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Understanding the Property Tax Process

Understanding the Property Tax Process. Featuring: Five Myths About Assessments. Presented April 27, 2011 Mark D. Armstrong, CIAO Kane County Supervisor of Assessments David J. Rickert, CPA Kane County Treasurer. As Supervisor of Assessments.

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Understanding the Property Tax Process

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  1. Understanding theProperty Tax Process Featuring: Five Myths About Assessments Presented April 27, 2011 Mark D. Armstrong, CIAOKane County Supervisor of Assessments David J. Rickert, CPAKane County Treasurer

  2. As Supervisor of Assessments . . . • I am not who develops your property’s initial valuation (that is done by the Township Assessors). • I am the one who equalizes values between townships. • I am the clerk of the Board of Review, which reviews assessment complaints. • I am notthe Supervisor of Assessors . . .

  3. . . . or any other title which I have mistakenly been called!

  4. . . . or any other title which I have mistakenly been called!

  5. Ground Rules • Please hold questions until the end. • I can discuss general assessment practice, but I can’t discuss the assessment of any individual parcel in this format. • If you would like a copy of this slide show, you may request one by sending an e-mail to ArmstrongMark@co.kane.il.us.

  6. Myth #1 • MYTH: Your Equalized Assessed Valuation and your property tax bill have a direct relationship: If the EAV changes by 5%, then the taxes for that parcel change by 5%.

  7. An analogy . . . Paying Property Taxes is like going out to a restaurant for . . . Pie!

  8. The Bakers (Taxing Bodies) Our “County Restaurant” has several “Bakers”; each “Baker” is a local taxing body.

  9. The Bakers (Taxing Bodies) Some of the Bakers make small pies . . . Taxing Bodies2010 LevyPercent Special Purpose Districts* $27,319,9632.39% Townships and Road Districts $29,595,9892.58% Forest Preserve District $32,062,3952.80% Fire Districts $34,957,598 3.05% Libraries/Library Districts $36,077,7993.15% Park Districts $47,108,179 4.11% Kane County $54,331,0064.75% *Conservancy Districts, Cemetery Districts, Sanitary Districts, Special Service Areas, and TIF Districts

  10. The Bakers (Taxing Bodies) . . . and some Bakers make bigger pies: Taxing Bodies2010 LevyPercent Community College Districts $61,721,9405.39% Municipalities $122,052,23510.66% Unit School Districts $699,784,17861.12%

  11. The Servers (Assessors) The Servers (Assessors) need to serve the Diners (taxpayers) one piece of each of the ten pies.

  12. The Diners (Taxpayers) EXAMPLE: Geneva Unit District 304 (2010 data) • Number of “Diners” (tax parcels) 12,633 • Total size of the “Diners” $1,409,003,529 (100%) • Median Residential “Diner” $99,507(0.007%) • Median Commercial/Industrial “Diner” $150,029(0.011%) • Geneva Commons—Largest “Diner” $30,579,171 (2.170%) Pay attention to those percentages!

  13. The Pie (Tax Bills) EXAMPLE: Geneva Unit District 304 (2010 data) • Total size of the Pie $74,731,335.05 (100%) • Number of “Slices” (tax parcels) 12,633 • Median Residential “Slice” $5,277.70 (0.007%) • Median Commercial/Industrial “Slice” $7,957.30 (0.011%) • Geneva Commons—Largest “Slice” $1,621,871.58 (2.170%) Tax bills are based on the “relative percentage” of the assessed valuation, not the valuation itself!

  14. Tax Statistics • The 1991 Property Tax Extension Limitation Law (PTELL) ended the direct relationship between assessed valuations and property tax bills. • In the 2010 (payable 2011) tax year, billable values of homes dropped by a median rate of 7.18%. • However, tax bills for those same homes increased by a median rate of 2.87%. • 67% of Kane County homeowners have bigger tax bills than last year, even though their billable valuations were lower.

  15. Myth #1: The Conclusion • MYTH: Your Equalized Assessed Valuation and your property tax bill have a direct relationship: If the EAV changes by 5%, then the taxes for that parcel change by 5%. • FACT: Taxes go up because some of the “pies” get bigger! • GLOBAL valuation changes WILL NOT impact tax bills. • INDIVIDUAL valuations changes WILL impact tax bills. BUSTED

  16. Myth #2 • MYTH: “Assessed Value” for property tax purposes directly relate to “Market Value”, such as in an appraisal you might get if you got a mortgage.

