Tuesday, April 8, 2008

Don't Know Their Assets From Their Elbows

originally published in the Hartford Advocate March 22, 2007

Don't Know Their Assets From Their Elbows
Reassessment promises higher tax bills for West Hartford

by Jennifer Abel

Life’s full of things that work well individually but clash together. Like plaids and stripes. Toothpaste and orange juice. And high home values and low tax rates.

Wait, what’s wrong with the last pair? West Hartford property owners will soon learn.

"[There’s] going to be a significant tax increase for many people," says Judy Aron of the West Hartford Taxpayers’ Association. Here’s why: every so often, town governments throughout Connecticut reassess the properties in their jurisdictions, to determine their values for tax purposes. West Hartford’s latest assessment (called a revaluation) took place last year, and residents received their property-value notices in October.

The last revaluation before that was in 1999. And between then and 2006 came this thing called the "housing bubble," where home prices rose far faster than incomes. According to Joanne Ferraresso, the city’s director of sssessment, in 1999 (through 2005) the average assessment for a single-family home in West Hartford was $135,570, compared to $234,300 last October.

That’s an increase of over 70 percent, and even that only applies to homes fair-to-middling by city standards. Overall, "values rose anywhere from 60 to 200 percent," says city spokesperson Renee McCue.

Quite a windfall for anyone who wants to sell a house bought in 1999, but a mixed blessing for those who simply wish to keep living where they are. More value in the home means more value to be taxed.

So where do those low tax rates come in? Next month, in light of the increased assessments, the town’s going to lower its mill rate, used to determine property taxes.

Though mill sounds like million it actually comes from the Latin mille, meaning thousand. It’s a dollar of tax on every $1,000 in value, and since West Hartford’s mill rate was 46.19 last year, homeowners had to pay $46.19 for every $1,000 their home was worth. But this year, "our town manager mentioned something about the mill rate going down almost 10 points," said Judy Aron. "But the reality is, the value of homes have gone up proportionately more than the mill rates will go down."

Actually, the rate is likely to drop at least 15 points, according to the town manager’s report to the council. Though it’s too early to say for sure, the new rate is expected to be around 31.43.

Not low enough, says Aron. She calculated that, with her home’s increased assessment, the mill rate would have to go down to 24.69 for her tax bill to match last year’s. What’s worse for homeowners is that they’re paying taxes on profits they won’t see unless they sell their house. "We’re paying taxes on unrealized capital gains," Aron said.

Ferraresso agrees. "The basis for property tax in Connecticut is ad valorum, meaning it’s based on the value of the property, not your ability to pay or the services you use."

The mill rate is calculated every year, basically by taking the cost of the city budget and dividing it by the property on the grand list. Since the list remains essentially the same between revaluations, residents see their mill rates rise each year and recognize that for the tax increase it is. This year, with the rate drop, some might not realize how much they’ll owe until their tax bills arrive in June.