Understanding the First & Eighth Criteria (or Must the Property Appraiser Always Deduct 15%)?


Florida property is required to be assessed at 100% of just value, which has been deemed equivalent to fair market value.  So why do the Property Appraisers sometimes deduct 15% for the “first and eighth”?  And does the Department of Revenue’s new bulletin require 15% to be deducted from the values of all property?  This post will briefly explain the first and eighth criteria of section 193.011, Fla. Stat., when those factors apply, what “costs of sale” may be deducted, and why a 15% deduction is commonly used.

What are the “first and eighth factors”?

The phrase “the first and eighth” refers to subsections (1) and (8) of Fla. Stat. 193.011.  Fla. Stat. 193.011 sets forth the eight factors that must be properly considered by the Property Appraiser in assessing property for tax purposes.  Subsection (1) requires the Property Appraiser to consider “the present cash value of the property, which is the amount a willing purchaser would pay a willing seller, exclusive of reasonable fees and costs of purchase, in cash or the immediate equivalent thereof in a transaction at arm’s length.”  The relevant portion of subsection (8) requires the Property Appraiser to consider “the net proceeds of the sale of the property, as received by the seller, after deduction of all of the usual and reasonable fees and costs of the sale, including the costs and expenses of financing, and allowance for unconventional or atypical terms of financing arrangements.”  Although these subsections contemplate consideration of a variety of information, the phrase “first and eighth” generally refers to the requirement that the Property Appraiser consider the costs of purchase and the costs of sale.”  In Turner v. Tokai Financial Services, the court explained that while subsection (1) contemplates the transaction from the buyer’s perspective and excludes fees and costs incurred by the buyer in addition to the purchase price, subsection (8) excludes the reasonable fees and costs that the seller would pay out of the proceeds received from the buyer.

Do the first and eighth criteria apply to both real and personal property?

Although some of the factors of section 193.011 are undoubtedly more relevant to appraisals of real property, the Tokai court held that, despite some legislative history to the contrary, because Fla. Stat. 193.011  is not expressly limited to real property, it should be interpreted as applying to both real and personal property.

What “costs of sale” should be deducted?

For real property, the Supreme Court of Florida has construed the phrase “reasonable fees and costs of sale” to include only those fees and costs typically associated with the closing of a sale of real property, such as reasonable attorney’s fees, broker’s commissions, appraisal fees, documentary stamp costs, survey costs and title insurance costs.  Determinining the costs of sale of tangible personal property can be a bit more challenging.  In Tokai, the court adopted the taxpayer’s market approach value for its used equipment, but rejected the taxpayer’s request for a 20% cost of sale deduction for sales commissions, advertising, warranties, delivery, installation and product demonstration, finding that such expenses were internal expenses, rather than external “costs of sale.”  For tangible property assessed by the cost approach, the Supreme Court later held in the Walmart case that sales tax should not be deducted as a cost of sale, because it is a generally accepted appraisal practice to include acquisition costs such as sales tax, freight and installation in the original cost when performing a cost approach valuation.

Does the “costs of sale” adjustment apply to values determined by the cost approach and income approach?

This, of course, is the hot question of the day.  Years ago, the court held in Bystrom v. Equitable Life Assur. Society that a costs of sale adjustment to a value arrived at by the income approach was improper because subsection (8) could only be applied if there had been an actual sale of the property.  Fast forward to January 2011, when the Florida Department of Revenue issued PTO Bulletin 11-01 , advising all county value adjustment boards that they may make cost of sale adjustments to values determined by any of the three traditional approaches (cost, income, or sales comparison).  This came on the heels of the DOR issuing VAB training materials that indicated that the eighth factor should result in a value less than fair market value. 

