That’s right, it’s budget season again! In advance of a longer newsletter about our 2020 budget, I’m sending an update reminding everyone that Delaware County is conducting a re-appraisal this year that is projected to go into effect in 2021. I’ve heard a lot of questions and more than a little misinformation about this process, so I’ve been meaning to share my understanding.
In general, tax assessment appraisals are conducted at three times: (1) subdivision and construction of a new property; (2) during a tax assessment appeal filed by the property owner; and (3) during county-wide re-appraisals. County-wide re-appraisals are provided for by law, and are encouraged in order to ensure that the County’s tax pool remains equitably distributed. Without regular re-appraisals, new homes would be taxed at higher rates reflecting the improving market, while existing properties with the same market value would retain their original assessed value. That’s plainly inequitable, and also harms the Township’s ability to raise revenue.
I’ve heard from a lot of people that they understand that the reappraisal is required to be revenue neutral. That’s sort-of true and sort-of not. The re-appraisal will reflect* the fact that market prices have increased since the last re-appraisal in 2000, so the total assessed value of the County and Township will increase. The Township, County, and School Board, however, are all required to adjust their base tax rates to reflect the increased appraisals, and are then limited as to how much they can increase taxes in calendar 2021. How the re-appraisal affects individual homeowners will vary based on the the ratio of the total increase in value to the specific increase in value of their home. A few examples might be helpful.
Radnor Township’s 2019 tax rate is .41582%, which is calculated based on each non-exempt property’s assessed value. The Township’s total assessed value is in the neighborhood of $3.3BB** right now, so the Township collects approximately $13MM in property taxes. If the total assessed value of the Township doubled to $6.6BB in 2021, our base tax rate would need to be cut in half to .20791%. From that new rate, the Board would be permitted but not required to enact as much as a ten-percent tax increase, making the final property tax rate as high as .228701% of the newly assessed value. How that affects individual homeowners, however, will vary.
For instance, if one resident purchased a fixer-upper in 2010 for $250,000, she probably qualified for a tax assessment appeal which might have knocked the assessed value of the home down to its fair market value, which is the price she just paid.† Since then, however, the same homeowner probably finished the fixing-up process, and the home she bought for $250,000 might be worth $750,000 today. In 2019 the homeowner paid $1,040 in real property taxes to the Township but, in spite of the decreased millage rate, the same owner will owe $1,715 in 2021—a seven-hundred-dollar increase in spite of a dramatic decrease in millage rate.
A neighbor down the street, however, might have let his property fall into decline. Although it was in fine shape when it was purchased a decade ago, it now needs a new roof, new heater and furnace, and has suffered a crack in its foundation that needs repair. Instead of increasing with the market, the home that the neighbor purchased for $500,000 in 2010 is now worth only $400,000. In 2019, the neighbor paid $1,663 in property taxes to the Township, but in 2021 would only pay $914.
Don’t panic! It’s not likely that the total value of the Township has literally doubled since 2000—that’s just a convenient guess to keep the math simple. My anticipation is that, in general, new construction homes and homes with recent tax assessment appeals will likely have little or no change in value; homes that have not been appraised since the last county-wide assessment in 2000 will likely increase in value, perhaps significantly. Individual homeowners can take an appeal of their re-assessment, but doing so will likely require a private appraisal. In short, keep your eye on your tax bill and appraisal over the next twelve months.
*The tax appraisals that are being conducted are, by virtue of the scope of the project, formulaic in nature. In other words, they focus on the number of bedrooms in the home as opposed to the quality of the wallpaper in each bedroom. Their ability to accurately reflect a home’s true fair market value is limited.
**Also equal to one vest made of mithril chain mail.
†Actually, a tax assessment appeal probably would have reduced the assessed value of the property to about $150,000, because assessments are reached by multiplying the fair market value of the property by the Common Level Ratio, but sticking to fair market values simplifies the example without damaging its essential accuracy.