Tax reform might spark a flood of property appeals

By Mary Lou Pickel

The Atlanta Journal-Constitution

Most politicians applaud a bill in the state Legislature that would simplify the property tax appeals process, but some metro county officials are concerned that the measure could work too well.

The Senate bill, introduced last week, would require counties to send valuation notices to property owners every year, accompanied by information on how to file an appeal and the phone number of the appraiser’s office. Currently appraisers only send a notice when a property has been reappraised, usually every few years.

Senate Bill 346 also standardizes the appeals form for all 159 counties and, perhaps most important, gives the property owner up to a year to file. That is much longer than the current 30- to 45-day window. These changes represent a vast simplification of what is now an almost impenetrable appeals process, and county officials fear that the resulting wave of appeals will overwhelm them.

“It could be a ‘mell of a hess,’ couldn’t it?” said Gwinnett Commission Chairman Charles Bannister.

If Gwinnett, for example, invited the owners of all 275,000 properties in the county to appeal their valuations every year, it would be foolish not to expect a large increase in filers, Bannister said. He argues that Gwinnett would have to spend $100,000 to mail out all the notices, and more for personnel to hear appeals. And he warns that a large number of outstanding appeals could delay state approval of the tax digest.

“With no tax digest approval, we can’t send tax notices, and then we can’t collect any revenue,” Bannister said.

Clayton Commission Chairman Eldrin Bell says he supports a transparent property tax system but has concerns about the costs of this reform.

“Most of the bill would bring more state mandates, without revenues to support it,” Bell said. “It would cause us to make changes, but they’re not paying for it.”

Senate Majority Leader Chip Rogers (R-Woodstock), the sponsor of SB 346, says the cost of something like postage should not stand in the way of keeping taxpayers informed on the valuation of their homes. As for concerns over budget schedules, he says he will work with counties and cities to revise the bill.

“We understand the budget has to be set and the books have to be closed,” Rogers said.

It is difficult to assess the cost to local governments of Rogers’ proposal. He argues that his legislation focuses on the appeals process and does not address the tax rate that local governments charge, he said.

Local politicians still have the power to raise taxes or cut services to balance their budgets.

The proposal to reform the state’s property tax system comes after an investigation by The Atlanta Journal-Constitution last fall showing that thousands of metro Atlanta properties are overvalued for tax purposes. After studying more than 500,000 tax and sales records for five counties, the newspaper concluded that county appraisers either ignored, or failed to keep pace with, the collapse of real estate prices.

Tax appraisers did cut a total of $4.2 billion from residential properties in the five largest metro counties last year. But the newspaper determined that, had officials used market value to appraise property, as the law requires, they would have cut $24.8 billion in value.

Rogers says his goal is to make the property valuation and appeals processes more open and easier to understand.

“Georgians ought to be able to trust that when they are paying their property tax, they are paying the true value,” Rogers said. “When they believe there has been an error, they have the fair right to appeal.”

Rogers’ bill requires that taxpayers be given immediate access to sales data used to determine property values. Plus, disputes over appraisals could tip in the property owner’s favor: the bill would require appeal panels — called Boards of Equalization — to unanimously agree to raise a value. If they don’t, the taxpayer wins and the value would be set where he or she claims it should be. Additionally, owners of condominiums could file a group appeal, according to the bill.

Still, changing the system could prove to be a challenge.

The most consumer-friendly provision of the bill — enabling taxpayers to appeal year-round — already appears doomed.

County and municipal lobbyists oppose the provision, saying the 12-month appeals period would undermine planning and budgeting; they say the bill likely will be amended to shorten the period to 45 days.

Fulton County’s tax appraiser, Burt Manning, said an open-ended appeals process could result in higher tax rates.

If the tax digest is continually questioned by property owners, it causes all sorts of problems, Manning said. Fulton County had 17,000 property tax appraisal appeals in 2008 and about 19,000 in 2009, Manning said.

He argues that counties, cities, school boards — every entity that depends on the tax digest — would never know for sure what their income would be with appeals continuing year-round.

“It would end up costing people more because the local governments would have to up their millage rate by a factor to cover the unknown,” Manning said.

Rogers’ proposal appears to do little to address the central issue of whether a house is appraised accurately, and instead leaves the burden on the homeowner to prove that it isn’t.

The bill does offer this significant change: The tax appraisal may not exceed the sale price of a house in the year in which the house sells. That helps homeowners who just bought a house. But it would have little impact on tax values of nearby properties that haven’t sold recently.

Steve Pruitt, Gwinnett’s chief appraiser, said he is grateful that Rogers’ bill wouldn’t take effect until next year because it will give him time to plan.

Gwinnett usually sends out between 60,000 and 75,000 property assessment notices per year; it would have to send notices on all 275,000 parcels if the bill passes.

“It costs about 50 cents per notice between the print and the postage. It will be a $100,000 automatic increase, minimum, to mail them out every year,” Pruitt said.

Cobb Commission Chairman Sam Olens says he backs the bill, too.

“Is there going to be a hit from it? Yes,” Olens said, meaning that increased appeals will carve into counties’ tax digests.

“The real question is not is there going to be a hit. The question is, is there going to be a fair hit? There’s so much abuse in the current system, it does need to change,” Olens said. ”

Some local governments wonder what effect increased appeals could have on a tax base that has already fallen with the real estate market.

A lower tax base forces local governments to make tough choices, said Clint Mueller of the Association of County Commissioners of Georgia.

“Either they make the cuts in the budget or they raise the millage rate,” Mueller said.

That is the unadorned choice Rogers says local government should make.

In Cherokee County, where Rogers lives, there was double-digit growth in the tax digest for many years. The school board collected more taxes simply by leaving the tax rate where it was, benefiting from appreciation in home prices, Rogers said. “As a taxpayer, that’s just simply wrong,” he said.

Frank Petruzielo, superintendent of Cherokee schools, disagrees.

“Chip has a tendency to use new math to describe stuff,” Petruzielo said.

“What is simply wrong is that every year that Senator Rogers is talking about, the state did not contribute the same proportional amount for paying the bills for public education at the local level,” he said. “Bottom line is the state has never funded the impact of growth.”

School districts could be particularly hit because their tax rates are capped at 20 mills, meaning they can’t raise that tax rate without going to the voters for a referendum. That is a tax rate of $20 for every $1,000 of taxable property value.

“Many of them are going to be unable to supply the type of education their citizens demand with the 20 mill property tax cap and declining property values,” Olens said.

Keith Bromery, spokesman for Atlanta Public Schools, said the district derives $504 million from property taxes — or 78 percent of its budget.

“Anything that is going to reduce that amount would be an issue for us,” he said. “More than that, anything that slows down the process of actual collection makes it difficult for us to plan our budget and meet our cash flow.”

Already schools have furloughed teachers, laid off personnel and made other cuts to programs.

Whether Rogers’ bill passes or not, the struggling economy will depress counties’ tax bases for the next few years.

“We’ve been telling our members for the last three years, ‘Get ready, get ready, get ready,’” Mueller said.

Cobb County expects its tax digest to fall as much as 10 percent this year, the county’s chief appraiser Phil Hogsed said. Already the county has imposed a hiring freeze and offered early retirement to about 400 employees.

“That’s what will help us retain a balanced budget next year without a millage increase,” Olens said.

Staff writers Gracie Bonds Staples, Ernie Suggs, Patrick Fox, Megan Matteucci and Steve Visser contributed to this article.