Many Property Appraisers take issue with the DOR’s interpretation and contend that it contravenes established Florida law.  Hillsborough County Property Appraiser Rob Turner has filed a challenge to the DOR’s VAB training materials, asking that they be deemed invalid.  The Clay County Property Appraiser and the Florida Association of Property Appraisers have joined in that action.  A separate rule challenge was also recently filed by the Property Appraisers of Alachua, Monroe and Okaloosa counties.   Also, the DOR’s bulletin, even if accepted and followed by the Property Appraisers, is carefully phrased to only require the VABs to make an eighth criterion adjustment “when justified by sufficiently relevant and credible evidence.”  Thus, absent a directive from the courts, it is doubtful that taxpayers will suddenly see lower assessments as a result of this bulletin, although it may provide them with an additional argument to be raised in VAB hearings.

Is the “cost of sale” adjustment always 15%?

Under the law, the Property Appraisers are only required to make such adjustments as are justified by the facts, and those adjustments may be higher or lower than 15%.  In the past, some county property appraisers were called out by the courts for unfairly assessing property at a level of assessment that was less than 100% of just value.  Thus, in reviewing each county’s tax roll, the DOR conducts sales ratio studies to ensure that the county property appraisers are sincerely attempting to reflect the full fair market value of the property in their jurisdiction.  In conducting those studies, the DOR generally assumes a 15% adjustment for costs of sale and uses those adjusted values to evaluate the fairness of the county’s tax roll.  Also, every year the Property Appraisers must submit Form DR-493 to the DOR to notify the DOR of the “costs of sale” adjustments made to each type of property in their county, and Rule 12D-8.002(4) requires them to submit documents justifying any adjustments in excess of 15%.

The confusion tends to arise because the certifications made by the Property Appraiser relate to the adjustments made in their mass appraisal process.  Thus, while a Property Appraiser may certify that they made a 15% adjustment during the mass appraisal process, if a taxpayer challenges their assessment, the Property Appraiser may prepare a fee appraisal using all three approaches to value, and may or may not make similar adjustments in each approach.  However, while the Property Appraisers may take issue with the DOR’s bulletin, the bulletin seems to suggest that if a Property Appraiser has certified that they used a 15% adjustment on Form DR-493, the VAB would be justified in making a 15% adjustment to any values that do not affirmatively appear to include such a deduction.  Until the courts weigh in, this will likely continue to be a hotly contested issue before the VABs and the courts.

Effect of Gulf Oil Spill on Property Tax Assessments


As Floridians are bombarded by headlines portending 10-30% losses in property values due to the BP oil spill, many property owners are probably wondering how this will affect their property tax bills.  This article will explain how and when the oil spill could affect property tax assessments, current litigation regarding these issues, and Governor Crist’s latest Executive Order authorizing interim assessments for affected properties.

How will the oil spill affect my 2010 property tax assessment?

Unfortunately, your 2010 taxes will be based on the value of your property as of January 1, 2010, prior to the explosion on the Deepwater Horizon and the subsequent oil spill.  Thus, it is unlikely that Floridians will see any reduction of their 2010 assessments as a result of the oil spill until at least 2011.  Some eager class action lawyers have jumped the gun a bit by filing a class action lawsuit against the Property Appraisers of all affected counties, seeking an order requiring them to consider the effects of the oil spill in calculating the 2011 assessments.  However, since the Property Appraisers are already required by state law to consider any pretty much any conditions that affect the fair market value of a property, that lawsuit would appear to be a bit premature, to put it nicely.

What if my property value is negatively affected by the oil spill?

The Property Appraisers are required to consider such factors as the condition of the property, the present cash value of the property, and, for income-producing properties, the income from the property.  Thus, if sale prices of properties along the Gulf coast decline as a result of the oil spill, or if hotels see greater vacancies, those factors will influence the 2011 assessments.  The primary case regarding contaminated property in Florida is Gulf Coast Recycling Inc. v. Turner, in which the court affirmed the value adjustment board’s reduction of the value of an apartment complex to $100 where the evidence showed that the costs associated with the cleanup of the contaminated property exceeded the price that would be paid for the property.

Of course, in the case of an oil spill, the property may not actually be contaminated as of the assessment date, but may suffer a loss in value due to its proximity to the contaminated waters.  This is commonly referred to as a “stigma.”  While Florida has not directly addressed this issue, other state courts have acknowledged that a stigma factor can affect property even if the contaminants are removed, and that stigma may be considered in determining the property’s value for tax purposes.

