patrick.net

you can read http://www.dailyherald.com/article/20101112/news/711139876/ and http://blogs.dailyherald.com/node/2855 for some more info on what's going on around here right now

Your fears are well founded. Taxes have nowhere to go but up, and that will continue the housing crash. It's a cascading effect...lower home values mean lower tax revenues, so local municipalities have to raise taxes on homeowners, which lowers home values...and round and round we go. I grew up in Westchester County, in NY. Highest property taxes in the nation.

http://www.thepivotpoint.org

In Alameda, CA we are seeing new parcel taxes for schools, as the state funding is inadequate. I am interested to see what this does to the price of homes here. I would guess that a parcel tax is not something that people would consider first during bidding, though having worse schools could actually matter.

Well value fell so far in south Florida and the cities were so over Fleeted Meeter maid squads and Parks department personnel, that it crushed them when they lost the tax base along with falling home values. So they increased the Milage rate.
It brought back up from where it would be if they didn't. But it's still no where the 5K people were paying on similar properties in the height of the bubble.

It's the same in Tennessee and our Federal government is adding fuel to the fire. My county is rushing to take advantage of Build America Bonds to build 4 new schools. It will increase the county debt to 265% of the current level. These commitments run almost 30 years. Property taxes have increased 30% in the last 4 years and are projected to be 170% of the 2006 level within the next 3 to 5 years. The county will need to collect revenue to cover all of it's expenses each year. Lower house prices, more foreclosures or a shrinking number of residents will all drive up taxes. I think that bdelaney is right in the above post. It can become a lop that feeds on itself, higher taxes = more defaults = higher taxes...
As state governments get into trouble there is the threat that they will stop funding some local functions tipping the scale faster. Our state for example funds 75% of teacher salaries.
If that gets cut we could expect another 20% increase at the local level.
The answer is yes, it will push some people over the edge.

In Minnesota property taxes are dependent on spending by local units of gov't. As housing
prices decline spending adjusts but ultimately, we still have to fund our schools police and a
myriad of other "services". I know that no two states are exactly the same in their approach to funding local services but regardless, declining house values mean smaller tax bases and
harder choices for elected officials. It's unfortunate but we have all made our own problems
in this regard and there are no easy or painless answers to the problem.

One needs a degree in all things finance and economics to figure out Cook Cook County, IL Taxes. The assessor establishes a market value of the property in question. (Recent selling price of that property has no bearing on the market value) The county establishes a 'multiplier' applied to 10% of the market value of the house. Each municipality within the county, puts in their funding request and a specific tax rate is then applied to meet the municipality's request. It is so convoluted that no one can really pinpoint how the bill is calculated. And, when everyone starts to complain, the fingers all point to other guilty parties in the tax pipeline. What's really got everyone up in arms is the fact that the assessor delayed sending out the second installment of the tax bill until after the election. I agree with mike sutherland...there are no easy or painless answers to the problem.

Here in Fairfield County, CT, taxes are basically disconnected from home prices. The town assesses the house based on some formula (e.g. number of bedroom, acreage, SF, etc.) and then sets the mil rate based on the annual budget. So when they re-assess every five years, you may see a big jump in home valuations but a corresponding decrease in the mil rate. The one thing that does get affected is the property tax on your vehicle since that's based on the KBB value. So a high mil rate means you pay a lot more tax on your car.

I am looking to buy a house and I'm very aware of the tax burden. I've seen some pretty good deals but have passed because the house is dirt cheap but the taxes are horrendous so the monthly vig is beyond what I'm willing to pay.

I-man says

Here in Fairfield County, CT, taxes are basically disconnected from home prices. The town assesses the house based on some formula (e.g. number of bedroom, acreage, SF, etc.) and then sets the mil rate based on the annual budget. [...]

I am looking to buy a house and I’m very aware of the tax burden. I’ve seen some pretty good deals but have passed because the house is dirt cheap but the taxes are horrendous so the monthly vig is beyond what I’m willing to pay.

