Tax assessment doesn't always reflect market value, Manchester aldermen told
When Manchester Tax Assessor Robert Gagne told aldermen last week the city's assessment was 1.5 percent higher than selling prices in 2011 and 7 percent higher in 2012, that doesn't mean folks should line up to get a rebate.
The numbers are just part of the complicated method municipalities and the state use to calculate tax rates, Gagne said. And a far cry from the old days when taxes were levied on the number of sheep and cattle a farmer owned.
"It's just a way to make sure the tax burden is fairly spread out," Gagne said.
It is confusing enough that taxpayers, too, ask questions about the process at the counter when they come in to pay their bill, he said. But it is the same formula in Manchester and all municipalities across the state, he said.
Gagne explained municipalities are required by the state Constitution to reassess properties to market value every five years.
State law requires those assessments fall between 90 and 110 percent of market value.
Not an easy feat when municipalities have to have their values set by mid-summer, three months before the end of the sales period.
"One hundred percent would be perfect," Gagne said. "But it is a moving target and imprecise system. Industry standard and state law accept 90 to 110 in the year of the revaluation," Gagne said.
The state Department of Revenue Administration reviews every sale in the state and develops a number of statistics, one of which is the median ratio, which for 2011 was 101.5 percent, hence the 1.5 percent Gagne explained to the alderman.
"In the state of New Hampshire, we're required to be at market value once every five years. In the off years - in this case 2012, 2013, 2014 - we don't have to be between 90 to 110, however we do have to remain proportional," Gagne said.
It's OK to be at 120 percent or 80 percent, so long as all property types are at or near that level in those off years, said Gagne.
For 2012, that was 107.4 percent. "What that means is our property values declined, the sales transactions trended downward in the median ratio for 2012," he said.
"When that number becomes very important is when we look at a particular property. When we compare market value to assessment on a single property, if its close to 107.4 percent, it means our assessment was proper and reasonable," Gagne said.
If someone's property was assessed for $100,000 and the market value was $70,000, that would be an incorrect assessment, he said.
When property values are increasing, the median ratio would be falling below the 100 percent.
"What level assessments are at will not impact what the city needs to raise," Gagne said. "The difference is made up by increasing the rate."
When talk about comparing market value to assessments, "we're talking as of April 1 by law, even though people get their tax bill in November."
Stephan Hamilton, DRA's director of property appraisal division, said the April 1 date has an interesting history in New Hampshire.
As the story goes, the April 1 date was the best time to inventory property, which at one time meant going out and counting a farmer's livestock, Hamilton said.
It would have been too cold to do it in winter, harder to move cattle or sheep during mud season and likely the lambs and calves would have been born, which would have beefed up the count.
"There is a long history of assessing different taxes in supporting communities in different ways at various times, such as head taxes, personal property taxes, stock and trade," Hamilton said.
"The method of taxation in New Hampshire has changed through time to the reliance on property taxes that has evolved," Hamilton said.