Are the Property Appraisers required to make a reduction to properties affected by the oil spill?

While the Property Appraisers are required to assess all property at its fair market value as of January 1st, there is currently no specific requirement that they make a specified percentage reduction to assessments of property affected by the oil spill.  That said, last year the legislature passed a statute providing for special tax treatment for property affected by defective drywall.  Thus, it is always possible that we will see similar legislation for properties affected by the oil spill.

Didn’t the Governor issue an Executive Order regarding assessment of properties affected by the oil spill?

Today, Governor Crist issued Executive Order 10-169, which authorizes (but does not require) Property Appraisers in the 26 counties in which he has declared a state of emergency to provide “interim assessments” of any properties that may have suffered a loss in value due to the oil spill.  These interim assessments will not affect the property owners’ tax bills.  Rather, the purpose of the interim assessments would be to assist property owners with documenting the loss in value to their property so as to help substantiate their claims submitted to BP.

I am sure that the Property Appraisers are going to be a bit surprised by this Order, as it is generally not their constitutional duty to serve as expert witnesses in their constituents’ private lawsuits.  Also, as the Order is not mandatory, many property appraisers may choose not to provide this extra valuation service.  Thus, rather than relying on the county Property Appraisers to assist them with their claims, property owners would be wise to compile their own evidence of any diminution of value, especially if it can be attributed specifically to the oil spill.

Obtaining “Working Waterfront” Classification for Florida Property Tax Purposes


In 2008, Florida voters amended the Florida Constitution to allow “working waterfront” properties to be assessed based on the current use of the property, as opposed to the highest and best use of the property.  Pursuant to Amendment 6, waterfront land used for commercial fishing, public boat launches, marinas, drystacks, and water-dependent marine manufacturing and repair facilities can no longer be assessed at its fair market value, which often represents the value of the property for a more-intensive use, such as for a hotel or condominium project.  Instead, the property must be assessed based on its actual use as of January 1st of each tax year, beginning with the 2010 tax year.

Sounds great, right?  Well, the bad news is that, despite the approval of this amendment by the voters, the Florida legislature has yet to pass any enabling legislation to define the types of properties that qualify or, more importantly, to provide a procedure for applying for and receiving classification as a working waterfront.  Oops.  The Senate considered SB 1468, which would have required taxpayers to apply for working waterfront classification by March 1st of each year, unless the counties waived the annual application requirement, but that bill died in committee.

In July 2009, the Florida Department of Revenue issued an informational bulletin, PTO 09-24, advising the county property appraisers that, because this constitutional provision is self-executing, working waterfront properties are entitled to be assessed at their actual use beginning in the 2010 tax year, regardless of the lack of enabling legislation.  Thus, while some property appraisers may disagree with the DOR and decide not to apply the constitutional amendment until the legislature passes enabling legislation, I expect that most counties will try to begin implementing the new law this year.

So, absent any procedures or forms for taxpayers to use in applying for working waterfront classification, how should one go about seeking this classification?  Some property appraisers may choose to develop county-specific procedures for taxpayers to use in their jurisdiction, but others may not.  The important thing to remember is that the property appraisers’ systems will generally not automatically recognize which properties qualify as working waterfronts.  So, if you believe your property qualifies for this classification, you should contact your county Property Appraiser and make sure that they are aware of how your property is being used, and that they have all of the information they need about your property to assess it based on its actual use.

Requesting an Informal Conference with Your County Property Appraiser


Florida law allows taxpayers to request an informal conference with their county property appraiser to discuss the assessed value of their property.  At first blush, it would seem that resolving a dispute informally, without the time, expense and stress of a VAB hearing or court proceeding would be a no-brainer.  Yet, in my experience, there are a number of reasons why taxpayers choose to go straight to VAB without meeting with the Property Appraiser first.