We're looking for a house in Fairfield County, Conn., too. We are facing the paradox that, while they have higher values, wealthier towns such as Greenwich and Westport have lower taxes, more services and, in some cases, better schools than the inland, more laid back, beautiful and less fancy part of the county (two or three towns inland from the Long Island Sound such as Redding, Ridgefield, Easton, Weston). Some of those inland towns tend to be high on the BS meter for school quality -- homeowners all talk up their schools. It reeks of desperation IMHO. I think some of those towns, which voted down development over the years, which would have attracted a business tax base, may be fearing for the future with state budget in the red.

I-Man, I'm with you on that last part. The tax burden has steered us away from several homes as well. Logic tells me that it has to be steering others away as well. I know that several of the communities we are considering have made reqeusts for new schools and other special funding. That means an increase is coming next year as well. This tax burden is compounded by the fact that we just re-elected a Governor who believes that his election was a Mandate to increase the IL income tax. http://articles.chicagotribune.com/2010-11-06/news/ct-met-quinn-tax-increase-20101106_1_tax-hike-income-tax-pat-quinn

The tax burden will continue to choke us all.

Looks to me like you need to appeal. Based on the article in the Daily Herald, that's why your taxes are going up. Everyone else appealed and got their valuations lowered pushing the burden onto those people that didn't appeal...

I'm in a Kansas 'burb of KCMO. My property tax bill has been flat for three years but my property's value has fallen by 30%, partly because it followed the pattern of the nationwide real estate crisis and partly due to a foreclosed house in terrible shape next door (and the one up from it, the owner still owns it but it's empty) and four houses behind me, foreclosed and empty. This coming spring when the next year tax info is sent for review, I fully intend to protest the tax and take it as far as it goes up the "leg" of the state.

In the Panhandle of Florida, Franklin County, property values have fallen to about the 2003 values. To counter this revenue decrease, the county government has increased the millage rates to avoid reducing county payrolls.

During the county commissioner's public hearings, they listened to property owner's pleas about not increasing taxes to cover a bloated budget and commissioners came up with a solution to furlough all 175 employees for twelve days across the board. At the following public hearing, county employees overwhelmed the commissioners and they voted to not furlough and instead raise the millage rates to cover the shortfall.

Franklin County School Board raised the millage rate also rather than take on the teacher's union and reduce payrolls.

Next year's budgets will need to be cut, but I am sure we will see a repeat of this year’s solution, and millage rates will be increased to cover the falling property tax base.

One county employee actually told property owners at the public school board budget hearing, "If you don't like your taxes, sell your home and leave the county!" Those property owners present could not believe the audacity of this government employee.

tatupu70 says

Looks to me like you need to appeal. Based on the article in the Daily Herald, that’s why your taxes are going up. Everyone else appealed and got their valuations lowered pushing the burden onto those people that didn’t appeal…

I would agree, but if you look at the second article, you will see that Cook County sent out the tax bill 4 weeks after the appeal process closed. Additionally, all of the properties we looked at appealed in either '07 or '08. Every one of them were rejected stating that the assessed value is within the norm for the neighborhood. A number of successful appeals were noted on commercial properties however. Makes one wonder how many of those business who had reductions on appeal were politically connected to the treasurer or assessor's offices.

isaaclang says

One county employee actually told property owners at the public school board budget hearing, “If you don’t like your taxes, sell your home and leave the county!” Those property owners present could not believe the audacity of this government employee.

and therein lies the rub. The governing/taxing bodies are so disconnected from reality that they can't even comprehend the fact that 20% are underwater and home values have fallen by as much as 40%. Just keep on spending our money. It's unbelievable

Yes there is an obvious relationship...and it only gets worse the deeper one looks.
In Pennsylvania the beneficiaries of property taxes - the teacher unions - have consistently
fought both at the ballot box and in testimony agains ANY TYPE of property tax relief. All the nonsense construction (it was suposed to be done for the "kids' sake") has been proven to be for NOTHING (McKinsey and co. did a consult on public education and found out that we have nothing to show for the truely massive amount of spending done over the last 25 years
for public education. NOTHING.

Except to raise the taxes to the point of people not being able to afford ANYTHING other than
public education.

