Thursday, April 4, 2013

Indianapolis Taxpayers to Be Hit With Large Property Tax Increase

One of my arguments for Governor Pence's proposed income tax cut is that Indianapolis taxpayers are in need of relief from being hammered by relentless tax and fee increases the past several years.  In my argument though one tax I never discussed being increased is property taxes.  I have to now add that to the list.  The Indianapolis Star reports:
Marion County homeowners hit recently by higher property tax assessments should brace themselves: The other shoe drops next week.
Seventy percent of homestead properties were hit with tax increases of varying size compared to last year, when 58 percent of homestead tax bills went up, said Cindy Land, administrative deputy for the treasurer’s office. A homestead, an owner’s primary residence, is eligible for large deductions for which rental and other residential properties don’t qualify.
Among homesteads that saw increases, Land said, the average amount was $137.50. She didn’t have a figure available for the across-the-board average change.


The Indianapolis Star reported last month that home assessments increased steeply, sometimes by double-digit percentages, in clusters of mostly older neighborhoods on the Near-Northside, the Northside and the Eastside, including Irvington.
Compounding those increases now are hikes in the property tax rates that were approved by some local units of government last fall and certified last month by state officials. Land says school building projects approved through voter referendums in recent years also have added to the tax bite. I'm sorry I missed the article about the steep increase in assessments.  When the Indiana Supreme Court forced the to go to a fair market value type assessment system that meant the assessments should now much more closely approximate fair market value than under the old assessment system.  When assessments are going up while home prices are barely rising, that could raise a red flag.  Our assessment system though does lag considerably behind, but that still doesn't explain the increase in assessments.

To simplify, there are four major factors that influence how much pay in taxes on a piece of property you own:
1) assessed value
2) tax rate
3) any exemptions/deductions property owner pays
4) whether the tax cap has been reached.
The Star article points out that only 17% of homeowners are up against the 1% cap.

The major factor though is Nos 1 and 2.  Raising assessments is a politically easier way to raise property tax revenue .  Assessors end up taking the heat, but the many local government entities receiving property tax revenue can continue to brag about keeping rates low while receiving more revenue to fund operations.Of course though if the assessed values get far above market value then the challenges to the assessments begin to stack up.  But most homeowners won't find it worth there while to find an attorney to do an appeal of an assessment.

Property taxes work unlike other types of taxes.  The need to fund local government services is calculated and then the tax rates and, surprisingly, assessments, are adjusted to bring in what property tax revenue is needed. Therefore with property taxes, more so than any other types of taxes, one has to look at what is driving the perceived need for that revenue.

Mentioned in the article are the numerous school building projects approved through voter referendums.  Indiana has for long been a leader in new school construction in the Midwest.  Indiana is home to a politically powerful construction industry that is very adept at convincing elected school boards of the need for ever newer and shinier buildings.  My Pike Township School District is an example of that.  The District has a plan to tear down elementary schools in the district every few years and build new buildings. Some of these buildings being torn down or are only a few decades old.  College Park Elementary is on the demolition list and it is approximately 25 years old.

Another factor, not mentioned in the article, that is driving the need for more property tax revenue to fund basic services is the large number of TIF districts that often end up draining revenue from the general fund that is funding basic services in favor of that money going to the pockets of private developers.  Those lost property taxes have to be made up somehow and the way is to raise more property tax revenue by raising the property assessments or the tax rates.

The news of greatly increased property taxes should kill off Mayor Ballard's desire to do away with the local homestead tax credit. That would lead to even higher property taxes.


Jon said...

My taxes are up 19%, there is not f#$@ing way I can sell my house for the auditor's assessed value. My neighbor on the left property went down 53% and the neighbor on the right went up about 10%.

Time for everyone in Marion to appeal their assessments.

Pete Boggs said...

But they "fixed" property taxes with a market value system & sealed it with a knuckle bump- right?

There is no party of small government, only false advertising.

Greg Bowes said...

Paul, you said, "Property taxes work unlike other types of taxes. The need to fund local government services is calculated and then the tax rates and, surprisingly, assessments, are adjusted to bring in what property tax revenue is needed."
I think you have this wrong. I don't know what is motivating the current Assessor, but when I was the Assessor, we formulated assessments based on methodology attempting to achieve market value, and did not consider local government spending or the tax rates in the process. State law, assessment methodology, the Town of St. John case, and our fear of too many assessment appeals kept us honest on this. In fact, when I was on the City-County Council, which made the spending decisions, we rarely had any discussion of how spending interacted with assessments. State law separates the choices made in spending from the choices made in assessment, not just as to who makes those decisions, but as to the timing. Assessment are supposed to be completed before the spending decisions are made. As I understand it, assessments are still on time, even after I left office. That means the assessment is done long before the Council decides how much to spend.

Pete Boggs said...

Mr. Bowes: The county makes a request based on projected spending (wish lists, etc.) to the DLGF, who then approves said request & tax rate to achieve same. Assessed valuation is a floating target determined by the assessors' office. There is no credible standard at work here.