One common reason is the short time available for filing a VAB petition.  Often, by the time a taxpayer receives their TRIM notice, digests it and does a little research about their assessment, the deadline to file a petition is right around the corner.  So they file a petition and then think that the decision is up to the VAB.  What many people don’t realize is that, even after you file a VAB petition and, for that matter, even up to the VAB hearing itself, you can still communicate directly with the Property Appraiser’s office in an effort to reach an agreement. 

Another reason for failing to communicate with the Property Appraiser is the belief that the Property Appaiser’s office is not interested in resolving disputes.  That is generally not the case.  The staff in most Property Appraisers’ offices are not eager for a showdown at VAB.  While they are naturally going to want to defend their work, if you have a credible argument, they would much rather discuss your assessment now rather than later before the Special Magistrate.

A third reason is the taxpayer’s fear of “showing their hand.”  Many tax professionals caution their clients against meeting with the property appraiser because they are concerned that the property appraiser’s office will take advantage of the opportunity to discover the taxpayer’s case so they can be better prepared to defend their assessment at the VAB hearing.  While that is always a risk, by taking some steps, the taxpayer can improve their chances of having a productive meeting with the Property Appraiser’s office.  Here are some do’s and don’ts for meeting with the Property Appraiser’s staff:

Do . . .

  • Request a copy of your property record card and any sales comparison or other worksheets that the Property Appraiser has prepared.  Preferably, you would want to review these documents prior to the meeting, so that you can be prepared to discuss them and ask questions.
  • Make sure that you still file a VAB petition, if the deadline for filing is prior to your informal conference.  If you reach an agreement, you can always withdraw your petition.
  • Be courteous and respectful to the staff.  Remember, they are just doing their jobs;  they don’t get a bonus if the county collects more taxes.  And it can’t hurt to establish a positive rapport in the event you have issues in future years.

Don’t . . .

  • Spend your money on an appraisal from someone that the local Property Appraiser’s office views as a “hack” or a “hired gun.”  The Property Appraiser’s staff know which appraisers have integrity, and which do not.  And for that matter, so do the Special Magistrates and the judges.  As much as it may be tempting to hire the person who will give you the lowest value, just remember that credibility is everything.
  • Rely solely on assessments of other properties.  The Property Appraiser’s office wants to see sales that support your claim, not hear “my neighbor’s assessment is lower.”
  • Argue for a reduction based on your good qualities as a human being.  Property taxes aren’t based on personal merit, so your community service, charitable activities, military service, and strong work ethic aren’t going to get you anywhere.  Focus on the real issue – the value of your property.
  • Talk in terms of the amount of taxes you think you should be paying.  Remember, the property appraiser is only concerned with the value of your property, not the amount of taxes that you ultimately pay.  They are not going to be prepared to negotiate the amount of taxes that are due – only the assessed value.

Above all, remember that you are dealing with a government office that does not have a vested interest in producing a high tax roll.  The Property Appraiser sets the value;  the County Commission, School Board and  other taxing authorities set the millage rate that determines the amount of taxes you owe.  The Property Appraiser’s office is interested in determining the value of your property under the constraints of Florida law and the limited information that comes before them.  Provide them with quality information and conduct yourself with a professional attitude, and you are much more likely to be successful.

The New Reduced Burden of Proof in Property Tax Appeals


UPDATE:  The Department of Revenue just released revised DOR VAB Training Revision – September 18 2009 that reflect a significant change in the way the DOR is interpreting the new presumption statute.  Contrary to what is stated in my blog below, it appears that the DOR is now advising the VABs that the Property Appraiser has the initial burden of coming forward with evidence to support his assessment, and that if the Property Appraiser loses the presumption of correctness, the VAB may set the value.  I will be revising this post accordingly, so stay tuned.

Taxpayers across Florida rejoiced when the legislature passed HB 521, effectively eliminating the high hurdle that taxpayers faced in appealing their property tax assessments.  Unfortunately, the new statute also raises a lot of questions about what proof is expected of the parties in a property tax case.  This post will try to address some of those questions.

When does the new burden of proof statute take effect?

The significant provisions of the new statute apply to the 2009 assessments, meaning that they will be applied in this year’s VAB proceedings and in any court cases challenging 2009 assessments.

