Why are assessed values going up?

BONNERS FERRY — While some homeowners believe that since their assessed value has doubled that their taxes also are doubling, Boundary County Deputy Assessor Olivia Drake said this is not the case.

Assessed values for property have risen in Boundary County, but the question is why — part of the answer is not reporting the sales of houses.

Drake told the Bonners Ferry Herald that the assessor’s job is to make a fair and equitable evaluation.

“By state code we’re required to assess at 100% market value,” she said.

She said that this isn’t possible to hit 100% of value, but there is some wiggle room to assess between 90 and 110%.

“If we don’t meet those, the state will walk in here and adjust our values to what they feel is correct,” she added.

All year, assessors gather sales information and adjust the values. Market value is set to Jan. 1 and the evaluations that came out in June are from January but aren’t sent out by mail until June 6.

“The value increase is extreme, even outrageous, but not a mistake,” County Assessor David Ryals said in the 2022 assessment notice. “The market madness continues and reported selling prices are much higher than last year’s values. Most residential properties will double in value this year.”

Drake said it takes a year to gather the data and crunch the numbers. It is difficult to accurately get the assessed values in Idaho due to it being voluntary to report the sales or purchase of houses. This means all the data the assessor receives is voluntary and likely incomplete.

When the assessor receives a sales verification, they check to make sure it was a true financial transaction and not a transfer to a family member at a discounted price, then data is collected and compared to the current sales.

Data from throughout the year is time adjusted to match the current market, Drake said.

The assessor sends the numbers to the state, which is then tested to ensure the assessed value is correct.

“This year we got tested and we were around 60% of market value,” Drake said.

Because they were not at 100% assessed value, the State Tax Commission increased values, which is where the jump in assessed values came from, she said.

Ryals wrote in the assessment notice that the recent increase put the assessment values in the county at 90.5%.

Drake said that even though the assessor’s office was getting sales information, the Assessor’s Office didn't apply the right time adjustment.

“The state saw the value shooting up way faster than we did,” she said. “So they said, ‘Hey, you have to bump up your values or you know, or else.’”

Drake said the assessor’s office applied a factor to bump everything up. Due to the price houses are selling for in Boundary County, residential land and residential improvements went up 60% to 80%.

When it comes to taxing district budgets, Drake said, “We have no goal to get money to satisfy the taxing districts. Our goal is just evaluation.”

Ryals similarly said in the assessment notice that, “values are not increased to get more revenues and tax districts will not collect a penny more due to this value increase. Instead, the levy rate or tax rates are adjusted down.”

How are jurisdictional budgets decided?

Bonners Ferry City Administrator Lisa Ailport told the Herald that much like Boundary County’s budget, the city’s budget is decided by looking at the costs required to maintain services and the same level of services.

Think of the city’s budget as a pie chart with all the different departments, planning, police, administration, fire, parks and another category for Economic Development Council, sluff fund and dike maintenance, Ailport said. The amounts given to these departments or services are based on what the ratepayers value.

For example, if ratepayers value the police department or see an increase in drugs and want to invest funds to that department for increased services such as more staff, then the department's budget will reflect that, but the overall base for all departments will not increase.

Rather the funds that would have gone to one department would instead go to another in order to meet the added level of services.

Every year the city can choose a 3% base rate increase, which is approximately $20,000 increase in property tax, Aliport said. The current city levy is around $719,000 and with a 3% increase would be approximately $740,000.

This is in order to maintain the same level of services. Even if there is a large city expansion the city can only increase its base 3%. This encourages a lack of growth, so strategic growth must be planned and calculated to not over tax or under tax property owners.

Ailport said the goal for the city is to keep the total base budget low and not expand cost, but have growth pay for growth. An example of this is using impact fees when subdivisions are annexed and costs of service goes up in order to accommodate.

There is another option to raising the tax base. If there are new homes or new construction, the city can only assess at 90%. So if the new construction added $10 million in assessed value, the city can only tax $9 million of it, but is still required to meet the same level of service across departments.

The tax burden is shifting from commercial to residential due to the Idaho Legislature providing tax breaks for commercial properties.

As a result, Ailport said residential property owners are picking up the tax burden, since the overall tax base is not dropping.

Assessed values are used to determine the total value of the jurisdiction an individual property owner has.

There is also a big push to not report how much housing is sold for. Drake said that if the assessor does not have the data to track trends, then even when values drop, they will not have the data in order to drop the levy rates.

In comparison to the rise in residential assessed value, commercial land didn't go up by the same amount. While values increased, sales data shows that they only increased by about 30%, Drake said.

This changed the taxing burden from commercial to residential — so homeowners pay more than those with business properties. Timber didn’t go up and agriculture went up a few percentage points.

So, how are rates decided?

Drake said once the assessed values across the county are collected, then the districts come in. Districts consist of county, fire, water, library, school and ambulance districts as well as cities. They set their budgets by looking at what it will cost to supply services for the whole year. Districts are limited in increasing their budgets to a 3% cap to continue maintaining the same level of services, even when inflation is closer to 10%.

She added it is hard when people say districts need to cut their budgets in order for taxes to be lower. When inflation is at 10% and districts can only raise their budgets by 3%, they are still hemorrhaging because they can’t even pay their people, but have to maintain the same level of service which now costs more.

The total district budget is divided by the total evaluation of the county (residential, commercial) and that equals the levy rate.

“So in a normal year, if values doubled, the levy rate would be cut in half,” Drake said.

What about exemptions?

The Homeowner Exemption is set by the state. It was raised last year by 25% from $125,000 to $150,000.

Drake said this didn’t help very much if the assessed value of a property went up 80% and the exemption went up 25%. She said a way around this could be indexing homeowners.

“So that if values went up 80%, the homeowners exemptions would go up 80%. And then they wouldn't see that huge tax shift on to them,” she said.

How did the burden shift?

Due to commercial assessment values not going up as much as residential, a lot of commercial entities in the county are going to see a huge tax cut, Drake said.

“They're gonna be paying in less than they were last year because homeowners are gonna be paying a lot more generally,” she said.

Last year, the county levy rate was .0041. If your value was assessed at $100,000 in 2021, then you would have paid $410.

The budgets are not yet set, but the estimated rate for 2022 is .0026. If your property was assessed at $100,000 last year but is now at $200,000 at the .0026 rate, you’d be paying $520.

This is an increase of $110.

This is because the budgets didn’t double, Drake said.

Drake added that in a normal year, rates and the assessment values would go up or down equally. She said for example, in a normal year if the assessment values went up twice then the levy rates would go down twice, making the landowner pay the same amount as they had the year before. This is not the case for 2022, due to the tax shift from commercial to residential.

Drake is running unopposed in November for County Assessor.