IPTI | Property tax in the news – June 2024

IPTI’s usual monthly newsletter – the “President’s Message” – contains, inter alia, some summarised news articles from around the world. This IPTI publication – “Property Tax in the News” – contains some of the more interesting news articles concerning property taxes in North America and Europe which is where many of our members have a particular interest. Links to these and more, similarly summarised, articles – from North America, Europe and around the globe – can be found in “IPTI Xtracts” on our website: www.ipti.org. Please note that these are news articles; they do not necessarily reflect IPTI’s views.

 

USA

With home prices up more than 50%, some states try to contain property taxes

Rising home values have led to higher real estate taxes around the U.S. Now many states are looking to provide relief to frustrated residents. For retirees Tom and Beverly McAdam, the good news is the value of their two-bedroom home in suburban Denver has risen 45% since they purchased it more than six years ago. That’s also the bad news, costing them thousands more in real estate taxes and leaving less for discretionary spending.

“To pay the higher property taxes, it just means we’ve got to take more money out of our investments when it comes time to hit those big bills,” Beverly McAdam said. She backs a Colorado ballot proposal that could cap the growth of property tax revenue. It’s one of several measures in states this year to limit, cut or offset escalating property taxes in response to complaints.

Over the past five years, single-family home prices have risen about 54% nationally, according to S&P Dow Jones Indices. That means higher tax bills for homeowners when governments don’t offset higher real estate values by reducing tax rates. And with offices seeing higher vacancies as people still work from home after the coronavirus pandemic, some commercial property values are declining, putting even more pressure on residential properties to deliver revenues.

“With assessed values skyrocketing over the past few years,” said Jared Walczak, vice president of state projects at the nonprofit Tax Foundation, “homeowners are clamoring for relief, and state policymakers are increasingly exploring ways to provide it.” Colorado, like Alabama and Wyoming, also has a new law that will limit the growth in tax-assessed values for homeowners. Property tax relief will be part of a special legislative session beginning June 18 in Kansas, while Nebraska also could hold a special session to cut property taxes.

Georgia voters will decide in November whether to authorize a new law limiting increases in assessed home values for tax purposes to the rate of inflation, unless local governments or school boards opt out. Five years ago, Lanell Griffith and her husband paid a little less than $2,700 in property taxes on their Topeka, Kansas, home in a historic neighborhood of tree-lined, brick streets. Their bill last year was more than $3,700.

“The government shouldn’t be able to arbitrarily just increase what they say you owe them without any sort of guardrails on that,” Griffith said. Kansas lawmakers this year passed three measures that would have reduced the state’s property tax levy for public schools. But each was vetoed by Democratic Gov. Laura Kelly because of concerns about other sections to cut income taxes. The special session will mark a fourth attempt at consensus. In Vermont, Republican Gov. Phil Scott has vowed to veto a bill that would raise property taxes by an average of nearly 14% to provide more money for public schools. Scott said people “simply cannot afford a historic, double digit property tax increase.”

In many states, property taxes are primarily a function of local governments such as counties, cities, school boards and special districts for libraries, fire departments and water systems. Each entity sets its own property tax rate, which is added to the others to come up with an overall tax bill for property owners. State legislatures can intervene in a variety of ways. They can establish statewide limits on how much assessed property values can rise, create partial tax exemptions for all homeowners or provide income tax credits to help offset property taxes for certain people, such as those 65 and older.

But any relief carries consequences. Limits on the growth of assessed property values may provide a greater benefit to the wealthy. Exemptions for homes used as primary residences can shift a greater tax burden to rental properties and businesses. “If you do this too much, you can now start tying the hands of your local government and cutting them off from the ability to raise revenue,” said Richard Auxier, a principal policy associate at the nonprofit Tax Policy Center.

While signing several property tax relief laws this year, Republican Wyoming Gov. Mark Gordon vetoed one that would have exempted 25% of a home’s value from property taxes. He said it “jeopardized the financial stability of the state and counties.” In 1982, voters in Muscogee County, Georgia, approved a local ordinance freezing assessed property values for homes used as primary residences. The result: longtime homeowners pay very little, newcomers pay more and businesses face some of the state’s highest property tax rates, said Suzanne Widenhouse, the county’s chief appraiser. Last year, two similar homes worth around $330,000 had dramatically different tax bills. One, whose assessed value was frozen in the 1980s, owed less than $8. The other, whose assessed value was frozen when purchased about five years ago, owed $3,236, Widenhouse said. “Anytime you grant an exemption, you create an inequality,” she said.