So, who has the burden of proof in a property tax appeal?

When HB 521 passed, newspaper headlines across the state proclaimed that the legislature had shifted the burden of proof to the Property Appraiser.  Not so.  Actually, even though the “clear and convincng evidence” hurdle has been eliminated, the party bringing the action (generally the taxpayer) still has the burden of proving their case by a preponderance of the evidence.  Specifically, the taxpayer must prove by a preponderance of the evidence that either the Property Appraiser’s assessment does not represent the just value  (fair market value) of the property or that the assessment was arbitrarily based on appraisal practices that are different from the appraisal practices generally applied by the property appraiser to comparable property within the same county.

What happens if the taxpayer proves that the assessment does not represent just value?

If the record contains competent, substantial evidence of value which cumulatively meets the requirements of law as set forth in section 193.011, Fla. Stat. and  which complies with professionally accepted appraisal practices, then the Value Adjustment Board [“VAB”] or court must establish the value.  Under prior law, the taxpayer’s evidence was only required to meet the requirements of law, but was not required to comply with professionally accepted appraisal practices.  Thus, it could be inferred that, under the new law, the court cannot set the value unless the taxpayer puts a valid appraisal in the record along with  testimony that the appraisal complies with professionally accepted appraisal practices.

If the evidence of value that is in the record does not meet the requirements of law or professionally accepted appraisal practices, the VAB or court must remand the matter back to the Property Appraiser with appropriate directions, which the Property Appraiser must follow.  If the Property Appraiser re-assesses the property on remand and the taxpayer is still dissatisfied, they can challenge the re-assessment using these same procedures.

What happens if the taxpayer proves that the assessment was arbitrarily based on appraisal practices that are different from the appraisal practices generally applied to comparable property within the county?

This is where it gets interesting.  Under prior law, if a taxpayer proved that his property was assessed by different appraisal practices than other similar property, the taxpayer was still required to prove that the assessment exceeded just value, albeit by a preponderance of the evidence, rather than clear and convincing evidence.  The courts had held that, even where a taxpayer proved that other properties were assessed at a lower value, the taxpayer could not obtain a reduction of their assessment unless they could show their own property was assessed higher than fair market value.  In effect, the courts were saying that just because your neighbors’ assessments may be too low, you are not entitled to have your property assessed at less than its just value.  The exception to this was for taxpayers who could state a claim under the Equal Protection Clause, which required them to prove that they were arbitrarily and systematically being assessed at a higher rate than substantially all other property in the county.

With the amended statute, it appears that if a taxpayer can prove that the Property Appraiser arbitrarily used different appraisal practices for their property, even if the taxpayer cannot prove that their assessment is too high, they may be entitled to an order remanding to the Property Appraiser for a reassessment, as described above.

So why am I hearing that the Property Appraiser now has the burden of proof?

Under the old law, the Property Appraiser’s assessment was presumed correct and the taxpayer had the burden of proving their case by clear and convincing evidence.  However, if the taxpayer proved that the Property Appraiser had failed to properly consider the factors of section 193.011, Fla. Stat., then the presumption of correctness was lost and the taxpayer only had to prove their case by a preponderance of the evidence.

Under the new law, if the Property Appraiser wants to retain the presumption of correctness, the Property Appraiser has the burden of proving that he properly considered the factors of section 193.011, Fla. Stat. and used appraisal methodology that complies with professionally accepted appraisal practices.  However, here’s the rub.  The legislature did not explain what happens if the Property Appraiser retains the presumption of correctness.  Under the old law, by retaining the presumption, the Property Appraiser forced the taxpayer to prove its case by a higher burden of proof (clear and convincing evidence).  The new law does not explain what benefit inures to the Property Appraiser if they go to all the trouble to retain the presumption of correctness.  Thus, this section, as written, is virtually meaningless.

