Beginning of the end for Prop A?

If you’re trying to sell your home in southeast Michigan right now,
you’re in a quandary a lot of mob bosses could relate to.

Someone close to you is lying - and that could cost you a lot of money.
But who’s the dissembler?

Is it your real estate agent, who keeps telling you your house is
doomed to fetch less than you paid for it five years ago?

Or is it your local tax assessor, who claims your house is worth way
more than any prospective buyer is offering?

Sometimes, late at night, a third, even scarier alternative occurs to
you: What if they’re both telling the truth?

Now you understand why Tony Soprano sometimes feels like whacking
everybody in sight.

Some ’splainin’ to do

Starting next month, Southfield City Assessor Sherry Lee and her peers
in municipalities across the state are going to be spending a lot of
time explaining to homeowners why the taxable value of their properties
is rising even as residential home prices are swooning.

It sounds like a scam, Lee conceded in a phone interview Thursday.

But there’s an innocent explanation, she said. Two of them, actually.

First, there’s the fact that the property assessments homeowners will
begin receiving next month are based on home sales during a 24-month
period that ended almost a year ago, on April 1, 2006.

So if property values in your neighborhood were holding their own back
in 2004 - or even rising at a double-digit annual pace, as they did in
some suburbs - the state equalized value (SEV) on this year’s
assessment will reflect that, even if prices have plunged precipitously in
recent months.

“Real estate agents are working in real time,” Lee noted, “and that’s
just a different parameter.”

Even as SEVs begin to reflect diminishing market values, moreover, the
gap between SEVs and the taxable values of many homes remains
significant - a 30% spread in the case of the typical homeowner. So, although
your home’s taxable value can never be more than the SEV, that taxable
value can continue to rise - by the rate of inflation or 5% a year,
whichever is less - even as your home’s SEV is plummeting.

Cities’ turn is coming

In theory, any significant, sustained dip in home values eventually
will be reflected in lower assessments. The real question is what
municipalities will do when the current sales slump ushers in an era of sharply
lower property tax collections a few years hence.

If municipalities find themselves caught between cuts in state revenue
sharing and diminishing property tax receipts - a likely prospect -
state lawmakers will be under tremendous pressure to fiddle with Proposal
A, the state’s 1994 overhaul of school and property taxes.

Taxpayers might accept a change in the Proposal A formula if cities
started laying off police and firefighters in droves. But powerful real
estate interests would resist any change in the status quo.

It’s hard to predict how such a battle would play out. In the long run,
though, don’t be too surprised if homeowners are the ones who end up
getting whacked.

Source:
http://www.wzzm13.com/news/news_article.aspx?storyid=69209