Colorado also has been at the center of the property tax debate. The state has experienced decades long growth in new residents, driving up demand for housing. Meanwhile, it has struggled to find a balance between providing tax relief for homeowners and sufficient funding for local governments.

A 1982 constitutional amendment limited residential properties to 45% of Colorado’s total property tax base while also setting a fixed assessment rate for commercial properties. To keep the ratio in balance as home values rose, residential tax assessments were cut, leaving less revenue for essential services such as fire districts. Colorado voters repealed that constitutional provision in 2020. Since then, assessed home values have risen rapidly and the General Assembly has responded.

The latest law, signed in May, is projected to shave over $1 billion annually off future property tax revenue by reducing tax rates and imposing growth limits. But that’s not enough to satisfy some residents. The conservative group Advance Colorado backed a citizens initiative asking voters in November to cap all property tax revenue growth at 4% per year and is gathering signatures for still another ballot initiative to lower property taxes. “People are saying this is too much growth; government doesn’t need this much money,” Advance Colorado President Michael Fields said. “People are genuinely scared of losing their houses.”

 

Alaska: Property tax and assessment reform bill passes

In the final days of the legislative session, SB179, an act relating to municipal property tax, received overwhelming support in both chambers with a bipartisan 39-1 vote in the House and unanimous support of 20-0 in the Senate. Several related bills had been working their way through the House and Senate during the legislative session:

• SB77, portions of which allow a municipality to temporarily exempt some properties from taxation to encourage economic development

• SB161, which allows a municipality to the opportunity to exempt farmland and farm structures from property tax

• HB347 and SB242, both of which establish baseline requirements for municipalities to promote transparency and fairness in the property tax assessment process
• SB179, which prohibit municipalities and the state from imposing a transfer tax on the sale of real property.

The House Rules Committee amended SB179 to include HB347, SB161, and portions of SB77 to become a comprehensive package in support of good governance regarding property taxes and the assessment process. Sen. Jesse Kiehl introduced SB242 to put guardrails on the assessment process in response to public outcry from his constituents in Haines and Juneau. The property owners in these jurisdictions believed they had received unjust assessments, suffered intimidating threats of further increases, and felt powerless during the assessment and Board of Equalization Process that failed to protect their right to due process and fair and just treatment.

At the center of the controversies was an uncertified assessor who moved from his brief employment with the City and Borough of Juneau to a contract assessor position in Haines. In just a few months, contract assessor Michael Dahle made significant changes in Haines by implementing the first phase of a new mass appraisal methodology for the Borough’s 2023 property tax assessments. Dahle found notoriety in Haines after he issued an assessment increase on appeal from $864,400 to $1.1 million on a modest property in the Haines Mosquito Lake area that was appraised at $620,000.

Research into Dahle’s credentials resulted in the discovery that the contract assessor held neither an assessor’s certification nor was he licensed as an appraiser. The lack of professional credentials was the basis of a petition to cancel his contract last December.

But the public outrage was due to the assessor’s office’s unwillingness to address unequal valuations, obvious errors and misdescriptions of properties, and a feeling of extortion when responses to appeals contained threats of significantly increasing the current year assessment if the appeal continued to the Board of Equalization.

Haines resident Paul Rogers submitted a citizen’s agenda request for assembly action requesting the cancellation of Dahle’s contract due to his lack of professional credentials. Nearly 600 signatures on a petition in a borough with just over 2,414 registered voters supported Roger’s request. The Haines Borough Assembly quickly took action and voted unanimously to terminate Dahle’s contract. Juneau experienced similar turmoil during Dahle’s tenure with CBJ’s Assessor’s Office. In 2021, Juneau commercial properties received assessment increases of 50% across the board, regardless of the area they were in or how Covid-19 shutdowns affected their industry.

The issues the Juneau property owners faced mirrored what Haines experienced with the use of the mass appraisal methodology, which uses a hybrid cost approach with some market data that ignores actual market sales conditions. The Juneau appellants also conveyed their dissatisfaction with the assessor’s hostile demeanor towards the property owners, as well as his threats to escalate the assessment if they did not withdraw their appeal.

The most egregious examples of excess assessments and unjust treatment became publicly known due to Restoring Public Trust, a white paper coauthored by Juneau property owner Greg Adler and Haines resident Brenda Josephson. The document illustrated weaknesses in state statutes with realworld examples of appeals from the 2022 and 2023 assessment processes in Juneau and Haines. However, property owners throughout the state came forward to testify about their personal experiences and the need to reform Alaska’s statute to ensure due process and just and fair treatment for all Alaskans.

