Assessments fall, tax bills may rise

Assessments fall, tax bills may rise

Lower home values hit owners, cities

Mike Wilkinson, Catherine Jun and Jim Lynch / The Detroit News

Property assessments in Metro Detroit last year fell further than they have in a quarter century, sparing only the poorest communities and triggering fears of a painful contraction in municipal services.

Many property owners getting their annual assessments in the mail over the next several weeks will catch an intimate glimpse of the widespread damage done by foreclosures, layoffs and a wobbling Michigan economy.

But for homeowners well aware that their house is worth far less than it was a few years ago, the biggest shock may be when their tax bill arrives in July: Although their assessment went down, many will still see their taxes go up.

"This is the dark side of Proposal A," said Tony Fuoco, who assesses property for five area communities.

The 1994 law tied assessment increases to inflation, insulating homeowners from steep increases in market value. That same protection created a gap between market value and "capped value," allowing inflationary increases even when assessments go down. This year, the taxable value can still go up by 2.3 percent.

Loraine Schobloher, 76, is a retired medical transcriptionist in Troy who relies on pension and Social Security checks to make ends meet. She's upset the assessment on her Parkview Drive home has fallen as her tax bill has grown.

"I'm on a fixed income," she said. "If the taxes keep going up, as it stands now you can't even get rid of your house. You can't win."

Annual real estate studies by area appraisers quantified the value losses that real estate agents and home sellers have known for months. The sales studies help establish property assessments, upon which property taxes are based.

Eight communities in the region saw double-digit drops, including Grosse Pointe Park and Grosse Pointe Woods. Only two communities -- Fenton and Royal Oak Township -- actually saw slight increases. For the counties and municipalities, the declining values will mean flat revenues, a trend likely to continue into 2009 and possibly 2010, said Steve Mellen, the equalization director for Macomb County.

And the drops in residential values mirror declines in other classes of property: industrial, commercial and agricultural. There were small gains in personal property.

"We're looking at (at) least two years for the tax system to recover," Mellen said. He's already told county officials, who are in negotiations with many of the county's employee unions, that they'll "be lucky" to collect as much in 2009 as they do this year.

In Center Line, where residential property values fell nearly 10 percent, city officials know that cuts loom. The only question remaining is how deep.

"Our situation is horrendous," said Center Line Mayor Mary Ann Zeilinski. "We've exhausted any reserve funds we had accumulated over the years."

Summer Minnick, director of state affairs for the Michigan Municipal League, said that drop in values will have a serious impact on municipal coffers. Areas that have a lot of new homes and communities that had more new residents move in recently will lose the most because their Proposal A "gap" is so narrow.

"It's very different from community to community," Minnick said.

But she said the long-term impact on communities will continue long after the economy recovers because assessments will be tied to lower values.

"Cities will be holding the bag on the market for a long time," Minnick said.

Over the next several weeks, property owners will receive their assessments in the mail. Most will find that their individual decrease -- or in rare cases an increase -- will not match their community's decline. That's because the changes are not uniform: In some neighborhoods and price brackets, property values held firm. In many cases, the most expensive homes saw the biggest declines, officials said.

In Detroit, Hamtramck, Highland Park and other communities with less expensive housing stock, the sales showed home values didn't change, seemingly unaffected by the thousands of foreclosures in the communities, said Gary Evanko, Wayne County equalization director.

But foreclosures in Northville, Canton and Plymouth had a bigger impact, where $600,000 homes went into foreclosure and were sold for $400,000.

"That's a big drop," he said.

Upset homeowners will get the chance in the next few months to challenge their assessments. That's when the local boards of review meet to consider adjustments.

Fuoco, who attends the review boards in the communities he works for, knows it could be a trying time as people try to make sense of the seemingly contradictory facts: Assessment down, taxable value up?

"People are going to be expecting a tax break and it's not going to happen," Fuoco said. He anticipates being "bombarded" at the boards of review. "It's going to be an education issue."

Before Proposal A, a decline in property value meant a decline in taxes. Conversely, an increase in value produced a bigger tax bill.

"The tough boards of review were before Proposal A," said Gary Evanko, director of Wayne County's equalization department. "It fueled the whole tax revolt."

Now, homeowners have protections during rising markets and municipalities during declining ones.

In Berkley, homeowners will take, on average, a 5.2 percent hit on their assessment. But many will still pay more. All told, the city budget will likely decline by $180,000, finance director David Sabuda said.

"We're watching the bottom line closely but we've got to prepare for the worst case scenario," Sabuda said.

To cut costs, the city is considering bulk purchasing of gas and oil with neighboring communities as well as leaving many city positions unfilled. Personnel make up about 70 percent of the general fund budget, he said. "We're looking at everything," he added.

While falling home values have created a buyer's market, the growing disparity with their tax levy is sobering some homebuyers, observed Jolie Levine Warpool, a Realtor in Oakland County.

"Somebody is going to be scared to death their taxes are going to jump up big time," she said.

That reality is keeping Joel Warren, 28, of Commerce Township from closing on homes that, based on their ticket price, are considered a steal. He and his wife have been looking for a home in South Lyon to raise their growing family.

One foreclosed home he was eying is listed at $240,000, down from $300,000 when it last sold in 2002. Once purchased, however, the taxes would remain at the 2002 level.

"That could be a difference of hundreds of dollars a month," Warren said. "It's hard to swallow."