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MailTribune.com
  • Why values fall but property taxes don't

  • Values for nearly all residential properties will be experiencing a reduction in their Real Market Value (Real market value) on their 2009 tax statement with an average decrease of 15 percent.
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  • Values for nearly all residential properties will be experiencing a reduction in their Real Market Value (Real market value) on their 2009 tax statement with an average decrease of 15 percent.
    One of the questions that we are frequently asked is how short sales and foreclosures have affected the market. There is no doubt that those sales have had a substantial effect on the marketplace.
    In an independent study, one analysis excluding bank-related and short sales and one including them, the outcome was nearly identical. Foreclosures and short sales represent 44.6 percent of the residential property sales. Sellers not subject to foreclosure or bank pressures are pricing their property at levels comparable to distress properties in order to be competitive.
    While the real market value will decrease for most properties, assessed values will increase by the constitutional 3 percent. That sounds like an oxymoron, but actually is a function of what the voters chose when they approved Ballot Measure 50 in 1997.
    When values rise (in 2005, values county-wide rose 23 percent), Measure 50 offered predictability instead of the volatility in taxes that came with a frantic real estate market. The steady 3 percent growth in assessed value was a change taxpayers welcomed. But now, how it can be that my market value goes down yet my taxes go up?
    Measure 50, a voter initiative, modified the Oregon Constitution. In 1997, in addition to the real market value, Measure 50 required that a new value be established: maximum assessed value. This new value was 10 percent less the 1995-96 real market value.
    Under Measure 50, property tax is based on the lower of the real market value or the maximum assessed value and is labeled assessed value on the tax statement. The maximum assessed value increases by 3 percent each year as long as the real market value of the property is greater than the maximum assessed value. As always, the real market value changes with the market.
    From 1997-2007 the real estate market (and real market value) saw unprecedented growth, while the maximum assessed value has continued to go up the constitutional 3 percent per year. This caused, at its peak in 2007, a county-wide average of residential property's maximum assessed value being 48.2 percent lower than the real market value.
    Last year, 2008, with a decline in real market value, a home with a real market value of $100,000 had an average assessed value of $52,500. The real market value for the average property would have to drop 48 percent — or below $52,500 — before the tax would be affected.
    Real market values are established as of Jan. 1 each year based on comparable property sales from the prior year through March of the current year. For properties that sell, the assessor's office compares the sales price to the prior year's real market value, calculating the percentage difference. That percentage adjustment is applied to all properties in the market area. If last year's average real market value is 15 percent higher than the average sales price for all properties sold in a market area, the values of all properties in that area are reduced 15 percent.
    A preliminary study for next year indicates a continuing decline in real market values, unless there is a turnaround in the second half of 2009. Changes up or down will be reflected on next year's 2010 tax bill depending on the location in the valley.
    But even with a further decline, taxpayers will likely see a minimum 3 percent increase in their taxes next year. An average decrease of 10 percent last year plus an average decrease of 15 percent this year equals a two-year drop of 25 percent. Since real market value has to dip below Measure 50's maximum assessed value, it would take an additional decrease of 22.5 percent for the average Jackson County taxpayer to receive any tax relief from declining values.
    Measure 50 did do what the taxpayers in the state intended by providing predictability in property taxes. Since Measure 50 is a constitutional amendment, no one can change it except the voters. The Legislature doesn't have the power to draft a new statute and fix any perceived flaws, nor does the assessor.
    I hope that this explanation makes Measure 50 and your tax bill, to be mailed in late October, a little clearer.
    Dan Ross is Jackson Councty Assessor.
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