This section of the statute also purports to overturn prior cases that had held that it is not for the court to decide which method of assessment is superior, as long as the Property Appraiser had properly considered the factors of section 193.011, Fla. Stat.  The new statute apparently requires the court, in deciding whether the Property Appraiser’s assessment is entitled to a presumption of correctness, to determine the appropriateness of the Property Appraiser’s choice of appraisal methodology (i.e. the income, cost or sales comparison approach).  Again, however, I would suggest that, absent any benefit to the Property Appraiser for retaining the presumption, this section of the statute will be rarely used, as many Property Appraisers may opt to simply waive the so-called “presumption” and proceed to the next step, whereby the taxpayer must prove their case by a preponderance of the evidence.

What exactly are “professionally accepted appraisal practices”?

This will no doubt be the subject of many disputes in the future.  One potential interpretation is that this requires compliance with the Uniform Standards of Professional Appraisal Practice [“USPAP”].  However, the Supreme Court of Florida and other Florida courts have referenced a variety of appraisal texts in past cases in an attempt to discern what constitutes generally accepted appraisal practices.  Thus, texts published by authoritative sources such as the International Association of Assessing Officers and the Appraisal Institute might qualify as evidence, as might testimony by a local appraiser or even the Department of Revenue’s publications.  This issue is definitely up in the air.

Does the new statute affect the burden of proof in exemption and classification disputes?

In my opinion, yes.  Prior cases had held that a property appraiser’s assessment (which includes exemption and classification decisions) must be upheld as long as it was supported by a reasonable hypothesis of legality.  The legislature did away with the “no reasonable hypothesis” burden years ago in value disputes, but trial courts have continued to apply that standard to exemption and classification disputes.  The new statute provides that, beginning with 2009 assessments, taxpayers who dispute the denial of an exemption or special classification need only prove their case by a preponderance of the evidence.

How to File a Value Adjustment Board Petition


Property owners who disagree with the Property Appraiser’s assessment of their property have the option of scheduling an informal conference with the Property Appraiser, filing a petition to the Value Adjustment Board [“VAB”], bringing an action in circuit court, or all of the above.  If there is a clear error in the Property Appraiser’s calculations or in their assumptions about your property, you can probably resolve the issue with a simple phone call.  However, if there is a serious disagreement about the ultimate value of the property, and you want to file a VAB petition, this post will explain that process.

What is the VAB?

The VAB is a a five member quasi-judicial board that consists of two county commissioners, one school board member, and two citizen members (one appointed by the county commission and the other appointed by the school board).  The VAB is not affiliated with the Property Appraiser’s office. 

The Petition

The VAB petition forms can usually be obtained from the Clerk of Court and the Property Appraiser.  The petition must be filed with the Clerk of the Value Adjustment Board no later than the 25th day after the Property Appraiser mails the Truth in Millage [“TRIM”] notice to the taxpayers, which usually occurs toward the end of August.  The VAB may only consider untimely petitions upon a showing of good cause, so it is important to file by the statutory deadline.

The Hearing

Once your petition is filed, if you request a hearing, the Clerk will schedule a hearing before a Special Magistrate.  In small counties, the hearings may be held before the entire VAB.  However, in larger counties, special magistrates are appointed to hear testimony, take evidence, and make recommendations to the VAB.  In disputes about the value of real property, the Special Magistrate will be a real property appraiser.  In disputes about the value of tangible personal property, the Special Magistrate will be a tangible personal property appraiser.  In exemption and classification disputes, the Special Magistrate will be an attorney.  The Special Magistrates are hired by the VAB, and are not affiliated with the Property Appraiser’s office.

You are entitled to be represented by an attorney or other agent in the VAB proceeding, but that is not a requirement.  If you decide to proceed without an attorney, you should be sure to review both the applicable Florida Statutes and any local rules adopted by your county’s value adjustment board.  In particular, you need to be aware of the requirements for exchanging evidence prior to the hearing as failure to do so may result in your evidence being excluded. 

