result of supply and demand quotients being reversed. Individual Property values go up because not everybody is willing to sell at the higher market value. Value is determined by what a reasonable buyer would buy at and a reasonable seller would sell at. If all properties were simultaneously available for sale, the best home for the best price would sell first, meaning lower pricing would get more competitive, dropping property values. As such, simply because your neighbor’s home sold for that value, does not inherently mean that all properties in the neighborhood would have sold for the higher value if they’d been on the market. Historically, this is why it’s been reasonable for a county assessor to allow that some property assessments do not increase to the same level as what the neighbor’s house sold for. The county has valued the properties as though all values have inflated equally and this simply is not and cannot be the case. The state is guilty here as well and needs to adjust it’s laws in this regard. Property owners and renters should be protected from massive surges in taxes that make it difficult for them to afford where they live. I’d recommend contacting both your county commissioner and state legislator and letting them know how unfair you feel the policy is as it stands.
- Raising property taxes lowers investment property value. If I have a fourplex (or any commercial or apartment building) that has $20,000 in annual rents, $10,000 in expenses of which $4,000 are property taxes, this means the property would have a net operating income of $10,000 per year. If the county assessor raises the assessed value so that my taxes go up to $6,000, that reduces my net operating income to $8,000/year. Let’s say that a fourplex usually sells at about a 6.5% cap rate. My value at $10,000 in net income would be $153,846 (NOI/cap rate). With the increased taxes and a reduced net income to $8,000, the value of my property drops to $123,076 at the same market cap rate. By increasing taxes by $2,000/year (which many of our assessments have that or much more at the current levy rate) it dropped the property value by almost exactly 20%. How much equity are you willing to share with your local government?
- Raising property taxes lowers Residential values. When a buyer goes to get funding to purchase a residential home, they go to a lender who will look at a ratio called a debt to income ratio. This ratio determines what percentage of your income can be allocated to debt. Some lenders use PITI (principle, interest, Taxes, insurance) for the payment amount being added to determine if a buyer will qualify. The higher the taxes, the higher the payment. The higher the payment, the lower the loan the lender will be willing to make. The lower the loan, the lower the value the buyer can afford and thereby offer to purchase your home. A home purchase isn’t as logical as an investment purpose, but it’s clear, higher taxes are detrimental to every owner’s property value.
- Don’t buy the argument that your taxes won’t necessarily go up. About 10-15 years ago, they told us the same thing. They dropped the levy rate to about 1.8% when values went up. If you live in Pocatello, they are back up to 2.15%. When the market crashed, they were incredibly resistant to lowering the values to the lower market values. Government officials have big eyes and big stomachs- you give them the inch, they’ll take 2 and never give anything back.
- Renters will end up paying the extra bill. This is a tax on the poor. Apartment owners have to comply with what is called a Debt Cover Ratio (DCR), which means the net income from a property must equal a certain quotient more than the total amount of annual debt service (all the principal and interest payments combined for the year). If the net income drops due to a significant tax increase, the landlord must raise the rents to get the debt coverage ratio back to an allowable ratio. (usually this is about 1.25-1.4). Because of the size of the tax increases proposed, landlords are going to have no alternative options but to raise rents to cover the increased expense and tenants will be the ones stuck with the bill. Is it fair- absolutely not. If the county was reasonable and did only moderate increases, these could be absorbed into normal market bumps on rents. However, if you’re a renter, expect some unpleasant increases at the end of your lease term. Or, get involved, go and protest unreasonable valuation increases at the county commissioners office and let them know they are taxing the wrong people.
- Bannock county only accounts for .056% of the levy rate of 2.15%. The county may say your taxes won’t go up that much because they will likely lower the levy. Rest assured that even if the county lower’s their rate, the city, school district and others will not feel so inclined. Your taxes will not drop significantly from their increase, even if the county does lower its’ levy rate a little. They just don’t have the buffer to do so.
If your property value went up significantly, it’s important that you appeal your assessment and let your voice be heard. Contact a trusted real estate agent to help you get some comparable sales to prove the county assessor has been unfair. Then file this form:
and email it to