Putting this into perspective:
In the early 60's and before, we had accountable school boards and no Federal money in education. people could afford sending kids to schools of their choice and still pay the taxes, since the taxes were manageable and cheap. To change this and give public ed the monopoly it now has, the formula had to change. the mix of money, Federal , state and local had not just to be raised, but it had to be wasted. It had to be spent on bad ideas, on worthless projects and insane programs. If enough was wasted, then people couldn't complain - thy'd have the multi-million dollar Taj Mahals called schools which didn't do any better a job as the ones they tore down.

The only remedy to this is giving people choice and by changing the way schools are financed.

If you want see the effects of a 100% property tax increase. Check out the housing prices in Portsmouth, NH. A lot of folks had their taxes go from $6k a year to $12k a year. The tax increase starts this year so it will be a good market to follow to see a drastic increase from start to finish. And by finish I mean the end result that will pretty much price out all of the local pubs and restaurants that are barely hanging on. Also, a lot of people in this town bought their houses before the bubble and they will now be forced to sell because of this increase. But who will want to move into a nice little seaside town if all the pubs and restaurants are gone? Looks like the future of Portsmouth, NH will be another bedroom community for Boston with lots McDonalds and Walmarts near by.

Lake County, IL here. We're in a house search and the more the recession drags on, the less I'm willing to spend overall and the more leery I am of high tax bills. Compounding the problem is the short sales, where Lake County appears to take an on-again, off-again approach to whether or not the ultimate sale price reflects "market value." I've seen homes that were listed for close to two years, gradually reducing in price, taking months to sell at the final short sale price-- but somehow the final price doesn't qualify as market value, even though it's OBVIOUS no one was willing to pay more. So example....a house that sells for $400k can be taxed as if it's still worth $900k. SCARY!

With no way to predict what their future tax rate will be, I think a lot of buyers are shying away from well-priced short sales. So they rot and become tear downs. I'm sure that does a lot for abutting property values.

Many listings here say "taxes have been appealed" but that offers zero reassurance until you know what the new tax rate is. And yes, whatever it is, it will be going up. The city has to fund the pensions that bombed in the market crash, the school district has to fund the schools that the state isn't paying bills on, the county has to fund it's bizarro assessment process....

With property taxes this high, there is no such thing as "owning" a house. You'll be old and gray and still owe $3000 a month. (I know seniors who are selling their lifelong paid-off homes strictly because they can't afford the taxes.) In the last 15 years, property taxes have DOUBLED here. I wonder whether the senior citizen exemption has doubled....bet not.

ehenlinux says

But who will want to move into a nice little seaside town if all the pubs and restaurants are gone?

More importantly who will want to move into a nice little seaside town if the property taxes are $12,000???

At nearly 10k per student nationally spent on education, you'd think we would be a nation of Einsteins. Nope. I nearly threw up when I went to vote in the public school cafeteria - 22 (I counted them) HUGE LCD TV's in the lunch room - what the hell is that about? It's a new school (less than 3 years old) and is nicer than most of the houses of the kids it serves - this was no small feat. Now I know why my property taxes have gone up nearly 100% in the past five years..so they can watch sponge bob and eat their government-provided meals. I wish they would stop knocking on my door with their incessant fund raising activities too - really, I'm forced to finance you already why would I voluntarily give them even more? Perhaps they should auction off some of those TVs instead.

EightBall says

I wish they would stop knocking on my door with their incessant fund raising activities too - really, I’m forced to finance you already why would I voluntarily give them even more? Perhaps they should auction off some of those TVs instead.

On our son's first day of kindergarten in one of this affluent Conn. county's best school systems (so say the homeowners in town), each child had to bring a supply of crayons, water colors, magic markers, pencils, scissors, etc. I never heard of that. This kind of crystalizes our apprehension to purchase a house in this high(er)-tax town.

If a restaurant's bathroom is dirty, what does the kitchen look like?

if only we could get HELOCs based on our assessed property value

I think our educational system strated at good note providing great education at somewhat high cost. This system has evolved into teaching low number of arrogant brats into not learning anything at extremely high cost.
There are far too many student completing high school that can not read or write. On such student our system spend upwrd or $100K during their learning year. The issue here is not the tax system but education system. Education system has become a blackhole of vested interest. It needs a major overhaul to make it more answerable.
-PBS

Except to raise the taxes to the point of people not being able to afford ANYTHING other than
public education.

Was this the government's ulterior motive from the get-go?

