Appraisals must be done fairly

Appraisals must be done fairly

Sunday, September 02, 2007 By STEVE McMILLANSpecial to the Press-Register

Given all the recent attention being paid to property taxes in Mobile and Baldwin counties, I think the public would benefit from some more information and background on property tax and appraisal issues.

The Alabama constitution and state law make it very clear that all property must be appraised at fair market value. Property owners must be treated fairly and governments must comply with the law.

Indeed, the constitution demands that "all taxes levied on property in this state shall be assessed in exact proportion to the value of each property."

Furthermore, the Code of Alabama clearly mandates involvement of each county tax official, governing body, board of equalization and the State Department of Revenue in the appraisal, equalization and assessment procedures to establish fair and reasonable market values as the basis for assessments for ad valorem taxes.

The Department of Revenue offers counties guidelines and procedures that, if followed, can keep year-to-year property tax increases from being exorbitant. Apparently, however, Baldwin County hasn't followed those procedures, as evidenced by the more than 22,000 appeals that have been filed by property owners.

Alabama's current ad valorem tax procedures emanated from several lawsuits dating back to at least the 1930s, and are directed toward the equity/uniformity of property assessment. The landmark case was decided in 1971.

In that federal court case, the plaintiffs alleged that although property assessments are to be based on fair market values, they significantly varied from county to county. The court agreed and ruled that all property within the state must be assessed and taxed at uniform rates.

In addition, the court required a statewide reassessment, with the objective being that assessments would not vary depending on the county in which the property was located. The Alabama Department of Revenue was designated by the court, and by state law, as the agency to accomplish this equalization.

Uniform appraisal procedures and quality control standards were established that included: standard, widely-accepted mass appraisal techniques; the routine performance of local market studies in order to stay abreast of relevant, value-related data such as current local development and construction costs, current land sales and financial data relative to commercial properties; and quality control through annual appraisal-to-sale ratio studies with industry standard statistical parameters of accountability.

The proper use of appraisal-to-sale ratio studies facilitates accountability and the evaluation of appraisal performance. Such studies enable management (state and county) to identify weaknesses in the process, correct problem areas and ensure equity/equalization among all the properties in a given county.

Further quality controls are mandated, such as a requirement that each county annually review 25 percent of the total parcels in the county and perform annual maintenance updates. These reviews should reflect changes that directly influence values.

As technology and appraisal techniques evolved, the Department of Revenue determined that annual reappraisals should be implemented to comply with the mandates that assessments be based on fair market value.

The department further determined that annual reappraisals be phased-in, based on a county's capability to implement the reappraisals, as measured by staff level, available technology and other factors, to arrive at fair and reasonable market values.

The Department of Revenue clearly has the legal authority to require annual reappraisals. This authority may be changed by the Legislature.

As one may readily see, Ala-

bama's ad valorem tax processes have changed dramatically from hand-drawn maps and assessments that were based on valuations which were decades old and, in most cases, were arbitrarily assigned by a tax assessor.

Many people argue that the advantages of annual reappraisals outweigh the disadvantages. They contend that annual appraisals are fairer to the taxpayers in that they more readily reflect increases or decreases in fair market values, if properly implemented and administered.

Based on a Department of Revenue study and report, Baldwin tax officials apparently have complied with few of the guidelines to prevent exorbitant increases in taxes. This is reflected in the unprecedented number of appeals.

As a result of public concerns, some worthwhile suggestions have been made. These range from annual reappraisals with a cap on the amount of increase in any given year, to basing taxes on purchase prices until such time as the property again sells.

All will require research.

After several meetings among all the parties involved, the group drafted a proposed agreement that creates administrative support and services from the Department of Revenue to help Baldwin County tax officials.

The Department of Revenue has agreed to assist in establishing neighborhood market areas, an incremental review schedule, schedule for special training for appraisers and building cost indices, and to assist in other integral aspects of the responsibilities of the Baldwin tax office.

In exchange, local officials must be amenable to cooperate in every aspect of the operations of the county tax office, including the county personnel department and the county administrator.

The agreement ends with a paragraph whose first line reads as follows: "All terms and provisions of this agreement shall be carried out after consultation by and among the parties hereto in a spirit of inter-governmental cooperation." In the event all parties do not agree, the Alabama Department of Revenue shall make the final decision (except for obligating the Baldwin County Commission to expend funds).

The agreement is absolutely intended to get Baldwin County back on track with equalization. It has absolutely nothing to do with annual reappraisal, and has absolutely nothing to do with an effort to generate additional revenue.

The agreement is intended to allow Baldwin County to comply with state laws and provide equitable, consistent, ad valorem assessments and fair taxation to all of our citizens.