Revenue Neutral Reval
The New Year is here and revaluation lurks. If county commissioners are serious about producing a “revenue-neutral” tax rate, as they have indicated is their desire, it would mean cutting the existing tax rate of 0.83 cents per $100 valuation to 0.59 cents, according to analysis of information provided by county staff. “Revenue neutral” meaning a new tax rate that is set so the county would collect the same amount of revenue from existing property as it would have prior to revaluation.
I am in possession of a Power Point file, produced by Mecklenburg County staff, which shows the relative change in values of various “Market Areas” in Mecklenburg. It is beyond my ability to know whether or not the contained information is accurate, so we must trust the government to have told us the truth. There is, however, some information that is worthy of reflection.
The first is the use of the term Median. The spreadsheet inserted in the county staff-produced presentation contains the descriptive term “Residential Median Sales Price.” Median by definition is the center point in an arithmetic progression. So staff is using the mid point of sales to determine the change in values for a predetermined area. More accurate would be using the Mean. The Mean is the average of the numbers and is not necessarily the same and, in fact, will almost always be different than the Median. I have no idea why staff chose one over the other, but using Median does not provide an accurate reflection of what is going on. Using the Mean does.
The next problem is the lack of commercial property in the presentation. The explanation has to do with lack of volume of commercial land sales in the recent past. Again, I’m not in a position to argue the point.
Next is the effect on Charlotte and the small towns. Since Mecklenburg sets the revaluation numbers, Charlotte, Pineville, Huntersville, et al, must look at their situation and determine their new tax rate. What are their numbers? Will they make them public, or just tell us what they want us to hear?
Beyond that it is a simple process: property values change relative to each other and revaluation is supposed to remedy that, so far as government is concerned. Then, having revalued the property in the county, the board of commissioners must set a new tax rate to reflect the new values. Since some will have increased and some decreased the effect of the new tax rate will be to cause some tax bills to go up, some to go down, regardless of the new rate set by commissioners.
In county staff’s presentation, they remind us that the last revaluation occurred in 2003. Overall since then, values have risen, despite the recent market downtown. Further, using the information county staff produced, we find there are 14 “Market Areas” scattered throughout the county. In only one of those areas has the Median value fallen. In one other area there is almost no change. All the rest show increases in their Median values. Using this information in the only way imaginable, one finds the new, revenue neutral tax rate for Mecklenburg County should be 0.59 cents.
This is determined by using 2003 stated total values for residential properties of $17,399,645, producing current tax revenue of $14,610,482 under the existing tax rate of 0.83 cents. By comparison, information provided by county staff shows 2010 total values from median sales, through the third quarter, producing a total value of $24,479,583.
Thus, to achieve revenue neutral – of $14,610,482 – the tax rate needs to be adjusted to 0.59 cents. The result is nearly the same if one tries to predict total values for the fourth quarter, using 75 percent of the change from second quarter to third quarter values.
County officials are currently wrapping the revaluation process, with new home values scheduled to be mailed to residents this month or early next month. Property owners can appeal their new assessed values; information on the appeals process is available here and details on the whole revaluation process here.
To calculate your property tax, take the assessed value of your property, divide by 100 and multiply by the current tax rate of 0.8387. Owners of a $200,000 house, for example, would have an annual county tax bill of $1,677.40.
The same calculation would be made post-revaluation, only substituting the new assessed value county officials determine for your home for its existing value and replacing whatever new tax rate commissioners set to replace the existing 0.83 cents. Commissioners are slated to set a new tax rate in mid-June. That new rate, as indicated above, should be no more than 0.59 cents.
Assuming, of course, that the board of commissioners is really serious about maintaining “revenue neutral,” instead of using the cover of revaluation to stuff county coffers with more taxpayer loot.
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