Bipartisan collaboration in support of good governance and strong communities for all Alaskans in both urban and rural regions of the state led to the passage of SB179. Upon hearing news of the passage of the property assessment reforms, Juneau resident Dave Hanna stated, “It’s heartening to see that our Legislature can come together and stand up for the rights of our taxpayers. The average citizen often feels they have no chance against the bureaucracy, so this should give them hope. Thank you to all who helped this pass.”

 

Florida: Property values soar on Fort Myers Beach as it redevelops in aftermath of Hurricane Ian

Property values on Fort Myers Beach are up by more than 36% from last year. On Sanibel Island, it’s an entirely different story. Here values fell by more than 10% over the year. The sharp contrast is what stands out most in Lee County’s preliminary tax roll for 2024, released June 1.

It’s a reflection of the recovery efforts from Hurricane Ian, with Fort Myers Beach much farther ahead in its comeback. More properties have changed hands and there’s been more new construction in the town, pushing up market and taxable values.

The area’s just – or market – values rose to more than $4.9 billion in 2024, up from about $3.6 billion last year. A big part of the increase is new construction, estimated at more than $631.7 million. That includes a myriad of damaged properties that have been repaired and returned to the tax rolls, from homes and condos to hotels and restaurants, said Lee County Property Appraiser Matt Caldwell.
“That’s a huge chunk of it,” he said.

While values are up sharply from last year, they’re still down by more than $1 billion from where they were before Ian hit in September 2022. “There are still properties that are extensively damaged,” Caldwell said. One of the biggest new contributors to values on Fort Myers Beach is the recently opened Margaritaville Resort. Planned long before Ian, the $200 million resort developed by TPI Hospitality has 254 guestrooms, with six restaurants and indoor and outdoor meeting and event space. It opened in December 2023.

The town has also seen some eyepopping sales since Ian, which have helped push up just, assessed and taxable values. The assessed value of a property takes into account any limits or caps on taxes. From there, the taxable value is determined by subtracting out any exemptions, and that’s used as the basis for the property tax bill.

Last year, Seagate Development Group acquired 10 acres of land for a record $52 million from the Myers family on Fort Myers Beach, with plans to replace the former Red Coconut RV Park and Mobile Home Park, with up to 15 stories of condo living. Because the Myers family had the property for decades, they enjoyed a longstanding tax cap on their commercial property, which vanished with the sale, driving up the assessed and taxable values, to the benefit of Fort Myers Beach, Caldwell explained.

Ian, he said, has brought a “whole new level of interest to the island,” as it redevelops. “Dozens of properties have changed hands in the last year, and they’re coming to the tax roll at 100% of their just, or market value,” he added. By next year, Caldwell predicts the town could be back to where it was before Ian from a “tax base perspective.” Total taxable value rose by more than 45% from 2023 to 2024.

 

CANADA

 

Alberta: Edmonton’s derelict subclass property tax aiding in property restoration

A new property tax subclass in Edmonton is funding property restoration in mature neighbourhoods. The subclass, approved in September 2023 by Edmonton City Council, taxes derelict properties specifically at a property tax rate about three times higher in 2024 than the average residential property.

Derelict properties are defined as properties where the structure is unfit for habitation or in a dilapidated state and falling into significant disrepair. They can avoid the higher tax rate by restoring their properties before Dec. 31, the condition date for tax assessments.

“The subclass was brought in to help cover the increased costs of providing city services like bylaw enforcement and fire rescue to derelict properties, as well as to promote community safety and vibrancy in mature neighbourhoods,” Edmonton branch manager of assessment and taxation Cate Watt said in a statement. “We’re really pleased to see progress so quickly. More than 15 per cent of the roughly 300 properties we originally identified last fall as in a derelict state have been cleaned up.”

Derelict property owners were notified of their status when the subclass was established and their updated status was listed on their 2024 assessment notice in January, the release said, and will see their new tax rate on their 2024 tax notice. Notices will be mailed to every Edmonton property owner. Property taxes are due by June 30.

 

Ontario: Downtown generates far more property tax revenue than big box stores, analysis shows

Findings come as city struggles to afford to fix deteriorating roads and other infrastructure

Despite moving away from Peterborough a few times, Andrew McMullan kept getting pulled back to the hometown he loves. “It’s like a vortex,” he said. Back in Peterborough these days, McMullan is once again a regular at the downtown corner store that was a fixture of his childhood – Jerry’s Quik Chek. “Jerry’s Quik Chek is… a staple of Peterborough. It’s been here for so many years,” said McMullan.

