From H. LeRoy Whiteley, Jr., Founder, Marylanders for Fair Property Taxation:
Dear Governor O’Malley,
Occasionally you have ventured out to support specific legislation that you feel benefits the State. WE URGE YOU TO TAKE THAT STEP BY LOOKING AT SB 498 – Task Force to Review Property Tax Assessment and Appeals Process. Every day we read about the budgetary woes of our State and the tough decisions that we all face in dealing with fiscal responsibility. THIS BILL PROVIDES AN OPPORTUNITY TO SOLVE SOME OF THOSE BUDGET PROBLEMS WITH LITTLE OR NO COST TO STUDY A SITUATION (PROPERTY ASSESSMENTS) THAT IS OUT OF CONTROL BUT CAN BE CORRECTED TO THE BENEFIT OF THE STATE AND ITS TAXPAYERS. Admittedly, budget control is much easier for us taxpayers since when our checkbook balance is near zero, we stop spending. Simple but effective.?!! Naturally, there are other means of addressing the budget problems and we have one very easy one for your consideration.
Our organization has mainly been working with our Harford County delegation but specifically with Senators Barry Glassman and Douglas Peters (PG) and Delegates Susan McComas and Wayne Norman to obtain legislation that would create a task force to review, study, and evaluate the property tax assessment and appeals system. We all know that property assessments are questionable. Many have risen to unprecedented levels during several years of similarly unprecedented value declines in a failing housing market. Unfortunately, we are told that at your direction, the former and current committee chairs, Ulysses Currie and Sheila Hixson, that have heard these proposals in the past, were not to allow this bill to arrive on the floor so that the representatives we elect can express our views. We are therefore appealing directly to you for a win-win situation that is beneficial to the State and all of its property taxpayers. At age 84 and having served our country during WWII and Korea to help preserve this democracy, we find it appalling that your apparent dictatorial powers prevent the democratic process from working. This legislation, when passed, will allow this task force to study ways to improve the assessment/taxation/appeals process with the goal of improving overall accuracy, equality, fairness, and uniformity in our property assessments and resulting taxes.
The real estate market is still in a dramatic downward spiral, drastically lowering total property values. However, assessments do not reflect those conditions. If all properties were correctly assessed it might be argued that reduced property values could lead to reduced revenues for all jurisdictions. Conversely, it can also be argued and shown that just the opposite may be true. The State issues about 700,000 assessment notices each year completing a re-assessment of over 2 million taxable properties every three years. Figures we have indicate that about 60,000 individual taxpayers appeal their assessments to the first assessor or second Property Tax Assessment Appeals Board (PTAAB) level each year. We question whether the unwieldy appeals process is the major reason for such a low appeals rate. We have records of State assessor issued comparable sales data given to taxpayers for their hearings wherein the assessed values are consistently lower than their recent sale values. A discussion with our County Treasurer confirms our findings. Further extrapolation of those figures indicates as much as $80 million in assessable base may be missing from just our Harford county assessment rolls. If this ratio is present throughout the State, the statewide figure becomes astronomical. Do the math, Governor, 24 more jurisdictions with that level of untapped assessable base becomes as Everett Dirksen used to say, “ A million here, a million there and before you know it you’re talking real money”. Use of a proper tabulation of property sales/actual market values coupled with a reliable indexed system could produce up-to-date assessments commensurate with actual market conditions. The total state assessable base would increase, tax rates could be decreased, and revenues could still match or exceed constant yields or amounts to meet society needs. IT’S A WIN-WIN SITUATION??
The entire assessment process is too subjective. It is a Computer Assisted Mass Appraisal system (CAMA) originally developed in 1977 that has limited capabilities to address specific conditions regarding the taxpayer’s actual property. It lumps all manner of housing together to arrive at average values for a heterogeneous mixture of construction types. The same parties who have administered the program for years have revamped the model without any taxpayer input to our knowledge. The new program has been employed starting with 2009 assessments. Appeals are increasing based on information we have. For instance, second level appeals of about 900 in 2008 have exceeded 19,000 in 2010. We firmly believe that this process merits extensive study and revamping to arrive at a fair assessment process that can keep pace with changing market conditions.
We recommend that the task force be empowered to review the whole process and suggest improvements. We offer a possible alternative system for consideration. Every property sale is recorded by deed with its sale value. The relationship of whether or not the sale is at arm’s length is available. IF all properties are set for assessment by a sale established to be fair market value (i.e. willing buyer; willing seller concept) and given an index value at the date of sale from such established sources such as the S & P Case Shiller Home Price Index, (home value/investment market) Marshall and Swift, (real estate and construction industry usage), Boeckh, (insurance industry) or Engineering News Record, (engineering and construction industry) the index values which these firms calculate daily using a myriad of factors including labor rates, location, materials costs, and similar items affecting market/construction conditions can be applied to every property on an individual basis specific to each and every property. The frequency at which these values can be monitored or adjusted if the property construction or condition changes are limitless. The accuracy, relativity, timeliness, and fairness are unquestionable. SDAT currently computes dwelling cost values utilizing construction based data. However, when it comes to appealing those values the taxpayer is limited to using sales data only. Why not then base the whole system on current sales data?
A benefit to utilizing computerized sales based, indexed system such as this is the fact that labor could be reduced while eliminating the personal subjectivity of assessors. We note that the Department of Assessments and Taxation currently is authorized to employ 261 assessors of varying pay grades. They report 215 positions filled at the assessor level. Forty-six supervisors also of varying pay grades supervise them. It might be possible to eliminate the entire assessor force of 215 assessors for a savings of about $15 million per year based on the average salaries of assessors given us by the Department. The supervisors who should be more capable, better educated, may even be licensed appraisers, could also possibly be reduced in number and charged with the upgrading of property construction conditions, oversight of computer input of new data, and limited interfacing with taxpayers for unusual assessed values that may arise. The current CAMA system is divided into 9 geographic State areas. At most, three well-qualified supervisors per CAMA area could cover the State areas resulting in another cost savings of about $2 million per year. Appeals should virtually be eliminated. The Property Tax Assessment Appeals Boards and Tax Court loads might also be reduced to a point of elimination. After all, who is ever going to question their own sale price? The savings are exponential when you consider the support services, buildings, and maintenance conditions/expenses associated with this vast bureaucracy. The task force should be given the opportunity to research these and all other similar cost effective options that can be offered. Your support and input is vital.
When Senator Glassman’s bill is enacted and such cost improving measures are adopted, the savings to the taxpayer are obvious. In addition, it appears obvious that if the assessment base is truly so faltered as to have much of its data corrupted and missing, think what a fair, accurate database would do to increase the assessable base. This could result in more revenue even with a reduced local tax rate. That is a win-win situation?? Also if the task force is properly represented by interested citizens, appointed by legislators, from taxpayers that have voiced their concerns about tax assessments and appeals, the public can feel it was truly represented in these matters. This is not the case today where tax assessments are unfairly set, constantly increased which results in an automatic tax increase. THIS IS TAXATION WITHOUT REPRESENTATION?? The number of citizen appointees to the task force, at the very minimum, should equal representation from the nine CAMA areas but more favorably at least one member from each of Maryland’s 24 jurisdictions as earlier versions of the bill proposed. This would result in true taxpayer input.
Our organization along with our coalition members has members experienced in many of these matters and we stand ready to meet with you and members of the legislature to further these efforts for the benefit of the State and its taxpayers. Show us your statesmanship and leadership. We urge your investigation and support of this SB 498 initiative to allow the taxpayers and the State the fair property taxation they deserve and can support.
H. LeRoy Whiteley, Jr.