There are lots of large percentages flying around in this thread.

What is missing is the the exact figures of the property taxes.

I looked around the web and it looks like one has to look it up almost county by county. For example, for Santa Clara County, California, there is a long and complicated document to be found at

http://www.sccgov.org/SCC/docs%2FFinance%20Agency%20%28AGY%29%2Fattachments%2FProperty%20Tax%2FTax%20Rate%20Book%202010-2011.pdf

The basic STATE property tax rate in California is 1.00%, but then on top of that there is a small fraction of a percent in variable parcel, school, bond, what-have-you taxes.that depend on the exact location of the property within cities, counties, school districts, water districts, and the like. It gets complicated.

And apart from the tax rate side, there is the taxable valuation side and the the whole Prop 13 law that limits the increase in valuation to the paid amount + min(CPI,2%) per year.

Whew, I wish there was a way to get a better overview of this, such as maps that shows a Venn diagram of all the various overlapping districts. Instead one almost has to go address -by-address on the county tax assessors web site.

Addendum:

In Santa Clara you can look up the dollar amount by address, but the page does not show what valuations and rates were applied

http://payments.scctax.org/payment/jsp/startup.jsp

Another important aspect of property taxes:

Parcel taxes (flat amounts per parcel) are very regressive because they do not at all take into account the size or value of the property.

Likewise, Prop 13 is incredibly regressive because people who bought early generally live in areas that are now very expensive, and pay a much lower effective tax rate than the later arrivals.

Here is a sample of the formula used in Cook County. Unfortunately one never knows what multiplier and tax rate will be used until after the bill is finalized and sent out.

To calculate your property tax bill, use the following example, which is for a home with estimated market value of $100,000:

$100,000 Estimated Market Value
X .10 Assessment Level (10%)
$10,000 Proposed Assessed Valuation
X2.8439 2007 State Equalizer
$28,439 Equalized Assessed Value
- 5,500 Homeowner Exemption
$22,939 Adjusted Equalized Value
X.10 Sample Tax Rate (your tax rate could vary)
$2,293 Estimated Tax Bill in Dollars

JeffO,

thanks for the example. One thing is for certain, property valuations and property tax rates are a bit of a black magic.

shrekgrinch says

ehenlinux says

If you want see the effects of a 100% property tax increase. Check out the housing prices in Portsmouth, NH. A lot of folks had their taxes go from $6k a year to $12k a year.

That is why we have Prop 13 out here in California. And, despite the wanton socialists who post on patrick.net, Prop 13 rocks for this very reason.

Since I'm here in the Midwest, can someone tell me more about the Prop 13 thing? I assume that there is no mystery multiplier or equalizer in play? If we could make it so that even one of the variables was a fixed number, the process would be somewhat more fair, I suppose. Then again, 'fair' is not what our taxing body is really concerned with.

Let's take this practically:

I looked at a ranch of about 2300 square feet just last week. The home is in foreclosure with an asking price of $309k. http://www.realtor.com/realestateandhomes-detail/Palos-Park_Il_60464_M85818-46450 The assessor has it listed with an 'estimated market value' of $574k. http://www.cookcountyassessor.com/Property_Search/Property_Details.aspx?Pin=23272030520000

The treasurer is showing the 2009 tax bill is $8900. But that $8900 is based on the market value of $574k. There is no way an appeal will be successful next year (the appeal process is closed for this year) because the surrounding homes still have a "market value" near this number. With Prop 13, would I be limited to the $309k? If yes, then I would probably be agreeable to the other taxing mumbo jumbo Cook County, IL applies, but forcing me to use their market value and deal with all the other equalizers and such is killing me.

You'll also want to make sure the previous tax bills have been paid. That would be a nice surprise to find out after the fact, now wouldn't it? Especially with an $8900 tax bill - that isn't chump change in my neck of the woods. Of course this varies from state to state as to whether it would transfer to you as the new owner...ask a local real estate attorney - most (but not all) realtors are more concerned with the deal going through. Illinois may have owner-occupied reduced rates as well so the $8900 might not be for real. If I turned my house into a rental my taxes would go up 200% in my county. Isn't that nice?

Prop 13 is a California thing and wouldn't apply to you. People complain about it for some reason but being the slave to the assessor is just wrong.

