Property tax fight gears up in Georgia

Georgia lawmakers looking to reform the property tax system are getting an unexpected boost from the continuing real estate crisis.

State Rep. Edward Lindsey (R-Buckhead) said the current crisis sheds light on a flaw in the system — that assessments are a tax on an unrealized gain — an issue that draws some complaints when values are rising but seems just plain unfair when they tumble.

Lindsey noted that current assessments have thousands of property owners looking at tax appraisals that are much higher than current market value. Thousands of long-term owners have also paid taxes for years on value they will never realize, he said. “It’s an issue of fairness,” Lindsey said. “This adds to the evidence of how unjust the system is. They have been paying property taxes on values they never actually saw.”

Lindsey, the author of a resolution to cap growth in assessments, said he’s getting increasing support for the cap even though he recognizes the tax system needs a full overhaul.

Burt Manning, chief appraiser for Fulton County, agreed the current tax system has inequities. But, he added, a freeze will create new ones by putting different tax values on comparable properties when the only difference is what was paid for them or when they were bought.

Newer residents would often pay more, he said.

“Our property tax system needs an overhaul,” Manning said.

“We’ve got exemptions for everything out there. Who says churches should not pay taxes? Why should someone 62 or older not pay school taxes? Still, I’m afraid of throwing the baby out with the bathwater.”

A search of current listings of properties for sale in high foreclosure areas compared with tax appraisals underscores the discrepancy between taxable values and sales prices.

Neighborhoods across northwest and southwest Atlanta routinely see sales at less than $30,000 for houses valued for taxes at three to five times as much.

The Atlanta Neighborhood Development Partnership did a study earlier this year using several metro Atlanta counties and found wide discrepancies between sales values and taxable values on properties in high foreclosure areas.

ANDP found owners in those communities were likely to pay more than $71.5 million extra in taxes this year because of the overvalued tax appraisals.

John O’Callaghan, the nonprofit’s CEO, said the system is unjust for longtime owners who have seen their taxable values and tax bills rise substantially, only to see their values plummet through the crisis.

“Those residents not only are getting hurt in this tax year but prior ones,” O’Callaghan said.

Tax bills are mailed each fall based on values assessors set as of Jan. 1 of that tax year.

When the real estate market is good values rise yearly. The challenge for assessors normally is how to keep up with the increases so owners pay all the taxes they should.

State law requires assessors to revisit every parcel at least once every three years so they don’t get too far behind the changing market and have to make radical changes at one time.

The goal is to place a taxable value for each parcel at what it would sell for in an open market transaction.

Rising assessments also allow local governments to keep tax rates the same and still see tax revenue increase every year. Legislators hope to change that with Lindsey’s proposed cap on assessment increases.

Lindsey would make sales price the guide for setting taxable values. He’d require assessors to reset the taxable value of each parcel whenever it is resold. After that it could never go up more than 3 percent or the cost of living in a year.

That, he reasons, would allow the market to set a true value on properties — rather than estimates from the assessors — and eliminate huge jumps in tax bills in a single year.

Local government officials have often opposed caps because they limit revenue growth for counties, cities and school boards and would force them to change the tax rate to increase collections.

Sam Olens, Cobb County commission chairman, said local governments can learn to live with such a system if they are careful money managers.

His county is among the handful with a floating homestead exemption that adjusts every year to account for growth in the tax digest, the total value of all taxable property.

Olens supports a cap because he feels property owners should be able to expect consistency year to year on property taxes.

He’d like to be sure the resolution takes into account when values change because of rezoning or a change in land use as well as other factors.

“I know they are trying to right a wrong,” Olens said. “I agree there is a wrong. I just want it to be a common sense solution rather than a seat of pants reaction.”

Still, the proposed cap will have plenty of opponents in the General Assembly.

State Sen. Vincent Fort (D-Atlanta) said taxable values need to be adjusted yearly to reflect true value, regardless if they are going up or down.

Owners may not have realized the gain from appreciation but they could have, he said.

That, Fort said, makes the current system more fair than one that has side-by-side owners of identical properties paying different tax bills.

“This is probably best left to the local governments to decide,” Fort said. “I’d prefer a general reassessment of properties as they decline. Tax caps ought to be a local issue.”