Humble little shops like this one – in dense, walkable neighbourhoods – deliver a surprising amount of financial value for Peterborough, according to a recent economic analysis of the city’s development patterns. The analysis, conducted by the North Carolina-based firm Urban3, looked at the property tax value of land per hectare citywide.

Jerry’s Quik Chek, on the corner of Park and Sherbrooke streets, generates $133,000 in property tax per hectare, significantly more than what the city gets from big box stores, according to the analysis. Peterborough’s two Walmart stores on average deliver only $74,000 in property taxes per hectare, while Costco brings in $47,000 per hectare.

The findings were presented at a public event the city held at the Market Hall on May 28. They show which areas of Peterborough are contributing the most in property taxes, as staff warn that the city is struggling to afford to maintain deteriorating roads and other infrastructure.

The analysis shows how Peterborough could raise more money to pay for infrastructure and other priorities if it develops more densely. “You’re actually not using a lot of your land efficiently,” said Joe Minicozzi, an urban designer and founder of Urban3, as he presented the findings at the event.

The oldest part of the city is one exception to that, according to Minicozzi. Downtown generates 13 percent of Peterborough’s property tax revenue, even though it only occupies five percent of the city’s land area.

Many of the 19th and early 20th century buildings in the core bring in $200,000 to $1 million in property tax revenue per hectare, the analysis revealed. “Your [great] grandparents had horse technology and dirt roads – and they left you these gems,” said Minicozzi, referring to some of the historic buildings that line George Street.

312 George Street, a 1915 art deco building that is currently home to Peterborough Inn and Suites, brings in $604,000 per hectare in property tax. “Go give that building a hug, it’s giving ya big value,” he said.

Historic downtown buildings have a number of features that raise their property values. Most have offices or apartments stacked above their main-floor retail space, they come with little or no on-site parking, and they were built to last for generations.

But big box stores occupy large tracts of land, much of which is taken up by parking, thereby lowering their property values and resulting in less tax money for the city.

“When you actually add more parking, you’re essentially diluting the value,” Minicozzi said. He said that while parking at big box stores may seem free, residents pay for it in the form of less tax revenue to run the city.

Like many North American cities, Peterborough has sprawled out considerably since the 1960s, but that hasn’t created more wealth for the community, according to Minicozzi.

“This land is sacred. It’s a sacred gift that’s been given to us,” he said. “Why would you waste it?” Another finding is that apartment buildings provide vastly more property tax revenue than single family homes.

Single family homes generate less than $60,000 in property taxes per hectare on average, whereas apartment buildings bring in $179,000 per hectare on average, Minicozzi said. The event came a few days before the city released an update to its asset management plan, which shows that Peterborough faces an approximately $135 million annual infrastructure deficit. The infrastructure deficit is, basically, the amount of money the city lacks each year to maintain existing roads and other infrastructure and build more to accommodate growth.

According to the report, 84 percent of Peterborough’s community housing facilities are in poor condition, 28 percent of Peterborough roads are in poor or very poor condition, and 14 percent of transit buses are past their useful life and need to be replaced.

Peterborough also has big gaps in its sidewalk network, including at many transit stops. But progress to build the 361 kilometres of missing sidewalks has been slow. Last year only one kilometre – or 0.3 percent – of missing sidewalks was installed, according to the report.

“Public infrastructure is often looked at as the backbone of our economy and quality of life,” the report states. “Unfortunately, years of under investment throughout the country has resulted in years of deferred repairs.”

“Canada is beginning to confront its ‘infrastructure deficit’ but it is not without challenges. Peterborough and most other municipalities struggle with the same infrastructure challenges.”

The state of Peterborough’s roads is “ridiculous,” according to McMullan, the Jerry’s Quik Chek shopper.

“I’ve lost at least six tires in the last two years because of the potholes that are unavoidable,” he said. “To see the money go into where it needs to go would be incredible.”

The consequences of the infrastructure shortfall can be seen in the state of downtown streets, which are getting so bad that city staff warned last year that they risk falling into an “unmanageable state of repair.”

City council agreed to spend $2.3 million this year to repave some downtown streets, including George and Water, as a temporary measure. But they will need to be torn up again when funding is available, to replace underground infrastructure that is also deteriorating, according to budget documents.

