Home's value determined by what tax assessors say it's worth
by Barbara Anderson

The Salem News
Thursday, May 31, 2012

As we approach another anniversary of the property tax-limiting Proposition 2, I'm happy to again celebrate its creation by Massachusetts voters in 1980. But I've recently learned that since the beginning of its July 1981 implementation I've misunderstood one thing about it over the years.

Basically, the local property tax levy for an individual city or town can increase by no more than 2.5 percent a year. Regular, required revaluations of a community can allow the tax on specific properties to increase by more than 2.5 percent, and others to increase less; but the town as a whole can levy only 2.5 percent more than it levied the year before, plus a factor for new construction, and, of course, the cost of successful overrides and debt exclusions.

So if you didn't vote or voted in favor of overrides at a "special" town election, don't come crying to me that "Prop 2 doesn't work!"




So how is the value of each piece of property determined?

The assessment of commercial/industrial property can be complicated, but single-family residential property seemed easy. I was told in the beginning that the determinant is "full and fair market value," and for 30 years I've thought I knew exactly what "fair market value" meant: What a house is worth if sold by a willing seller to a willing buyer. That made perfect literal sense, no one has ever contradicted me when I've repeated it, and now that we have the Internet, Wikipedia also uses that definition.

Then last fall my partner, Chip Ford, who had been renting the house behind mine, became a first-time homebuyer. The two small houses were once part of the same property in a neighborhood that contained summer cottages that have been converted to year-round or torn down and replaced by larger homes. Because of limited frontage, our connecting land can't be developed.

Chip's rented house was on the market for a while, as interested young couples learned that the "starter home" needed work to be livable for a family. (That pile of wood in the yard isn't for romantic evenings by the fireplace; it's for the wood stove in the kitchen, under the loft, that is needed to heat the upstairs.)

So the little house didn't sell at its original asking price, nor at its lowered asking price. The landlord finally accepted a price that Chip could afford.

I suggested he immediately tell the town assessors what he paid, so they would know the actual, up-to-the-minute market value in time for the new tax bills.

Actually, I didn't think he needed to tell them. In the early years of state-mandated revaluation, when the job was labor-intensive, assessors used to update their assessments one section of town at a time. But in the computer age, I assumed that as sales appeared in local newspapers, the assessors would note the sale prices, type them into the computer, and click on "adjust everyone's share of the property tax levy, taking into account this new piece of information."

Our town's assessors were very nice, and tried to explain how my simple assumption was wrong. One of them came out to check the property, noted the inadequate frontage, visible ledge, and necessary woodpile; and after filling out the necessary paperwork, Chip did get an abatement of his first property-tax bill. But his new bill is still based on an amount quite a bit more than he actually paid for the property.

How is this possible? He was a willing buyer at a certain price; his landlord was a willing seller who wasn't under pressure to get rid of the property. What part of "market value" doesn't everyone understand? Well, at least I still "get" the annual car assessment. Prop 2 also cut the auto excise rate, from $66 per thousand dollars of value to $25 per thousand. In this case, "value" is not the market value of a car, fortunately.

Back when the auto excise was the most hated tax in the commonwealth, the annual pain was ameliorated somewhat by using not the sale price, but the manufacturer's list price of the auto, which then depreciated quickly to 10 percent by the fifth year.

Our auto excise is then fixed at that amount. When I bought my used Honda CRV in 2004, it was almost fully depreciated; starting the next year and ever since, my excise bill has been $57.50.

Back in the mid-1980s there was a proposal to assess the $25 on the "true market value" of the auto. This was dropped after arguments that it would be hard to determine this since assessors couldn't find most cars during the workday to see if they were in top shape or had kids eating ice cream and/or dogs throwing up as part of regular use.

So, a celebration clarification: Our homes aren't necessarily assessed at their true market value, and our cars definitely aren't. Let's just be glad that there's a limit on the rates.

I'm also glad, by the way, that overrides require a vote not only at Town Meeting, but on the local ballot, which sometimes shows up unexpectedly. For example, this year's Marblehead override election is on a non-traditional Thursday, June 21.

The comments made and opinions expressed in her columns are those of Barbara Anderson
and do not necessarily reflect those of Citizens for Limited Taxation.

Barbara Anderson is executive director of Citizens for Limited Taxation. Her column appears weekly in the Salem News and other Eagle Tribune newspapers; bi-weekly in the Tinytown Gazette.

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