Property taxes are set on assessed valuation and not on market value; never has the gap between the two been more evident than it is today. The market value of homes is declining due to the glut of properties for sale plus the number of bank-owned properties on the market. Assessed valuations that were set years or even months ago are out of whack with today’s true value.
Town and city governments must realize that increased spending is the cause of increased taxing. Tax rates are set by dividing the spending in the current budget into the total value of taxable property in that city or town. When spending goes up and the property worth of the city or town remains the same, then taxes go up to compensate. But what happens when the property worth of the community goes down? Then taxes will have to either go down to match the new lower value or will have to increase to make up the loss.
The homeowner/taxpayer is in for a rude awakening if they don’t take control of their local budgets now.
It will take just one court decision to determine which figure can be used in setting the taxable value of a property; true market value or assessed value based on some other formula. Today’s property owners are taking a severe hit on their equity in this declining market. On top of that they pay property taxes based on assessed value that is more than their property would bring on the market.
And here comes the rub: In most cases when a property sells for less than the assessed value, the new owners will file for an abatement citing recent comparable sales that support their argument. When the abatement is granted it seems that justice is done ¿ but is it? The abatement granted is based on current market value. What about the owners down the street or in the general area who struggle to keep their property? Their home is the same type structure with the same square footage and on a similar lot. Still, their tax bill will be much higher because their taxes are based on an assessed value and not the abated figure.
Are there two standards for taxation of property in New Hampshire?
When an abatement is granted shouldn’t it also apply to all like properties within the taxable boundaries of that city or town? If not, this punishes all property owners, but especially the elderly who have paid off their mortgages and live on fixed incomes because now they are paying a disproportionate share of the local budgets.
In hundreds of cases throughout the state properties are selling for much less than their assessed values. A random search of public information on recent sales will bring up hundreds of examples. Candia Road in Manchester, sold for $150,000, assessed for $216,000; Oakland St. in Manchester, sold for $185,000, assessed at $225,000; E. Deering Road in Deering sold for $194,900, assessed for $250,000; Dupaw Gould Road in Brookline sold for $200,000, assessed for $304,400. In Rochester, Olde Farm Rd sold for $90,000, assessed for $138,800; Oak Street in Dover sold for $79,900, assessed for $158,100; Lakeview Drive in Strafford sold for $100,000, assessed for $167,100.
The list goes on and on with dozens of examples in most New Hampshire municipalities. The questions that will be asked of the courts are about fairness. Shouldn’t values on all similar properties be set by the same formula? Shouldn’t the true worth of a home be based on what it will bring on the market?
The question that taxpayers must ask is, “Shouldn’t our governing body decrease spending at least to match the decrease in our municipal property worth?”
Those communities that have adopted a spending cap have an advantage over the others because they have taken control of spending increases. Caps on spending serve to enforce local control, strengthen elected government and increase public input, but it is not enough to do the job in today’s economy. Budgets must be cut to anticipate the growing threat of loss of municipal worth and to prevent soaring tax increases.
Our local communities already face increased spending because one-time funding from the so- called stimulus package is just that—one-time funding that served to postpone fiscal decisions for a year. And they also have to come up with money to fund programs that the state has downshifted to them.
Many experts are telling us that the real estate market will continue to decline until the inventory of bank owned homes is depleted and short sale transactions are a thing of the past.
Add this to the problems created by an unstable method of property tax assessment and the answer is—and will continue to be—that we must carefully watch government spending as well as find ways to treat our taxpayers fairly.
George A Lovejoy
Barrington