The notion that one’s property may be assessed at a different, presumably higher, value often invokes unpleasant thoughts of property tax bills. We’re all aware that the selling prices for homes in the Northeast have shot up, so don’t higher property taxes go hand in hand?
In fact, the one does not necessarily lead to the other, as Thetford Listers Sean Boyce, Barbara Harrington, and Sue Howard helped to explain.
First, a little history. In 1997, Act 60 created a shared responsibility for education across all Vermont towns by requiring towns to contribute to the state Education Fund. The fund is used to provide equal school funding regardless of the wealth, or lack of, in different towns. Contributions to the education fund come out of a town’s property taxes, and there has to be a way to ensure that all towns contribute fairly to the fund. Thus it became necessary to verify that town Grand Lists of property values, on which taxes are based, are accurate since they are maintained by town listers, not the state. If the Grand List in a town doesn’t represent fair market value, that town would send more or less tax revenue than its fair share to the statewide Education Fund.
The values of properties recorded in the town’s Grand List are equal to their fair market values at the time of a town-wide re-appraisal. However, assessments are not conducted every year and, as we know, the market value of homes is rising. To ensure that properties are nevertheless taxed for the state’s Education Fund as close as possible to fair market value, the Common Level of Appraisal, or CLA. is applied. This figure is computed annually by the state based on a statistical analysis of recent property sales in each town. The CLA does not change taxpayer’s property values, only the resulting education tax rate in each town.
For example, if homes in a town have, on average, an assessed value of 80% of what they are actually selling for, the CLA for the town is 0.8. This figure of 0.8 is used to compute a home’s adjusted fair market value (for tax purposes only). If a home is listed as $500,000 in value, with a CLA of 0.8, its adjusted fair market value would be $500,000 divided by 0.8, or $625,000, and the state education tax or school tax due from the property would be calculated on this amount.
The CLA accounts for the fact that towns do not re-assess very frequently. Assessments are expensive undertakings. In fact, the state pays a town $8.50 a year for every parcel to help with the cost of reappraisal (reassessment). However, when a town’s CLA falls below 0.85 or rises above 110%, the town is required by law to reassess. Right now, Thetford is using data from 2012, which is the most recent list of appraised values of all properties, and the CLA is hovering at 0.855. A reassessment would be mandated in the near future. Sean, Barbara, and Sue are being proactive in starting the process of reassessing sooner.
As one might imagine, this is not a quick process given that it encompasses 1,464 properties. To facilitate the project the town has contracted for assistance from a professional company, Appraisal Resource Group Inc. based in Essex Junction, which is a stroke of luck given the severe state-wide shortage of professional assessors. This company has a history of assessing in Vermont, including in Barre, Proctor, Plymouth, Guilford, and Williston, to name a few. The agreement is that the Thetford listers will perform the actual inspections and data recording of the 1,464 properties, a substantial task that will take many months. The company will manage the project, provide additional training as needed, manage and customize the hefty software that handles all the data, and perform comparable sales modeling, valuation analysis, and statistical review. They will also take on the most complicated properties in town, like farms, big estates, and lakeside locations. The project is expected to be complete in time to update the 2025 Grand List.
Though the task seems onerous, our listers are actually looking forward to it. They will learn a lot along the way and also receive training in property appraisal from professionals so they can better perform their lister duties. Among them, they will visit every property in Thetford and thus will get intimately acquainted with the town. They also will participate in public relations, an important facet of reappraisal that requires the joint effort of the company and the town’s administration. The listers will often be the “face” of the town as they visit different properties. However, other avenues to reach residents would include public notices, press releases, and presentations to taxpayers, businesses, and local officials to explain the scope and objectives of the project.
It’s a misconception that reassessment automatically raises property taxes. The purpose of this town-wide undertaking is to ensure that assessments are fair and accurate. After years without reassessment, some properties will be over-valued while others will be under-valued. Over-valued properties are actually subsidizing the taxes of under-valued properties. Even if an assessed value increases, taxes don’t automatically go up.
Another factor is that the amount of property tax levied is derived from assessment, but is not in lockstep with it. If taxes change, don’t blame the lister; they only work on the assessment side of the equation! The figure in the Grand List (expressed as property value divided by 100) is used to calculate the fraction of the municipal budget that is paid by the property owner. Generally, if the Grand List of the town increases, the tax rate will probably go down because the tax levy is distributed over a broader base. If taxes go up, it means the town budget has increased and more taxes are needed to support it.
In summary, “If the total amount of taxes collected is a pie, the size of the pie is determined by town boards, school boards and county legislatures. The assessor doesn't impact the size of the pie; he or she just ensures the pie is cut up fairly — that taxes are fairly distributed based on current market values.”
Photo credit: Li Shen