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Property Tax Update

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Steven H. Lasher
Foster Swift Municipal Law News
January 2009

Tax Appeal Funding Program

The Michigan Department of Treasury has recently announced a program to assist municipalities in defending appeals of public utility property assessments. Treasury will assist in either securing appraisals of utility property or paying for appraisals and other related appeal costs. However, the program is available only if the taxable value of the property is greater than $50 million. While this particular program will likely provide no benefit to most of you, it is at least an indication that the state recognizes that the cost of tax appeals is an increasing burden to municipalities and that some sharing of the costs of such appeals is appropriate.

Assessor Certification

Municipalities should be aware that it is the responsibility of each governmental unit to verify that their assessor holds the proper certification (Level 1, 2, 3 or 4) required for that jurisdiction. The level of certification required for a governmental unit is based on the state equalized value of that unit. Effective January 7, 2009, the State Assessor’s Board has reiterated that policy and clarified its policy that assessors who certify valuations for multiple municipalities must be certified at a level equivalent to the combined values of all units assessed by that assessor. For example, if an assessor assesses four units of government, each with an SEV requiring a Level 2 assessor, but who combined SEV would require a Level 3 assessor, then that assessor must be a Level 3. An 18 month grace period is provided where the certification level of the combined Property Tax Update (Continued) units increases from one year to the next. However, no grace period is provided where an assessor takes on a new unit which increases the Level requirement.

2009 Boards of Review

The rules applicable to Board of Review (especially the upcoming March Boards of Review) continually change, generally requiring additional administrative functions to the scope of your Board of Review. In a Bulletin recently issued by the State Tax Commission, the STC reminds members of the Board of Review of various requirements of, and limitations on, their role.

  1. All Boards of Review must now maintain appropriate documentation of their decisions, including minutes, forms 4035 and 4035a detailing changes made by the Board, and a detailed reason why a change was made. Minutes must include the day, time, and place of meetings; members present and absent; a log identifying hearing date; petitioner’s name and parcel number; type of appeal and action taken by the Board; and actual hours the Board was in session.
  2. For Poverty (Hardship) Exemptions, Boards of Review must follow guidelines established by the municipality, and such guidelines must include an asset test. This should serve as a reminder that all municipalities should have a Poverty (Hardship) Exemption policy in place consistent with statutory and State Tax Commission guidelines if they intend to grant such exemptions.
  3. As most of you know, the inflation rate for taxable value increases for 2009 is 4.4%. The resulting increase in taxable values, coupled with the declining values in at least residential property, will certainly be of concern to many property owners. Boards of Review should clearly understand that they may not apply any other inflation rate or revise taxable values unless a change in the SEV warrants such a change. Taxable value is a mathematical calculation and cannot be changed by the Board of Review unless there has been a mathematical error or a change in the SEV results in a change to Taxable value. Further, the Board of Review is required to explain how the inflation rate is calculated if asked by a property owner. The Board of Review should explain that the methodology for calculating the inflation rate is established by statute and for 2009 was based on the 12 month US Department of Labor statistics for the period October 2006 through September 2007.
  4. Generally, assessors must look at recent property sales and develop a 24-month sales study prior to assessing properties. In 2007, the State Tax Commission published a bulletin allowing single year sales studies (the period from October 1 to September 30 prior to the December 31 assessment date) where there is substantial evidence of a declining market. Evidence may include (a) a reduced number of market sales without a reduction in the number of listings; (b) an increase in the number of foreclosure sales; (c) a loss of a major employer; and (d) a single year sales study ratio higher than the standard 24-month ratio. Thus, given the economic situation through most of Michigan, it is certainly possible that your assessor has used a single year sales study in preparing 2009 assessments. The Board of Review should be prepared to respond to questions regarding the single-year sales studies.