Prior to the hearing, the Special Magistrate will usually review the procedures with all of the petitioners in attendance and administer an oath to all testifying witnesses.  When it is your turn to present your case, you will have an opportunity to present your evidence and the Property Appraiser’s representatives or counsel will be permitted to cross-examine you.  You will have the same right when the Property Appraiser presents their case.  You may also be given time for a brief rebuttal (basically, the last word).  Some VABs are stricter than others in applying the rules of evidence.   In general though, you should always be prepared to present live witness testimony, as affidavits, letters and other hearsay evidence will usually not be admitted. 

The Decision

Some Special Magistrates will advise you of their decision at the conclusion of the hearing, but most will take the decision under advisement and issue a written recommendation shortly after the hearing.  The written recommendations are submitted to the Value Adjustment Board, with copies to both parties.  The Value Adjustment Board will hold a final meeting or meetings, during which it will either reject or approve the recommendations of the Special Magistrates.  Some VABs allow petitioners to address the Board, but generally no new evidence may be presented at the final VAB meeting.  Any evidence you want to present must be presented at the hearing before the Special Magistrate. 

Following the final VAB meeting, you will receive a Final Record of Decision, which represents the final decision of the Board.  If your petition is approved, your assessment will be reduced accordingly.  If it is denied, you would have the right to file an action in circuit court, but it must be filed within 60 days of the Record of Decision.

Frequently Asked Questions About Property Tax Bills


With TRIM notices being issued around Florida in the coming weeks, this post will attempt to answer three of the most commonly-asked questions about property tax bills:  (1) Why is my property assessed at a higher value than my neighbors’ similar property?  (2) Why is my assessed value higher than the price I paid for the property?  (3) Sales prices are going down, so why is my assessment going up?

Why is my property assessed at a higher value than my neighbors’ similar property?  The reason the property tax system was historically considered to be a fair system of taxation was that everyone was assessed based on the fair market value of their property, and that was that.  In the last few years, however, the number of exemptions, special classifications and assessment caps has exploded, thus resulting in similar properties within the same neighborhood being taxed at vastly different rates, depending on when the property was purchased, whether the purchaser was a first-time home buyer, whether the property has a homestead exemption and whether the owner “ported” their cap from another property.

The short answer is that, while the assessed values may differ for a variety of reasons, if the properties are truly similar, the just value should reflect that similarity.  If the just values are substantially different, it is most likely due to differences in the size or configuration of the lot, the age of the improvements, or the overall quality of the construction.  However, if you feel that a mistake has been made, you should contact the Property Appraiser.

Why is my assessed value higher than the price I paid for the property?  The just value of your property is determined as of January 1st of the tax year in question.  While the Property Appraiser is statutorily required to consider the price paid for your property, he can disregard that factor if it is not relevant, i.e. if the sale occurred too long ago or it was not an arms-length transaction, for example.  In most cases, the assessed value is influenced the most by sales of similar property in the area during the last calendar year.

As an example, if you paid $100,000 for your property in January 2005, but similar properties were selling for closer to $200,000 in the last few months of 2008, your 2o09 assessment will likely be higher than what you paid for the property.

If I re-finance my property or take out a line of credit, will my assessment increase?  Probably not.  The Property Appraisers generally base their determinations on actual consummated sale transactions between willing buyers and willing sellers.

Sales prices are going down, so why is my assessed value going up?  Two issues are at play here.  First, the Property Appraiser is required to assess all property at its value as of January 1st, and must submit his or her completed tax roll to the Department of Revenue by July 1st.  Thus, the Property Appraisers tend to rely more on sales that occurred during the previous calendar year, and possibly sales from the first couple months of the current year.  Thus, if sales begin to decline in the spring or summer, that decrease probably will not be recognized until the following tax year.

The other possible reason is the “re-capture” provision of the Save Our Homes Amendment.  If you have had a homestead exemption on your property for many years, chances are your assessed value (on which taxes are determined) has been much lower than the fair market value of your property.  This is because, by law, the assessment of homestead property cannot increase more than 3% per year (or the percent change in the CPI).  However, if your assessment is lower than the fair market value of your property, the assessment will increase by that 3% each year until it matches the just value.  So, even if the just value of your property decreased, as long as your assessed value was lower, that assessed value will continue increasing by 3% per  year or the CPI, until it equals the just value.