Prop 13 is a disaster in California. When it was approved by misguided voters in 1978 it did a number of things:

1) roll back property tax rates to 1975 levels.
2) cap property tax at 1% of assessed hom value and cap local taxes on property at 1% of that 1%.
3) limit yearly growth to 2% a year.
4) property tax reassesment is only triggered when more than 50% of the property changes hands.
4a) Seniors have the option of tranfering their current tax assesment level to new property.
4b) transfers of property within the family (to children, for example) do not trigger a reassesment.
5) institute a supermajority requirement for new taxes to be instituted in the state.
6) institute a simple majority requirement to repeal taxes.

If you bought your house a number of years ago for $309, hey that's great, your taxes are limited to around $3k/year to start. The unfortunate sucker who purchased his house last year for $574 is paying around $5700/year - $2k more per year than you just because he bought at a higher price.

While long time residents have been huge beneficiaries of this law (in parts of Silicon Valley, for example, it's possible to find someone paying $1000/year living next door to someone paying $10,000/year on an almost identical property), the biggest beneficiaries have been commercial property owners. Commercial property owners typically get around the reassesment issue by breaking up ownership among several shell companies or individuals. If no individual owns more than 50% of a property no reassesment is triggered.

One horribly bad effect of prop 13 was that it started starving local governments of funding, resulting in local governments having to go to the state government more and more. This resulted in schools, among other services, getting starved for funds, which is part of the reason why California schools are no longer at the top of nation.

And because of the two thirds supermajority to pass a new tax lawmakers in the state capital could no longer effectively raise taxes when they needed to in order to deal with budget issues. While anti-tax people may think this is a good thing, one of the issues that emerged from this situation is that people/lawmakers/interest groups starting using the state initiative process as a means to go directly to CA voters to institute new programs/expenses. These new programs weren't alway adequately funded, but now they have to be funded and can't be cut during the budget process because the initiative process removes it from the control of the state legislature.

I don't think allowing for property tax increases of 100% in a year is necessarily a great thing, but prop 13 is just stupid and unfair.

omgbacon says

The unfortunate sucker who purchased his house last year for $574 is paying around $5700/year - $2k more per year than you just because he bought at a higher price

Theoretically the higher property taxes should be coming out of the purchase and should be a wash.

And yes, the commercial property protects are the main problems with Prop 13. That and its application on rental properties. Sheer stupidity.

prop 13 is just stupid and unfair

Some slick operators snuck in a lot of bad stuff with a needed tax reform. Golf claps all around.

But IMO median and below owner-occupied homes and below should enjoy insulation from tax rises over the years. Somebody like my mom in her house in Fresno isn't consuming city resources any more and shouldn't have to move out of her average place to avoid a rising tax burden.

HEY PATRICK! I LIVE IN NEIL CODELLS SCHOOL DISTRICT AND NOW PAY $20K PER YEAR PROPERTY TAXES! HOORAY CROOK COUNTY!

You Thought California State Pensions Were Out Of Control? Wait Until You See This List From Illinois »

UPDATE: Since we published this story yesterday it has been picked up by Glenn Beck, Business Insider, Patrick.net, and several other sources. As of 5 AM this morning it has been seen by 322,000 unique visitors. Keep it going!

##

Meet Neil Codell an Illinois educator with a $26 million state pension.

Just to drive the point further -- if Obama gets his way on his proposed state bailout, you will be paying a portion of Mr. Codell's pension. 'Codell, Neil C.' is 4th from the top of the list. His estimated career pension is $26,661,604. That's almost $27 million for a single administrator within just one local Illinois school system (Niles, to be exact).

* Read about his benefits package HERE

Obama has requested a $50 billion bailout, this time for states. We've covered it before, in a general sense, here, here and here. Certain states are broke for one reason -- Public Employee Pensions.

Rather than require that certain bloated, mis-managed states cut pensions, Obama is trying to sell Congress another bailout -- this one for bankrupt mini-Greece fiefdoms that are politically important to Democrats -- California, New York, Illinois and Michigan.

