Property values

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Property Values, when used by state and local governments, are generally used as a way of raising revenue to fund various government functions. Generally, a tax, as a percentage of the value of real property is levied on various property owning citizens.

When judging the value of real property in Kentucky, the State Constitution gives the following guidance:

"All property, not exempted from taxation by this Constitution, shall be assessed for taxation at its fair cash value, estimated at the price it would bring at a fair voluntary sale; and any officer, or other person authorized to assess values for taxation, who shall commit any willful error in the performance of his duty, shall be deemed guilty of misfeasance, and upon conviction thereof shall forfeit his office, and be otherwise punished as may be provided by law." [1]

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Lexington Property Values

How property values are established in Lexington

The use of property taxes is important in the raising of revenue for any city or county. These property taxes make it possible for local governments to operate and provide members of the community with important services such as police, fire department, ambulance, school, and road services. For these reasons, the Kentucky State Constitution gives local municipalities the authority to assess properties values in order to raise revenue.

In Kentucky, property taxes are collected by the Sheriff's Department and property values are assessed by Property Value Administrators (PVA) in each county. The state constitution declares that properties "... shall be assessed for taxation at its fair cash value, estimated at the price it would bring at a fair voluntary sale..." [2]

While the Fayette County PVA is capable of doing good job in assessing the fair market value of a property, there are instances in which assessments of a worth are too high. The proper manner of assessing the value of a property should be that of using a recent sale price of the subject house, provided that the transaction is arms length; or where both parties in the transaction treat each other without favoritism.

Examples of Appraisals

Examples of when the Fayette County PVA do not assess property fairly are when a property is bought for what seems to be a low price for the neighborhood. These types of sales can either be through means of buying through a Realtor, from a bank, or from the Master Commissioner's sale.

An example of a property's assessment being higher than that of it's recent sale price: Toner St: a street of virtually identical townhomes that are assessed at prices ranging from $14,000-60,000 [2] Sale prices on the street range from $24,750 in 2007 [3] for a property that is currently assessed at $36,000 [4] to a sale price of $54,000 in 2006 [5] for a property that is currently assessed at the sale price of $54,000[6].

There is also a home on the street that has been assessed at $39,000 [7] despite it's sale price in 1984 of $40,500 [8].

Another example of a strange assessment value is in the case of 555 Toner, which was sold by Housing and Development- a Federal agency, for the price of $18,000 in 2004 [9]. Only a year later, the property was reassessed at 2 times that amount, or $36,000[10]. Is the public to believe that the federal government really sold a property for 1/2 what it was truly worth or did not have the foresight to see that it would appreciate at the rate of 100% in a year?

The problem with the system of appraisal used is that it seems to be random at best. When a property is purchased at a lower price than others in the neighborhood, the Fayette County PVA seems to assume that the underlying fair market value is more than what it actually brought in a sale. The discrepancy from assessed values and sale prices should only further confuse citizens with the ongoing correction in the housing market.

Appeals of the assessment of real property

If property owners feel that the county's assessment of the property's value is incorrect there is a complicated appeals process that must be strictly followed.

The following comes from the Fayette County PVA website: "Real property assessment notices are mailed annually in April to owners that had any change from the previous year. It is not necessary to receive a notice to file an appeal. Property owners that do not agree with the assessed value have the right to file an appeal. [3]

Fayette County PVA employees are committed in their requirement of establishing 100% Fair Market Value in a fair and equitable manner. If you do not agree your property would sell for the value determined, please follow these guidelines:

If your opinion of the fair cash value of your property differs from the assessed value, please call 859-246-2722 or visit us at 101 E. Vine Street, 6th floor. Office hours are 8 am - 4:30 pm, Monday through Friday.

The open inspection period begins the first Monday in May and continues for 13 days including Saturdays. By law, you must speak with a designated PVA employee prior to filing an appeal. This must be done by May 19, 2008 for the January 1, 2008 tax year.

If an agreement is not reached with the PVA representative prior to May 19, 2008, you then can appeal in writing to the Fayette County Clerk, 162 E. Main Street. The appeal must be postmarked by May 19, 2008. or hand-delivered to the County Clerk by close of business May 20, 2008.

After the close of open inspection, an adjustment based on opinion of value cannot be made.

The Fayette County Clerk schedules all Local Board of Tax Appeal hearings.

If you do not agree with the decision of the Local Board of Tax Appeals you then have the right to appeal before the Kentucky Board of Tax Appeals and then to Circuit Court.

Appeals filed by a paid representative must include a letter of authorization from the owner.[4]

Exemptions

The Homestead Exemption is for all homeowners who will be 65 years of age or over any time during the current tax year, who live in their home and maintain it as their primary residence. You must apply at the PVA office and provide proof of age or request the application be processed by mail. Applications requested by mail must include verification of your age. If you have questions, please contact Dorothy McIntyre at (859) 246-2722, ext 246 or by email at Dorothy.McIntyre@ky.gov.

