Tuesday, October 26, 2021

WisGOP assessment change would cut property taxes for big buildings, raise them for homeowners

In addition to the typical cultural issue BS being debated in the gerrymandered GOP Legislature this week, there is a group of bills coming through that deal with housing and assessment practices in the state. And one bill in particular could make Wisconsin homeowners pay a lot more starting next year.
Madison City Assessor Michelle Drea contended one of the bills, which would prohibit assessors from using what is known as the income approach to determine a property’s fair market value, would actually do the opposite for homeowners across the state by shifting taxes paid by commercial property owners onto residential property owners….

Assessors use a wide variety of data to determine the value of a parcel of property. The three traditional approaches to assessment are based on comparable sales, cost and income. Homes are typically assessed through the sales approach and income is used for business-related properties.

“The foundation of the income approach is the concept of anticipation, assigning a current value to anticipated future benefits — how much income will this property reasonably produce,” Drea said in an email. “AB 610 would prohibit the use of future or anticipated benefits, thus outlawing the income approach to assessment.
Which makes little sense, given that part of the value of a property is based on what can be done with it. But then you see who’s lobbying for this bill, and it makes more sense.

Why the Realtors would want to jack up property taxes on homeowners escapes me (and shows them to be RW hacks more than an interest group), but commercial realtors and apartment associations? They’re more than happy to have office buildings and multi-family housing have their assessments go down.

(But hey, maybe those owners of multi-tenant properties will gladly cut their rents if their property taxes and….HAHAHAHAHA!!! Sorry, I can’t keep a straight face with that one.)

Madison Assesor Drea says that because the assessed value of commercial properties would significantly drop, it would man residential homes take up a higher share of the city’s property values, and would result in significantly higher property taxes for homeowners.
Drea said lowering commercial assessments would increase property taxes by an average of $2,000 per residential property, though the exact increase on any given property would vary depending on its assessed value. Drea did not provide an estimate for the specific impact on an average single-family home, which last year was valued at $315,200 and paid $7,082 in property taxes.

Drea said the 50% loss of the city’s commercial value was a “conservative estimate” and would be a direct result of having to artificially deflate commercial assessments as she would have to support those assessments using less reliable data before the Board of Assessor, Board of Review or circuit courts.
In addition, if the new criteria leads to more lawsuits filed by major real estate holders, that’s going to drive up costs for local governments to argue those cases in court. Or they’re going to relent and lower those assessments to avoid the costs and headaches, which is another way the ultra-rich and connected are able to get breaks in the system that everyday Wisconsinites.

That being said, it looks like WisGOPs felt some blowback from this bill, because they put in an amendment (approved unanimously in committee) allowing assessors to take into account how much the property generates today.
Assembly Amendment 1 adds “actual or market rent” as a fourth item of information that an assessor must consider when determining value of real property under current law. The amendment defines “actual or market rent” as the most probable rent that a property should bring in a competitive and open market reflecting all conditions and restrictions of the lease agreement, including permitted uses, use restrictions, expense obligations, term, concessions, renewal and purchase options, and tenant improvements.
It’s a small start, and given that rents are rising in the state overall, at least allows some of that reality to be included as part of the property value assessments of buildings.

But it’s still something to worry about, and the looming property tax hike on homeowners due to this giveaway by WisGOP should be all the reason Governor Evers needs to veto this bill, should it even reach his desk.

1 comment:

  1. It seems like many GOP legislators including Vos, Strobel. Krug, and former legislator Nygren own what this bill defines as commercial property or are realtors. I am surprised the League of Municipalities hasn't weighed in or the WI Association of School Boards as this will make passing referendums more difficult.