Property Tax

A Coldwell Banker reality sign is seen in front of a home for sale Wednesday on East 4th Avenue. Home sales factor into the Kittitas County Asssessor’s Office annual property valuations.

As homeowners in Kittitas County receive their notice in value from the County Assessor’s office this year, they may get weak in the knees at the increase in their home and property values. County Assessor Mike Hougardy wants people to know that any increases people see can be broken down quite simply.

“This isn’t a dramatic rise in taxes,” he said. “This is a dramatic rise in value.”

HOW THE BREAKDOWN WORKS

Hougardy said tax value is a piece of the puzzle in figuring out what everyone’s going to pay in taxes, but it’s more of a tool to determine levy rates within the county. He continued by pointing out that a dramatic increase in value doesn’t necessarily represent an equal percentage increase in taxes.

“That’s just one of those things that people don’t know about,” he said.

Hougardy acknowledged that taxes do go up each year, regardless of the percentage of value gain in a home, and that there are constitutional limits to them. Taxes that homeowners pay are determined by the individual tax districts, with each one having its own set of voter-approved levy lid lifts. For example, the recently approved levy lift for Fire District 2 will only affect homeowners that live within that district. Hougardy said in past years, as home values would rise or lower, the levy rate would change correspondingly.

Take the fire district levies for example. Hougardy said the statutory max for fire district levies is $1.50 per $1,000 in assessed value. If home values increase dramatically, then the $1.50 number would traditionally decrease. In the case of Fire District 2, Hougardy said the premise of the levy lift was so the district could maintain the $1.50 amount for a period of years despite the home value increase.

“The levy process is described as very simple in theory,” he said. “It really is pretty easy. You have the budgets of all the taxing districts and the value in that taxing district. You just divide one by the other and it tells you how much each person is going to pay based on their value.”

As a result of Initiative 747, which was passed in 2001, tax districts are only able to raise the base property tax rate by 1% per year. Hougardy said levies are not included in that percentage. Overall, he said there is another 1% limit mandated in the Washington State Constitution where homeowners cannot be taxed more than 1% of their real property value, another check Hougardy said his office performs.

“When we calculate the levies, we have a series of checks we have to go through to make sure none of them break the constitutional limits to those,” he said. “A 1% limit is basically $10 per $1,000 of value, which doesn’t include voter-approved levies or excess levies. The highest tax rate in Kittitas County is Ellensburg, and this past year they’re right at about $12 per $1,000 in value, which is over that 1%, but half of that is school (levies) which doesn’t count toward that 1%.”

Hougardy said the levy lid lifts are important within the county because schools and fire districts are having a hard time keeping up with meeting the demand of all the new residents arriving in the county each year. Due to the 1% cap on the base tax rate, the budgets just don’t balance out on their own under the strain.

“With county growth, with population growth, that 1% doesn’t keep up with the growth of the budgets and the services that go with it,” he said.

Hougardy pointed out that values don’t generate tax revenue for the individual taxing districts. For example, an area like Suncadia that has some of the most expensive real estate within the county doesn’t have tax levies like the one recently voted for Fire District 2, or the school levies that exist in Ellensburg. Despite this, Hougardy said the higher taxes paid by homeowners within Suncadia help balance out the amounts paid by homeowners in surrounding communities within their tax district.

“The high values at Suncadia kind of helps the other places up there in terms of their levy rates,” he said. “Just their overall taxing districts they are in have lower budgets than Ellensburg.”

THE PROCESS OF ASSESSMENT

Hougardy said the assessor’s office works on what’s called a six-year physical evaluation cycle. Basically, this means that each one of the approximately 34,000 taxable parcels within the county will be physically assessed once every six years. To do this the office breaks up the county into six separate areas, and they are rotated through with one area being assessed each year within the cycle. A team of six appraisers visits approximately 1,000 parcels each year.

“That’s your opportunity to physically inspect the property,” he said. “Observe any changes to it, note any condition issues, if there’s been any new buildings added, that kind of stuff.”

The cycle begins in October and tends to last until spring, after which notices of value are sent out. Hougardy said the office also checks on new building permits issued within the county yearly, adding them to the record. According to Washington Department of Revenue rules, Hougardy said the county must add all new construction to the tax roster, even if there’s just a foundation.

“We have to put that on the record,” he said. “We visit that every year until it’s complete usually.”

For the five areas within the county that aren’t getting physically inspected each year, Hougardy said the office performs a market analysis to change the values within those areas if necessary. Agricultural land is assessed in the same way as residential, having a valuation based on what it would likely sell for on the market. Hougardy said land is assessed by a term called highest and best use. He said much of the agricultural land is signed up for a state-run program that gives it a different assessed value, since the land isn’t being developed.

“They have to be in the program for that,” he said. “Not all ag land is in that. Most of the farmers are in that program, so they’re paying a lower tax based on their assessed value. When they come out of the program, they must pay 10 years of back tax. If they sell that (land), whoever buys it will have to continue in that program and meet the qualifications for the program or somebody will have to pay that back tax.”

On the residential side, Hougardy said valuations are based on property sales in the area. He said the requirement is to value the property at 100% of market value. The office has data on every home within the county, and a nationally recognized cost model is applied using the data, which also factors in depreciation in some properties.

“We take that cost and we have to look at all of the sales in a given area and how they are functioning versus our assessed value,” he said. “We come up with a market factor.”

THE APPEALS PROCESS

Hougardy said approximately 100 appeals are filed each year, representing approximately .29% of the taxable parcels. In order to appeal, he said it must be filed within 30 days of the release of notice of value. The appeals process is handled by the Board of Equalization, a board that is independent from the county. Hougardy said people sometimes get confused as to what the appeals process applies to.

“They cannot appeal their tax,” he said. “They can appeal their value. They need to prove that we don’t have them at market value. A lot of people want to appeal their increase in value, but really it’s are we higher than market value is what people need to focus on.”

One issue Hougardy said property owners take up with the office is that they sometimes don’t understand that the office doesn’t perform property value assessments based on direct comps in the way that their home would be appraised for a real estate transaction or bank loan.

“They are going to look at two homes that are as close as they can find to your house, and then determine a price based on those two sales,” he said. “It’s not our mandate at all to do it like that. We do mass appraisal, which means we’re taking 60 sales and applying it to a market. Taxpayers couldn’t afford to have us do individual house fee appraisals. It’s just an impossible task.”

To help their case, Hougardy said people who want to appeal should support their evidence with sales records that show that their house was assessed above market value. Although it is time consuming for the office, he said he encourages people to appeal if they believe they see inconsistencies, remembering that the appeal is targeted at specific factors.

“I’m a taxpayer, too,” he said. “My house went up tons this year, but it’s not that increase. It’s are we above market value, that’s what people need to look at.”

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