The Disability Exemption is for homeowners that receive benefits for total disability and who live in their home and maintain their home as their primary residence. This exemption is applied for annually in December. If you have any further questions regarding the Disability Exemption, please contact Dorothy McIntyre at (859) 246-2722, ext 246 or by email at Dorothy.McIntyre@ky.gov. Disabled veterans do not need to apply on an annual basis.

The Homestead/Disability Exemption for 2009 is $33,700. For qualified applicants, this amount is deducted from the fair cash value assessment of their residence. [5]

School Boards and Increases in Property Taxes

Raising property taxes to obtain extra revenue is a growing trend among school boards in Kentucky. By state law, a school board is allowed to increase property taxes up to 4 percent in a given year without a voter referendum. School boards often claim a lack of state funding as the main reason behind increases, a reason many people have disagreed with and voiced their opinion about in board meetings and elsewhere. The opposition believes that school districts do not have a "funding" problem, but rather a spending problem. According to the Kentucky Department of Education Web site, the total state education budget for the 2010 fiscal year is $4.883 billion.[6] Below are a few examples of some controversial tax increases, as well as some counties who elected not to raise property taxes.

Bullitt County

On Sept. 7, 2010, Bullitt County Public Schools approved the maximum 4 percent increase on property taxes with a 3 to 2 vote. The tax rate increased to 55.2 cents per every $100 assessed, up from 52.9 cents the previous year. This means the owner of a home worth $100,000 would pay an $23 per year.

Christian County

On Aug. 26, Christian County Public Schools approved the maximum 4 percent increase on property taxes by a 3 to 1 vote. It was the first time since the 2007-2008 fiscal year that the board had voted on an increase, which is expected to raise an additional $400,000. The extra money is expected to go toward a salary increase for the staff, and the board discussed doing the same over the next five years in order to give the entire school system staff a 5 percent pay increase. Acknowledging the fact that Christian County teachers' pay are on average with surrounding counties, the board said they want to keep the salaries competitive and that the kids deserve a better than "average" education.

The county schools are in need of new math books, which is expected to cost $800,000, but the board voted to delay buying textbooks until Senate Bill 1, which will modify the state's educational standards, is passed.

The increase raises the property tax from 36.8 cents to 37.9 cents per every $100 assessed, meaning an owner of a $100,000 home would pay an extra $11 per year. Prior to the board's decision, Christian County recently approved an increase in county property tax.

Crittenden County

On Sept. 2, 2010, Crittenden County Public Schools voted with a 4 to 1 vote to increase its property tax rate for the fourth straight year. The increase raised the rate from 44.2 cents per every $100 assessed to 45.6 cents. There are three schools in the school district; Crittenden County Elementary School, Crittenden County Middle School, and Crittenden County High School. The school distict's budget is $10 million.

Jefferson County

On Aug. 23, 2010, Jefferson County Public Schools approved a property tax increase of the maximum 4 percent by a 6 to 1 vote. It was the third year in a row that rates were increased. The tax rate was raised from 64.6 cents to 67.6 cents per every $100 assessed, meaning an individual with a house valued at $100,000 would pay an extra $30 per year. The increase passed amid criticism and opposition from the Louisville TEA Party, which in a press release urged taxpayers to show up to the hearing to voice their opinion. The release stated:

"If passed, it will mean a total of about a 10% increase over the past three years. They recently gave everyone in the JCPS system a 1% raise, when many people in Louisville are unemployed. This tax increase is totally uncalled for. Especially in light of their rich retirement system (people who retire at age 55, with 33 years of service can actually receive a net check in retirement which is higher then their net check while working, and with a built in 1 1/2% COLA each year)." [7]

For a copy of the entire release, click here.

Oldham County

On Aug. 26, 2010, Oldham County Public Schools voted with a 4 to 1 vote to raise property tax rates by 2 cents per every $100 assessed. The increase equated to a 2.9 percent increase from the previous year, meaning the owner of a home worth $100,000 would pay an extra $20 per year.

Spencer County

On Sept. 8, 2010, Spencer County Public Schools approved a 4 percent tax increase on property taxes, despite a public statement from the superintendent saying he would recommend a lower rate. The tax rate was raised to 58.1 cents, meaning the owner of a 150,000 home will have to pay an addition $31.50 in taxes per year. The tax increase upset some in the community, as seen in this opinion article written by the editor of The Spencer Magnet News. According to the article, the school system already has a $21 million budget for its 2,873 students.

Trigg County

On Sept. 2, 2010, Trigg County Public Schools voted unanimously to keep its property tax rates the same. The board traditionally raised the rate the maximum 4 percent each year, but has recently stopped since the 2008-2009 school year following the closing of Johnson Controls, Inc., which was a major employer in the community.

Links

1. Kentucky Department of Education

2. Kentucky School Boards Association


References

  1. Kentucky Constitution: Section 172
  2. Legislative Research Commission
  3. [1]
  4. Fayette PVA Appeals Process
  5. Fayette County Exemption Page
  6. Kentucky Education Facts
  7. JCPS Seeks to Raise Your Taxes: Again!
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