Property tax administration

Property tax administration starts with a general budget for the upcoming fiscal year.  All departments and services using property tax revenue submit a budget to determine the total funding to run the local governments.  However, fees collected for certain services may offset this total budget amount.  Trends by many local governments have been to raise revenue through fees to manage the general budget and lessen property tax burdens.  Direct fees maybe charged for services such as garbage collection, water and sewer, fire and ambulance calls, certain police actions, and many other services.

With a projected budget less anticipated fee collections estimated the next step, in determining the tax rate, is to establish the tax digest.  The tax digest is the total amount of taxable assessment value of all the real estate within the county.  The county tax assessment office or tax appraisal district is staffed with tax assessors who are responsible for calculating and maintaining the tax digest.  This is not an easy undertaking because it requires an individual ad valorem estimate by the assessment office for each property in the county.  To value every property, the assessment office must keep an accurate inventory of all property.

The assessment office identifies every parcel of land with a numbering system giving each parcel a unique identification number, called the assessor’s parcel number.  In addition, the assessment office maintains a file and records for every parcel of land, improvements to the parcel, property ownership history, and historic assessed values.

With information on each property, the assessment office now makes ad valorem estimates.  We will discuss property valuation in a future chapter.  However, assessors use a variety of techniques and different techniques for different property types.  Let’s not get bogged down in assessment valuation techniques at this point, but it is important to remember that an assessor cannot spend too much time on any one-property valuation because they office have to make and keep current thousands of ad valorem values.  Assessors rarely have the time or resources to do valuations utilizing all three traditional approaches to value that will be covered.

Therefore, assessment offices often use mass valuation techniques.  One example of a mass valuation technique is a statistical model estimated from comparable sales data.  Such a model can be used to value a large number of properties very quickly once a model is developed.

Because of the nature of the assessor’s task, ad valorem estimate are not necessarily very accurate estimates of current market values.  Sometimes the assessor is too high, sometimes too low, and sometimes just about right. 

Usually, when property owners think that their ad valorem estimate is too low, resulting is a low property tax bill, or just right there is no incentive to take the time and effort to ask the assessor for a change.  However, if a property owner thinks that their ad valorem estimate is too high, assessment offices offer times during the year in which the property owner can an assessment appeal. 

With an assessment appeal, the property owner needs to build a case for an adjustment in the ad valorem value for his or her property and present this case before an assessor or an assessment board of appeals.  An assessment board of appeals is a group of officials given the authority to change ad valorem values if convinced that an adjustment is warranted.  The property owner’s basis of the ad valorem assessment appeal might be accomplished by hiring an appraiser, providing comparable sales data, presenting a recent sale contract, showing ad valorem values on similar properties, reviewing economic data in the area, or providing pictures of the property.

The assessor now takes the ad valorem estimate for each property and multiplies by an assessment ratio yielding the assessed values.  Assessment ratios generally range from 40% to 100% of the ad valorem estimate and are set by the taxing jurisdiction. For simplicity, some states, like Texas, just use 100% of the ad valorem estimate as the assessed value.  This makes sense to me!