Wednesday, February 14, 2007

Moving Targets

There's been some lively discussion on this blog about the real estate tax assessments which were just mailed this week.

But there may be some fuzziness about "rates" and the amount we are paying, so the Growler will try to help explain this. There is a difference between the tax rate and the fair market value of one's home. However, both are needed to calculate the final tax owed.

The City calculates the fair market value of each home annually (a schedule which is much more aggressive than other jurisidictions in the Washingto metropolitan area). These assessments are issued in January or February. For years, fair market value has been rising due to a booming housing market. And as we all know, many single family homeowners like the Growler saw a slight decrease in assessed value this year because home sales (used as the determinant of value) were down and sellers had to drop their prices to move the properties. That means some homes may be less valuable in 2007 than in the previous year, at least for tax purposes.

The taxation rate is applied to each $100 of assessed value and is set later by City Council based on what the proposed budget looks like.

And that's where things get interesting. Politicians and bureaucrats can claim they are lowering the tax rate, but you and the Growler and everyone else has been paying steadily rising taxes from 2000 to 2006 because the lower rate was being applied to a higher value.

Let's use the late Helen Miller's house at 1301 Queen Street as an example. It hasn't been renovated or expanded, so the appreciation is solely due to increased buyer activity in Parker-Gray.

FY2000 tax rate: $1.110
Assessed value of 1301 Queen: $134,500
FY 2000 tax bill: $1,492.95

FY2001 tax rate: $1.110
Assessed value of 1301 Queen: $157,800
FY 2001 tax bill: $1,751.58

FY2002 tax rate: $1.080
Assessed value of 1301 Queen: $184,600
FY 2002 tax bill: $1,993.68

FY2003 tax rate: $1.035
Assessed value of 1301 Queen: $214,500
FY 2003 tax bill: $2,220.08

FY2004 tax rate: $1.035
Assessed value of 1301 Queen: $299,300
FY 2004 tax bill: $3,097.76

FY2005 tax rate: $0.995
Assessed value of 1301 Queen: $382,300
FY 2005 tax bill: $3,803.89

FY2006 tax rate: $0.915
Assessed value of 1301 Queen: $454,400
FY 2006 tax rate: $4,157.76

We don't know the rate for 2007 yet, but these figures demonstrate that the tax bill for 1301 Queen rose a staggering 278.49% from 2000 to 2006, even though the rate was lowered several times (with much crowing and posturing by politicians). These increases occurred all around the City but are most noticeable in Parker-Gray, which as a gentrifying neighborhood has had some of the greatest appreciation of all.

Now that raises two questions:

1. What have the politicians been doing with this windfall? and

2. Why aren't they plowing it back into Parker-Gray improvements now that the district is contributing a hefty sum annually to the City's coffers? Do they still think of us as a drain on resources?