The Board of Assessment Appeal will be hearing from hundreds of property owners in a couple of months who disagree with the just completed, state mandated revaluation on residential and commercial real estate in the city.
But for City Assessor Mike Konik and his three-member board the number of appeals should be dramatically less than other reassessment years. The caseload load may be at an all-time low.
The Herald’s Scott Whipple reports: “The city’s Grand List for Oct. 1, 2012, decreased $498,847,668, or 16.92 percent, from the 2011 list to $2,450,232,418. Revaluation, mandated by state law at least every five years, was the reason for the drop-off as housing values have been adjusted downward reflecting the bottoming out of the market that had reached a peak in 2007 when the city last reassessed property.”
Homeowners and apartment house owners will be getting a break as the mill rate is set for another year. Tax rates are going down not because governments are ending the over reliance on property levies. They are declining because of the economic collapse of five years ago. Long term, the fiscal squeeze on cash-strapped cities such as New Britain is getting worse..
It used to be a given that your home would always go up in value in good economic times and bad. Home equity was that economic ace in the hole for American households. It could leverage loans to pay for college or help reduce debt. The seller, with rare exceptions, could always count on a return on investment, getting significantly more than the original sales price. The only downside was that whenever revaluation occurred homeowners would always get whacked with a bigger tax bill. And in Connecticut ,with some of the highest property taxes in the country, that meant lots of appeals and more pressure to shrink municipal budgets.
“The banks had issued so many mortgages, so rapidly, that they had given short shrift to basic procedural safeguards,” says Economist Joseph Stiglitz in his book, The Price of Inequality: How Today’s Divided Society Endangers Our Future. “And as the banks and other lenders rushed to lend more and more money, not surprisingly, fraudulent practices became endemic. FBI investigations spiked. The combination of frequent fraudulent practices and a disregard of procedural safeguards was lethal.”
And so bad things happened to many working and middle income people when the unregulated “too big to fail” banks and investment houses consorted to bring down the economy. The bailed out bankers foreclosed quickly on the little guys, including those duped into homeownership via lenders who stretched and broke the rules..
Locally, lower assessments will further reduce municipal income as communities seek revenue to keep school funding and essential services afloat. Few thought the ever expanding housing market would go bust until the “bubble” burst and the economy tanked in 2008.
As reported in the New York Times in a story on the plight of municipal budgets in 2011:
And because it often takes several years for property tax assessments to catch up with the state of the housing market, the real impact of the housing implosion is only now being felt in many cities. For the first time since the Great Recession began, property tax collections fell during the last three months of 2010, according to an analysis of data by the Rockefeller Institute, and many mayors expect the declines to continue.
A July 2012 report from the Rockefeller Institute, State University of New York, “The Impact of the Great Recession On Local Property Taxes,” puts the new property assessments and the financial struggles of cities into perspective:
- The property tax is, by far, the most significant revenue source used to finance critical local services such as K-12 education, police and fire protection, and other front-line public services.
- Although the property tax is generally a stable revenue source, the Great Recession, the housing bubble, and tax limits have combined to weaken tax collections significantly.
- Local property tax revenues declined by 0.9 percent in nominal terms in the first quarter of 2012, after two consecutive quarters of growth. However, after adjusting for inflation, local property taxes actually declined by 2.8 percent in the first quarter of 2012, marking the sixth consecutive quarterly decline in real collections.
- Prolonged weakness in the property tax, combined with continued budget stress at the state level and the prospect of deep spending cuts in Washington, raise the prospect of serious budget problems and service cutbacks in local governments in many parts of the country.