  17. (Courtesy of the Aurora Beacon-News)

  18. (Courtesy of the Aurora Beacon-News)

  19. (Courtesy of the Aurora Beacon-News)

  20. (Courtesy of the Aurora Beacon-News)

  21. Assessed vs. Market Value Difference 1: As a matter of law, regular maintenance is not considered in developing valuations for property tax purposes for homes.

  22. Assessed vs. Market Value Difference 1: As a matter of law, regular maintenance is not considered in developing valuations for property tax purposes for homes.     (35 ILCS 200/10‑20)     Sec. 10‑20. Repairs and maintenance of residential property. Maintenance and repairs to residential property owned and used exclusively for a residential purpose shall not increase the assessed valuation of the property. For purposes of this Section, work shall be deemed repair and maintenance when it (1) does not increase the square footage of improvements and does not materially alter the existing character and condition of the structure but is limited to work performed to prolong the life of the existing improvements or to keep the existing improvements in a well maintained condition; and (2) employs materials, such as those used for roofing or siding, whose value is not greater than the replacement value of the materials being replaced. Maintenance and repairs, as those terms are used in this Section, to property that enhance the overall exterior and interior appearance and quality of a residence by restoring it from a state of disrepair to a standard state of repair do not "materially alter the existing character and condition" of the residence. (Source: P.A. 90‑788, eff. 8‑14‑98.)

  23. Assessed vs. Market Value • In other words, the law provides that a house with a roof in this condition . . .

  24. Assessed vs. Market Value • In other words, the law provides that a house with a roof in this condition . . . • . . . is valued the same as a house with a roof in this condition.

  25. Assessed vs. Market Value • But when it gets to this condition where it’s beyond normal maintenance, it can factor into the valuation.

  26. Assessed vs. Market Value Difference 2: By law, assessed valuations must be based on: • Fair Cash Value     (35 ILCS 200/1‑50)     Sec. 1‑50. Fair cash value. The amount for which a property can be sold in the due course of business and trade, not under duress, between a willing buyer and a willing seller. (Source: P.A. 88‑455.)

  27. Assessed vs. Market Value Difference 2: By law, assessed valuations must be based on: • Fair Cash Value • Multiplied by 33.33%     (35 ILCS 200/1‑50)     Sec. 1‑50. Fair cash value. The amount for which a property can be sold in the due course of business and trade, not under duress, between a willing buyer and a willing seller. (Source: P.A. 88‑455.)     (35 ILCS 200/9‑145)     Sec. 9‑145. Statutory level of assessment. Except in counties with more than 200,000 inhabitants which classify property for purposes of taxation, property shall be valued as follows:         (a) Each tract or lot of property shall be valued at 33 1/3% of its fair cash value. (Source: P.A. 91‑497, eff. 1‑1‑00.)

  28. Assessed vs. Market Value Difference 2: By law, assessed valuations must be based on: • Fair Cash Value • Multiplied by 33.33% • As of January 1 of the assessment year     (35 ILCS 200/1‑50)     Sec. 1‑50. Fair cash value. The amount for which a property can be sold in the due course of business and trade, not under duress, between a willing buyer and a willing seller. (Source: P.A. 88‑455.)     (35 ILCS 200/9‑145)     Sec. 9‑145. Statutory level of assessment. Except in counties with more than 200,000 inhabitants which classify property for purposes of taxation, property shall be valued as follows:         (a) Each tract or lot of property shall be valued at 33 1/3% of its fair cash value. (Source: P.A. 91‑497, eff. 1‑1‑00.) (35 ILCS 200/9‑95)     Sec. 9‑95. Listing of property. All property subject to taxation under this Code, including property becoming taxable for the first time, shall be listed by the proper legal description in the name of the owner, and assessed at the times and in the manner provided in Sections 9‑215 through 9‑225, and also in any year that the Department orders a reassessment (to the extent the reassessment is so ordered), with reference to the amount owned on January 1 in the year for which it is assessed, including all property purchased that day. (Source: P.A. 85‑1221; 86‑1481; 88‑455.)

