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If property values are down, can tax assessments be far behind? wonder St. Louis County homeowners

This article first appeared in the St. Louis Beacon, April 16, 2009 - Property owners in St. Louis County are about to test the theory of gravity and find out whether what goes up will really come down.

Next month, owners of the 365,000 residential properties in the county will receive their preliminary property tax notices. During the last reassessment, in 2007, many bills rose sharply because of rising property values. With today's news filled with the woes of the real-estate market, homeowners could be forgiven for assuming that as dramatically as their bills shot up last time, the bottom line number should drop just as much this time.

But in 2007, the median value rose by 22 percent. This year, the median drop is estimated at 9 percent.

The result is bound to be a lot of unhappy property tax payers and a lot of calls to the Eugene Leung, director of revenue for the county. His office is ready, and he doesn't buy the old adage that you can't fight city hall -- or in this case, the county government center.

"It's not necessarily a fight," Leung said. "It's an art to try to establish the fair market value of a property that is not going to be sold. There are professional standards for doing that, but like anything else when you're doing something en masse, a 1 percent error affects 3,000 properties. It's a matter of getting it right."

When the tax estimate notices arrive, determining whether the county has it right -- and the possible impact of lower assessments -- could rank right up there with the fragility of Chris Carpenter's body, the prospects for the Blues in the playoffs and the next American Idol as a topic of local conversation.

HOW THE PROCESS WORKS

Residential property in Missouri is assessed every two years, with the resulting values used to determine how much tax revenue goes to the patchwork of local districts, from schools to fire departments to municipalities to libraries and the rest.

Because of legislation passed last year, homeowners will for the first time be receiving projected notices of how much money they will owe by the end of the year. The numbers are preliminary, but they should give people a pretty good idea of what their tax bill will be.

The math is simple: assessed valuation times whatever tax rate the individual jurisdictions have set. Leung's office determines the first number; boards of the taxing district determine the second ones. To drive that point home, the tax liability notice will break down what jurisdiction gets how much money -- and it will include contact numbers for each of them.

To try to take into account the deflation of the housing boom, assessors have used updated computer software and recent sales figures for comparable homes to try to make their estimates as accurate as they can. Still, says Leung, "everybody is suspicious of the assessor."

As a result, when St. Louis County made homeowners' preliminary assessments available on its website in March -- crashing the website -- 963 property owners called with questions. Leung considers that figure surprisingly low.

"I thought earlier, before we released those preliminary values, there would be more of a concern about the fact that property values didn't drop 20-25 percent for everybody," he said. "St. Louis just doesn't have the same volatility in housing prices as other areas. But people may have been reading those articles more carefully than we thought."

The median drop in the county was 9 percent -- for every 101 properties, 50 had a change more than that and 50 had a change less than that.

After the projected tax liability notices go out in May, homeowners may contact the county's Board of Equalization for informal conferences and, if necessary, formal hearings. The board's decisions come out in September; anyone who wants to take the process further may appeal to the State Tax Commission.

Factors that support a property owner's appeal could include an independent appraisal, photos, repair estimates and sales of comparable properties. Taxes must be paid by Dec. 31.

WHO GETS THE MONEY

But determining how much a home is worth is only half of the property tax equation. Jurisdictions that rely on those tax receipts worry that their services will have to be cut - and that anger on the part of homeowners may affect their revenue for years to come.

Such anger has translated into new legislation, pushed by state Sen. Jane Cunningham, R-Chesterfield. Dubbed the Predictable Property Tax Act, it is designed to make sure that people aren't priced out of their homes by rising -- and surprising -- assessments.

It requires that assessments more accurately reflect the value of the market by taking into account foreclosures, houses that banks have taken over and houses that have been on the market for a long period of time -- requirements not in the law now, she says. It also would make sure that assessments would not increase unless a property is sold, except if its square footage is increased. The exception would be a rise of 2 percent or the Midwest cost-of-living increase, whichever is less.

Cunningham said 20 other states have similar provisions. The result, she added, would be to make sure homeowners can remain where they are even when housing prices rise.

"Right now," she said, "homeowners are penalized with higher taxes if they maintain or improve their home. They are letting communities run down, which is not going to help cities or communities at all. This way, they are encouraged to improve or maintain their property because it increases the resale value but not the taxes.

"I have constituents show me pictures all the time of driveways cracking up and paint peeling off, pictures that they take to appeal their assessments. They are letting those happen on purpose. Most of them are senior citizens trying to stay in their homes."

