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08-28-03
Reassessment: How Old Is Your House?
Property tax bills have been mailed in about a dozen counties. In some
counties, the bills created an uproar, in others, hardly a peep. What's
going on?
It's early yet (with about 80 counties to go), but, so far, the thing
that matters most for tax bills is the age of the house. Owners of older
homes are seeing the biggest tax increases. Many owners of newer homes
are seeing tax cuts.
The assessment system we used up until last year gave a break to older
homes. The assessor would use a thick manual of rules to figure out how
much it would cost to build the house today. Then, the assessor would
apply a depreciation rate to account for age. An average 10-year-old house
had its value reduced by 15 percent. An average 70-year-old house saw
a 60-percent reduction. Under our new market value assessment system,
values are adjusted to account for actual selling prices. Older home assessments
must increase more to reach their selling prices.
Evidence from the Indiana Legislative Services Agency shows that, in
Marion County, houses built since 1960 have smaller increases in their
assessments, averaging about 70 percent. Houses built before 1940 have
bigger assessment increases, averaging about 175 percent--their assessments
almost tripled. Owners of the newer houses saw tax cuts, on average, even
in Marion County. Owners of the older houses saw the big tax hikes. Many
tax bills more than doubled.
You can see this in action for Tippecanoe County, thanks to the work
of the county's computer staff and the LafayetteJournal and Courier
newspaper. The newspaper's Web site, http://www.jconline.com,
has a section called "property tax assessment." Click on "look up property
tax," type in a street name and you can see the taxes on the houses for
2002 and 2003.
I know this seems like an invasion of privacy, but property tax assessments
and tax bills have always been public information. You can get the same
information in most county courthouses.
Type "Sullivan Street" in the address box. That's the street where I
live, in a newer housing development called University Farm. The houses
on Sullivan Street are 10 to 20 years old. You'll see that all of my neighbors
and I received tax cuts in 2003. That's because the depreciation rates
used for our houses under the old assessment system were small, so our
assessments went up only 56 to 73 percent.
Now try "Sugar Hill," which is a street in a desirable older neighborhood
just west of Purdue. Most of these homeowners saw tax increases. Their
assessments went up more, by as much as 164 percent, so most of their
tax bills increased at least 40 percent. It happened because these older
houses got the big depreciation breaks under the old assessment system.
The new market values of the Sugar Hill houses are pretty high, most
topping $200,000. The folks in the Meridian-Kessler area of Indianapolis
saw tax hikes too, and many of their houses are even more valuable. One
might get the impression that it's just upper income people who are paying
more. They can afford it, so what's the problem?
Go back to the Web site and type in "Melody Lane," and you'll see the
problem. This street is in a neighborhood of older, modest houses, with
market values under $100,000. The assessments on all of these houses just
about tripled, and their tax bills increased 49 to 62 percent--big tax
hikes for people who are not rich.
We suspect two things from the results of reassessment so far. First,
older homes see bigger tax increases, while newer homes often get cuts.
The owners of the older homes have complained, loudly, while the newer
homeowners have kept their heads down. But statewide, so far, close to
half of all homeowners have seen tax cuts.
The second thing we've learned is that it is not just upper-income people
who are seeing big tax hikes. Owners of lower-valued older homes have
also seen their taxes rise.
Perhaps the legislature will debate policies to ease the difficulties
of homeowners whose taxes have increased. If so, they'll need to keep
both these things in mind.
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