  29. Assessed vs. Market Value Difference 2: By law, assessed valuations must be based on: • Fair Cash Value • Multiplied by 33.33% • As of January 1 of the assessment year • Based on the three prior years of sales     (35 ILCS 200/1‑50)     Sec. 1‑50. Fair cash value. The amount for which a property can be sold in the due course of business and trade, not under duress, between a willing buyer and a willing seller. (Source: P.A. 88‑455.)     (35 ILCS 200/9‑145)     Sec. 9‑145. Statutory level of assessment. Except in counties with more than 200,000 inhabitants which classify property for purposes of taxation, property shall be valued as follows:         (a) Each tract or lot of property shall be valued at 33 1/3% of its fair cash value. (Source: P.A. 91‑497, eff. 1‑1‑00.) (35 ILCS 200/9‑95)     Sec. 9‑95. Listing of property. All property subject to taxation under this Code, including property becoming taxable for the first time, shall be listed by the proper legal description in the name of the owner, and assessed at the times and in the manner provided in Sections 9‑215 through 9‑225, and also in any year that the Department orders a reassessment (to the extent the reassessment is so ordered), with reference to the amount owned on January 1 in the year for which it is assessed, including all property purchased that day. (Source: P.A. 85‑1221; 86‑1481; 88‑455.)     (35 ILCS 200/1‑55)     Sec. 1‑55.33 1/3%. One‑third of the fair cash value of property, as determined by the Department's sales ratio studies for the 3 most recent years preceding the assessment year, adjusted to take into account any changes in assessment levels implemented since the data for the studies were collected. (Source: P.A. 86‑1481; 87‑877; 88‑455.)

  30. Assessed vs. Market Value Difference 2: By law, assessed valuations must be based on: • Fair Cash Value • Multiplied by 33.33% • As of January 1 of the assessment year • Based on the three prior years of sales     (35 ILCS 200/1‑50)     Sec. 1‑50. Fair cash value. The amount for which a property can be sold in the due course of business and trade, not under duress, between a willing buyer and a willing seller. (Source: P.A. 88‑455.)     (35 ILCS 200/9‑145)     Sec. 9‑145. Statutory level of assessment. Except in counties with more than 200,000 inhabitants which classify property for purposes of taxation, property shall be valued as follows:         (a) Each tract or lot of property shall be valued at 33 1/3% of its fair cash value. (Source: P.A. 91‑497, eff. 1‑1‑00.) (35 ILCS 200/9‑95)     Sec. 9‑95. Listing of property. All property subject to taxation under this Code, including property becoming taxable for the first time, shall be listed by the proper legal description in the name of the owner, and assessed at the times and in the manner provided in Sections 9‑215 through 9‑225, and also in any year that the Department orders a reassessment (to the extent the reassessment is so ordered), with reference to the amount owned on January 1 in the year for which it is assessed, including all property purchased that day. (Source: P.A. 85‑1221; 86‑1481; 88‑455.)     (35 ILCS 200/1‑55)     Sec. 1‑55.33 1/3%. One‑third of the fair cash value of property, as determined by the Department's sales ratio studies for the 3 most recent years preceding the assessment year, adjusted to take into account any changes in assessment levels implemented since the data for the studies were collected. (Source: P.A. 86‑1481; 87‑877; 88‑455.) The Case-Schiller Index shows how three-year means can differ from current value points:

  31. Case-Schiller Index (10-City National)

  32. Case-Schiller Index (10-City National)

  33. Case-Schiller Index (Chicago)

  34. Case-Schiller Index (Chicago)

  35. Myth #2: Conclusion • MYTH: “Assessed Value” for property tax purposes directly relate to “Market Value”, such as in an appraisal you might get if you got a mortgage. • FACT: State law requires the assessed valuations to reflect something a little different than the current market conditions. • They are 12-18 months behind market conditions as of the assessment date. • They are 30-36 months behind market conditions by the time tax bills are due for that tax year. BUSTED

  36. Myth #3: The Myth • MYTH: Complaints to Board of Review require hiring a lawyer, appraiser, or some other professional; it’s just too complicated for a typical homeowner to figure out.