In Omaha area we pay a property tax of about two to 2 1/2 percent of full Market Value. So a 200K house will have $4K-$5K in property tax. Fortunately we have had a stable economy compared to other areas, but our property taxes as a PERCENTAGE of market re-sale of our houses is quite high. I believe it ranks very high compared with most areas of the country.

In Nassau County, Long Island NY taxes are ridiculous and getting worse every year, in an area that hasn't come close to seeing the bubble fully deflate.

What I find even more ridiculous is asking prices for single family houses on the market as opposed to the current 'fair market values' according to Nassau County's property tax assessment website: http://www.nassaucountyny.gov/mynassauproperty/main.jsp

Pick virtually any house for sale in this county on MLS and look at the current asking price as opposed to the fair market value the county lists for the same property. Asking prices are 10-30% higher on average than listed by the county, and the current assessment values for every single home in the county have decreased year after year since 2008.

Look back at the sales history on the county website, and look at the purchase prices as opposed to the assessment for a given year, people were basically paying in-line with the assessment. Now obviously no-one wants to let go of this 'wealth' they've accumulated over the past 10 years, and it's taking much longer than I'd hoped to see these numbers start to fall in line.

Who in their right mind would purchase a house for much more than the county is currently assessing it for is just begging for a re-assessment and tax increase. This lack of forethought is part of what enabled the bubble in the first place. Whoever is listing their house for much more than this fair market value is out of their mind.

As my wife and I look at houses in the area, we bring a copy of the county's page for each house we look at and have made offers accordingly. Perhaps if we sling enough *(#*($, eventually some of it will stick. I think you'd be foolish to pay even the current fair market value for the house for this current year, as the trend of assessed values is downward and shows no sign of stopping.

In Tucson, this year my tax bill went up over 10% and I also have a few rentals in Albuquerque and hey go up every year at least 3-5%.

Tough being a landlord... Daryl

Can't comment on Illinois but in SC (Richland county) landlords (non-resident owners) are charged 6%. That makes it not worth being a landlord for me. So, I'm planning to turn my house over to the county unless a buyer completes the sale. Buyer offer is $20,000 for 1262 sq ft. Rental income is $550 to $650/month. But its low income so you have to restore the house every few years. So, in my opinion, some break point occurs with landlords when taxes get too high. That probably knocks the market down significantly.

tenant in foreclosed house says

I-man says

Here in Fairfield County, CT, taxes are basically disconnected from home prices. The town assesses the house based on some formula (e.g. number of bedroom, acreage, SF, etc.) and then sets the mil rate based on the annual budget. […]
I am looking to buy a house and I’m very aware of the tax burden. I’ve seen some pretty good deals but have passed because the house is dirt cheap but the taxes are horrendous so the monthly vig is beyond what I’m willing to pay.

We’re looking for a house in Fairfield County, Conn., too. We are facing the paradox that, while they have higher values, wealthier towns such as Greenwich and Westport have lower taxes, more services and, in some cases, better schools than the inland, more laid back, beautiful and less fancy part of the county (two or three towns inland from the Long Island Sound such as Redding, Ridgefield, Easton, Weston). Some of those inland towns tend to be high on the BS meter for school quality — homeowners all talk up their schools. It reeks of desperation IMHO. I think some of those towns, which voted down development over the years, which would have attracted a business tax base, may be fearing for the future with state budget in the red.

I used to live in Redding pre-divorce (the ex and kids now live in the house). It's got a decent school system but the town budget is often driven by the school supporters. They'll demand the best of everything and claim that the school system keeps house prices high. Every year, there's a fight between the "nothing's too good for my kids" and the "let's be reasonable about expenditures" crowds and there are usually several budgets that get voted down before enough cuts are made.

But like you also said, I have to buy a whole bunch of school supplies for the kids that I would've thought would be covered by the school.

omgbacon says

While long time residents have been huge beneficiaries of this law (in parts of Silicon Valley, for example, it’s possible to find someone paying $1000/year living next door to someone paying $10,000/year on an almost identical property), the biggest beneficiaries have been commercial property owners. Commercial property owners typically get around the reassesment issue by breaking up ownership among several shell companies or individuals. If no individual owns more than 50% of a property no reassesment is triggered.

The homeowners who are paying $10K are the ones who overpaid during the bubble.
Its just one of the many signs of the vast mistake(s) they made.