 

EUROPE

 

France: Tax authorities promise “improvements” for 2024 property tax declaration.

In 2023, France introduced a new one-off form – the property tax declaration – which many households struggled with submitting it correctly. French tax authorities on Wednesday admitted difficulties with the new system, and promised improvements for the 2024 declarations.

On Tuesday, the head of France’s tax administration, Amélie Verdier, acknowledged the “very significant difficulties” that people had to deal with when submitting the property tax declaration in 2023. “We certainly have not communicated enough about the fact that there is now this new obligation”, Verdier conceded, while presenting her annual report, as reported by Franceinfo.

While it is not an extra tax, the déclaration d’occupation is a one-off piece of paperwork that has to be filed by all people who own property in France.

It informs the fiscal authorities whether your property is a main residence or a second home, which in turn allows them to correctly apply the taxe d’habitation, which is now only charged to second homeowners.

On top of the fact that many people did not realise they needed to fill out the form, there were also technical challenges and glitches in 2023, which led to the deadline for the declaration being pushed back three times.

Tax authorities also did not offer a paper version last year and many people struggled with the tax website. For second homeowners living outside of France, this often meant having to create an online account for the first time.

Verdier also noted that only 82 percent of non-professional property owners filled out the form, as many did not realise they needed to do so.

As a result, tax authorities sent out notices based on estimations and incorrect information to the remaining 18 percent, which led to incorrect bills including for 16,500 children erroneously received tax bills.

French tax authorities also saw the number of appeals against the incorrect application of the taxe d’habitation increase from the annual average of 400,000 to 600,000 in 2023.

Foreigners especially struggled with certain linguistic aspects of the form – from listing outbuildings to properties owned via SCI and understanding who is considered the ‘occupier’. The Local created a guide to help answer these questions.

Verdier said that “fairly substantial progress has been made” this year. Tax authorities inserted a reminder about the property tax declaration within the standard income tax declaration to help make more people aware of the requirement.

In response to issues with the tax website, fiscal authorities are also offering a paper version in 2024, intended for those with difficulty accessing the internet and for the “elderly who are less digitally literate”.

This year, the fine (€150) will be applied to those who fail to meet the deadline. It is also worth noting that failing to fill out the form can lead to tax authorities sending you an estimated bill, meaning the amount you are charged may be based on incorrect information.

 

UK: Retailers call for business rates and planning reform after fall in shoppers

Visits to high streets, shopping centres and retail parks fell by 3.6% in May, continuing downward trend. Retailers have called on the government to rethink business rates and planning laws to revive high streets and shopping centres after visitor numbers fell again in May.

Shoppers at stores on high streets, shopping centres and retail parks decreased by 3.6% in May, maintaining a trend that began last summer as a mini-boom in high street visits after the pandemic lockdowns petered out. Shopping centres were the hardest hit, but all three types of retail destination were down as poor weather combined with negative consumer sentiment and the shift to working from home and online shopping to hit visitor numbers.

Helen Dickinson, the chief executive of the British Retail Consortium trade body, which represents most major retailers, said: “With an election only five weeks away, political parties have a role to play by having policies that mean retailers can invest in rejuvenating shopping destinations across the UK.

“A broken business rates system and outdated planning laws are holding back the industry – politicians of all stripes must address these issues. This will boost economic growth, lift consumer spirits, and help drive more shoppers back to our high streets and other retail destinations.”

Labour has pledged to replace business rates with a new system of business property taxation as part of a five-point plan to revive high streets, while the Conservatives have held several consultations on the matter – but failed to change the system during their time in office.

Retailers were still hopeful an improvement in the weather and events such as the Olympics and football’s European Championships would encourage shoppers to hit the high street, said Dickinson.

Diane Wehrle, an expert on town centres at Rendle Intelligence and Insights, said poor weather would have reduced visitor numbers but the drop was led by an “underlying structural shift” away from physical shops as well as households’ efforts to save money because of a surge in the cost of essentials such as food and energy bills.

“Wage inflation is now outpacing price inflation but there’s a lag as time is required for consumers to react. They have had a year of struggling and probably using their savings.”

She added that the shift to working from home had enlivened some smaller towns but led to quieter streets in big cities, particularly on Mondays and Fridays. On the positive side, fewer shoppers did not necessarily mean less money spent in shops as people were doing less browsing and those who visited town centre were more inclined to spend.

 

 

Compliments of the International Property Tax Institute – A member of EACCNY