  37. When Can Complaints be Filed? • By state law, “the complaint shall be filed on or before 30 calendar days after the date of publication of the assessment list” in a local newspaper. (35 ILCS 200/16-55) • Assessment lists must be published “by township, if so organized.” (35 ILCS 200/12-10) • Complaints should not be filed until the assessments are certified to the Board. • The final filing dates for the 2011 assessment year are not yet set.

  38. Finding Out Deadlines To find out a township deadline: • Visit the Board’s web site at www.KaneCountyAssessments.org/Appeal.htm. • Call the Board Office at (630) 208-3818. • Go to www.KaneCountyAssessments.org, select the “subscribe” link, and register your e-mail address to get assessment news.

  39. Finding Out Deadlines To find out a township deadline: • Visit the Board’s web site at www.KaneCountyAssessments.org/Appeal.htm. • Call the Board Office at (630) 208-3818. • Go to www.KaneCountyAssessments.org, select the “subscribe”, link, and register your e-mail address to get assessment news.

  40. How Can Complaints be Filed? • Always start by calling your Township Assessor!!! • 1,278 homes received reductions because the taxpayer contacted the Township Assessor directly, and the Township Assessor recommended a reduction. • Formal assessment complaints are heard by the County Board of Review.

  41. How Can Complaints be Filed? • Assessment complaints MUST be filed within 30 days of a township assessment roll’s publication in a local newspaper. • Assessment Complaints can be made only on the Assessed Valuation; the Illinois Property Tax Appeal Board has consistently ruled that percentage of increase and the amount of taxes are not legitimate grounds for appeal.

  42. Why Are Complaints Filed? • There are three principal grounds for an assessment complaint. • Overvaluation (“The assessor shows my house to be worth $275,000, but recent sales of comparable houses show a range of $220,000 to $235,000.”) • Lack of Uniformity (“The assessor has valued my home at $275,000, but comparable houses show a value of $220,000 to $235,000.”) • Incorrect physical description (“The assessor thought I had a 3,800-square-foot house; I only have 3,400 square feet.”)

  43. May short sales be used? • A “Short sale” transaction is where the seller sells a home for less than the balance of the existing mortgage. • Short Sales often require lender cooperation. • Short Sales have always been included in Kane County sales-ratio studies, and the Board of Review will consider short sales in reviewing assessment complaints. • The state began tracking short sales in 2011.

  44. May foreclosure sales be used? • “Foreclosure Sales” can consist of several types of transactions. • Transfer from borrower to lender. • Court-ordered transfers to lender. • Sale from lender to new buyer.

  45. May foreclosure sales be used? • A sale from a lender to a new buyer may be considered a market transaction, but only if it meets other requirements (such as being “advertised for sale”.) • By state law, sales from lenders have been excluded from Kane County sales-ratio studies prior to 2011. • The Board of Review has been considering post-foreclosure sales from lenders in reviewing assessment complaints.

  46. Last Year’s Results • In 2010, the Board of Review certified assessments of 145,985 residential properties • 1,515 Homeowners filed individual assessment complaints. • 77% were filed by the homeowners themselves. • 23% were filed by attorneys representing the homeowners.

  47. Last Year’s Results • Of the homeowners who filed complaints themselves: • The Board reduced 62.5% of them. • The median reduction was 8%. • Of the homeowners used an attorney: • The Board reduced 62.1% of them. • The median reduction was 9%.

  48. Myth #3: The Conclusion • MYTH: Complaints to Board of Review require hiring a lawyer, appraiser, or some other professional; it’s just too complicated for a typical homeowner to figure out. • FACT: In 2010, homeowners who filed themselves had a similar success rate and median reduction than those who filed using a paid attorney. BUSTED

  49. Myth #4 • MYTH: Homestead exemptions don’t provide any significant tax savings for homeowners.

  50. Homestead Exemptions Homestead Exemptions reduce the Equalized Assessed Value (EAV) of owner-occupied dwellings. • General ………………………………………….$6,000 • Senior Citizen …………………………………..$4,000 • Senior Freeze ………………Base Year Assessment • Homestead Improvement ……………..up to $25,000 • Returning Veterans …………………………….$5,000 • Disabled Veterans Standard …………up to $5,000 • Disabled Veterans Adaptive ………….up to $70,000 • Disabled Persons ………………………………$2,000

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