NDLC March Madness 3/27/2019

Kevin Ternes, CAE, CG City of Minot Assessor National Assessor Designation ND Certified General Appraiser ND Class 1 City Assessor 28 years assessment experience

Today’s conversation: Assessing 101 Let’s Review Property Assessment Different Levels of Understanding of the Assessment Process

Renewed Spotlight on Property Tax -Updated assessments after many years of lapsed review activity -Fair or not Fair -Legislative Interest in Property Tax -Property Tax as a Stable Revenue Source (Minot Experience)

Discuss two concepts today Assessment of property by the local assessor Equalization of the assessments at the township/city/county/state levels

The assessor is not a TAX MAN, or TAX COLLECTOR The assessor is not a TAX MAN, or TAX COLLECTOR. They don’t determine the tax rate or the mill levy. They don’t raise or lower people’s taxes. The assessor is simply assessing real property as to its estimated market value. Spreading the tax levy fairly over all taxable property with market value as the determination of who pays what.

Assessor Responsibilities The assessor is responsible for determining the true and full value of each tract of real property subject to taxation and all taxable improvements and structures. Classes of property are valued and listed separately according to agricultural, residential and commercial. Boards of Equalization make sure the assessments are fair, reasonable, and equitable.

Assessment x Mill Levy(Tax Rate)= Property Tax The jurisdiction applies a mill levy to the assessed value of each property to levy the property tax. Generally, school districts have the largest mill levy and collect most of the property tax bill in most small cities or counties.

Rate = Tax levied /Value $200 2% $4 Levied

Government budgets determine how much we pay in property taxes If assessments go up, and the mill levy goes down, a citizen’s property tax could remain the same even though the assessment went up. When equalizing, you are only concerned with market value. No consideration is given to the tax dollars. AndIt does not matter who is the best citizen etc. or who can afford what.

If assessments go down, but the mill levy goes up, a citizen’s property tax could remain the same as last year even though their assessment went down. Elected officials determine how much will be collected and spent for their jurisdiction. Considered at budget time, not at equalization time.

Equalization Process 57-02-27.1. Property to be valued at true and full value. Beginning with the year …. all assessors and boards of equalization shall place the values of all items of taxable property at the true and full value of the property except as otherwise specifically provided by law, and the amount of taxes that may be levied on such property for the year….

Equalization defined: A dictionary definition is “To make equal, uniform, or constant….. The assessor should provide assessments that are equalized but it is the duty of the township, city board, and county boards to verify and approve the assessment tax roll.

Assessment Process Your assessor is simply a real property appraiser. The assessor should have real estate experience and is required by law to have a certain level of classroom education. The amount of education required depends on the size of the jurisdiction they are assessing. In addition to appraising property for tax assessment, the assessor processes certain exemptions and credits for qualifying property owners.

Market Value All taxable property must be assessed at current market value. Certainly similar properties should have about the same market value and therefore should have similar assessments. When protests come in during the equalization meeting, the board should review other properties in the area and sale of similar property to determine if the assessments are reasonable and equal.

Three big factors in real estate market value Location-neighborhood Size- Square footage, Condition-a 40 year old home without any updates or repairs will not sell for the same as the same type of home next door that has been updated with new exterior and interior

A common citizen complaint is, “Well that house is just like mine, why is mine assessed higher than that one”? Probably because they have new windows, siding and the interior has been remodeled to include all new flooring, bathroom fixtures and kitchen. Houses that are updated sell for more than those that are original or need repairs. I have found that citizens get things mixed up sometimes. (We are all human)

Assessor gathers data throughout the year Tracking sales of real estate Physically measuring and listing new construction Reviewing existing real property to make sure the data is correct and the assessment is reasonable compared to recent sales. In Minot we physically visit and review each property on average every 7 years. Inside if owner makes appointment, if not outside estimate.

Assessing for 2019 Assessor uses the prior year, 2018 to gather property sales in his jurisdiction. Then reviews portions of the jurisdiction to determine the assessment as compared to recent sales. Lists all new construction and assesses to market value

How does the assessor measure the level of assessment to market value?

Here is how we measure assessments in Minot

Market Studies include a sales ratio study that are done by the assessor and the state A sales ratio study is a good indicator of where the assessment level is compared to market value. The assessor should present the results of this study to the board for their review

Example of a Sales Ratio Study Sale # Assessment Sale Price % $ 56,000 $ 67,000 83.58 $104,000 $123,000 84.55 $ 78,000 $ 84,500 92.3 $ 92,000 $ 99,000 92.9 5 $ 87,400 $ 82,000 1.065 Median % is 92.3% This would indicate that on average the assessment level is about 8% below market value. Measures level but not accuracy or consistency

When market values go up, assessments will go up. Assessments must trend market values according to state statute. However in Minot last 2 years, residential assessments have dropped about 6% in the last 2 years.

Your assessor should be gathering market data all year long about real estate which includes recent property sales and income and expense data for use in appraising commercial property.

Market Analysis and Trends

Assessing is serious business Citizens want to know that assessing is accurate and fair and equitable. They expect similar properties to have a similar assessment. Our office does market studies of the entire town, individual neighborhoods, and even certain styles of homes.

Example: Are two story homes assessed on average at the same level of assessment to market value as 1 story homes. You wouldn’t want a situation where 1 story homes are assessed closer to market value on average than a different style of home.

You also would not want certain newer type neighborhoods assessed closer to market value than older type neighborhoods, although it is possible there may be more recent and better sales data in certain parts of your jurisdiction than in others.

Even with limited sales and market information, your assessor has techniques and methods that they can use to provide the best estimate of market value for assessment purposes on the taxable property in your township or city.

Three approaches to appraisal Contrary to popular opinion, the assessor does not guess when estimating value. Three textbook approaches Cost Approach Sales Comparison Income Approach Assessors have been trained in the use of these techniques and will generally be an expert on real estate in your city.

The assessor plays an important role in providing a state required obligation. That of assessing property according to its market value so that the local jurisdictions, whether it be a school, park board, city or county, can apply their mill levy to the assessment.

Once the assessor turns in the assessment roll and presents it to the Board of Equalization, it is up to the board to review the assessment roll and approve the assessments. (Board is elected officials) It is the assessor’s job to provide the board with reports, examples, data, pictures, maps, anything that can assist the board in determining whether assessments are reasonable, at market value, and equitable.

What are we gonna do about high taxes? It’s the budget silly. Quit spending more money then you spent last year. Lower levy if values go up. Communication to citizens about the process. Encouraging public to attend budget hearings.

Exemptions/Credits Disabled Veteran Senior Citizen’s with less than 26K, 75k, 65 and older Blind Wheelchair Churches/charitable/government New business/5 year improvements/2 year new residential construction

Resources County Tax Director Full time City Assessor (nearest larger city) North Dakota Tax Commissioner’s Office http://www.nd.gov/tax/property/pubs/

Kevin Ternes, CAE, CG City of Minot Assessor PO Box 434 Minot ND 58702 701-857-4160 kevin.ternes@minotnd.org