Cunningham says her bill would not reduce local revenue and would cut the size of government because fewer assessments would be needed. She also says foreclosed homes would "fly off the market in sales" when the bill passes because assessments would be locked in.

The bill would require passage by the Legislature as well as a vote of the people. Neither is expected this year, she said, because of resistance from fellow lawmakers, but she expects the effort will take more than one session for such a large change.

Her approach is praised by a group called the St. Louis County Residents for Property Tax Relief Now. Spokeswoman Sarah Haenni of Kirkwood, who became involved in the issue two years ago after being surprised by her own home's reassessment, said it would help people plan for their future.

She also favors another change -- an elected assessor for St. Louis County, so homeowners can have a more direct say about how much their home will be valued.

"I don't think the people are crooked," Haenni said of the current system. "I just think the system they use has quirks that people don't understand. It's a confusing and convoluted process. When we're taxed on something, we should be able to understand.

"I want to neutralize the impact of assessment increases on my tax bill. I don't vote on assessment. I vote on tax rates. If we need more money for schools, they should go to the voter and ask for it. Assessments should not be the driver of revenue."

TOUGH LESSON FOR SCHOOLS

Not surprisingly, schools are opposed to Cunningham's approach. Brent Ghan, spokesman for the Missouri School Boards Association, said it would be "really devastating" for the state's classrooms.

"We would never claim that property taxes are the perfect way to fund public schools," he said. "We're aware of the concerns that property owners have with their taxes, especially people with fixed incomes. But as long as property taxes are the way schools are funded on the local level, districts should be able to benefit when values increase and there is growth in the community, to help them keep up with rising expenses."

John Urkevich, executive director of the Cooperating School Districts, said school districts that have not hit the limit authorized for their tax levy can roll up rates to compensate for lower assessments, to a degree. But he said the Cunningham bill would create inequitable situations where property owners who live next door to each other would have wildly different tax situations.

In tough economic times, he added, school board members may have to swallow hard before voting to raise their districts' tax rates. But if the alternative is inferior learning, "it's very difficult to criticize a district if it does that to educate the children in that community. That's the business they are in."

In the Lindbergh School District, the question is far from hypothetical. Its tax levy is $2.75 for each $100 of assessed valuation, as high as it can go without voter approval. In 2005, an effort to raise the rate by 65 cents over several years was soundly defeated.

As a result, Superintendent Jim Simpson said, the district had to cut $1.3 million in the middle of the year from its $60 million budget, resulting in fewer field trips and reduced supplies among other reductions. Because salaries typically make up 80 percent or more of a school district's budget, any future cuts would more drastically affect the quality of education in the district.

Normally, said Patrick Lanane, Lindbergh's chief financial officer, the district would have expected a $2.2 million gain in revenue from reassessment. Instead, it lost $225,000, and the reduction was that small only because increases in commercial property offset the 9 percent drop in residential property assessment.

The situation is quite different from what school officials have become used to, Simpson said.

"Just 24 months ago, this conversation would have seemed bizarre," he added. "Everybody was thinking everything was going up every year, but the problem was that everything was going up too fast."

The dash of cold water on those expectations may be just what Missouri needs to step back and turn a critical eye on its tax structure overall, Urkevich said.

"The property tax is part of that," he said, "along with the sales tax, but also tax abatements and tax diversions where millions of dollars are given away. The result is that it raises taxes on individuals.

"When you take property off the tax rolls, the property that remains on the rolls bears a bigger share of the burden. Homeowners and small businesses sometimes subsidize the development of larger projects through their tax dollars."

Adds Ghan of the School Boards Association:

"Property taxes tend to be the most unpopular taxes we have, so maybe there is a better mix out there. But if there is an alternative, we have to make sure it doesn't lead to less money for schools."

Dale Singer began his career in professional journalism in 1969 by talking his way into a summer vacation replacement job at the now-defunct United Press International bureau in St. Louis; he later joined UPI full-time in 1972. Eight years later, he moved to the Post-Dispatch, where for the next 28-plus years he was a business reporter and editor, a Metro reporter specializing in education, assistant editor of the Editorial Page for 10 years and finally news editor of the newspaper's website. In September of 2008, he joined the staff of the Beacon, where he reported primarily on education. In addition to practicing journalism, Dale has been an adjunct professor at University College at Washington U. He and his wife live in west St. Louis County with their spoiled Bichon, Teddy. They have two adult daughters, who have followed them into the word business as a communications manager and a website editor, and three grandchildren. Dale reported for St. Louis Public Radio from 2013 to 2016.

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