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HomeMy WebLinkAboutAgenda - 04-07-2015 - 4e1 ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: April 7, 2015 Action Agenda Item No. 4 -e SUBJECT: Update Report: 2017 Countywide Revaluation of Real Property DEPARTMENT: Tax Administration PUBLIC HEARING: (Y /N) No ATTACHMENT(S): 1) March 19, 2015 Memo from Tax Administrator - 2017 Property Tax Revaluation 2) RES- 2012 -048 Resolution Regarding the Next General Reappraisal (May 15, 2012) 3) RES- 2013 -041 Information and Resolution Regarding the Next Revaluation (May 7, 2013) INFORMATION CONTACT: Dwane Brinson, Tax Administrator, (919) 245 -2726 PURPOSE: To discuss the project plan, current market trends and statistics, current economic indicators, and potential impacts as they relate to the 2017 countywide revaluation. BACKGROUND: The Orange County Tax Administrator's Office conducted property tax revaluations in 2005 and 2009. Current tax assessments still reflect market value as of January 1, 2009. With a four -year revaluation cycle, the next revaluation would have occurred in 2013. However, at its May 15, 2012 regular meeting, the Board of County Commissioners (BOCC) received a presentation from the Tax Administrator recommending postponing the 2013 revaluation to 2015. The BOCC subsequently approved a resolution (Attachment 2) to accept this recommendation and delay the revaluation to 2015. Similarly, at its May 7, 2013 regular meeting, the BOCC received a presentation from the Tax Administrator recommending further postponing the next countywide revaluation until 2017. The BOCC approved a resolution to delay the revaluation to 2017 (Attachment 3). FINANCIAL IMPACT: None RECOMMENDATION(S): The Manager recommends that the Board receive the report on Orange County's 2017 countywide revaluation of real property. Attachment 1 ORANGE COUNTY TAX ADMINISTRATION 228 S CHURTON STREET, SUITE 200, PO BOX 8181 HILLSBOROUGH, NORTH CAROLINA 27278 Telephone (919) 245 -2725 Fax (919) 644 -3332 T. Dwane Brinson, Director Memorandum To: Orange County Board of Commissioners Cc: Bonnie Hammersley, County Manager From: Dwane Brinson, Tax Administrator Date: March 19, 2015 Re: 2017 Property Tax Revaluation Update North Carolina state law, G.S. 105- 286(a), mandates that counties conduct a countywide revaluation at least once every eight years. Orange County last conducted a countywide revaluation effective for January 1, 2009 and current tax assessments reflect market value as of that appraisal date. Therefore, Orange County is required to complete its next revaluation no later than January 1, 2017. This memorandum is an effort to explain current market conditions and provide an update of the 2017 countywide revaluation. Current Market Conditions It is evident that the economy is improving. Sales volume is increasing, sales prices are rising and properties are selling faster. As part of this report an analysis of Orange County qualified sales is provided. Real property tax assessments in Orange County currently reflect market value as of January 1, 2009, the County's last revaluation appraisal date. Figures, ratios and statistics provided in this report compare the County's current tax assessment based on January 1, 2009 market value against recent qualified market sales. This is performed annually to determine the impact of a countywide revaluation, in part. Elaboration on recent qualified market sales and the statistical measuring tools is provided below. K Sales Analysis The predominant method of measuring mass appraisal effectiveness is through the median sales ratio. This is computed by dividing the assessed value by the sales price. A sales ratio of greater than 1 indicates that the tax assessment is higher than the property's recent sales price and vice versa. One simple way to describe this measure is that the sales ratio shows what percentage of market value is represented by current tax assessment. For example, a median sales ratio of 1.05 indicates that tax assessments in that category represent 105% of current market sales. However, this ratio is only a measure of central tendency. Ratios higher and lower than the median exist, too. Coefficient of Dispersion (COD) shows the data spread. A lower COD is better, and one less than 15 is a post - revaluation goal. The lower the COD, the more tightly- compacted the sales are around the median sales ratio. Based on the 2014 qualified market sales analyzed, it appears Orange County tax assessments are still within an acceptable range. The median sales ratio is gradually falling, indicating market values and tax assessments are getting closer and closer. The COD is acceptable considering the sales analyzed are six years removed from the last revaluation. Median Sales Ratio —1.007 (down from 1.04 since the Tax Administrator's 2013 report) Coefficient of Dispersion —19.80 Revaluation Process Field reviews for the 2017 revaluation began in April 2014 and have continued to date. Tax office appraisers are visiting residences and talking to residents when possible. During the visit, even if no one is home, the appraisers are leaving postcards at the residences as a means of collaboration between the tax office and residents. We want records to be accurate and the 2017 revaluation value to be indicative of market value. A tentative timeline is provided below: • April 2014 — January 2016: Field visits to verify property records • January: Mail summary description of property with annual listing forms • January 2016 — April 2016: Field reviews of sales used in models • February 2016 — May 2016: Review grade, depreciation, etc. field reviews • April 2016 — July 2016: Development of new rates for SOV and testing • Jules: Finalize SOV • July /August 2016: Public Hearing on SOV • September /October 2016: Adoption of SOV • December 2016: Final, holistic review • January 2017: Send out value change notices • January 2017 — March 2017: Informal appeals • April 2017 — June 2017: Board of Equalization and Review hearings M Collaboration with Community A local government project that directly affects each resident as much as a countywide revaluation should have built -in education and collaboration efforts. The tax office realizes that completing this project accurately and successfully requires assistance from the public. Moreover, collaboration is the cornerstone of Orange County Government, and the tax office embraces that approach as well. We feel it is not enough for the public to hear about the 2017 revaluation only at the very end of the process through a notice of new value in early 2017. Therefore, at a minimum, we are taking the following measures to collaborate with the public: 1. Presentations to Chambers of Commerce, Friends of Downtown Chapel Hill, BOCC, etc. 2. Press releases through Orange County Public Affairs 3. Sales bank posted on tax office website 4. Summary descriptions mailed with 2016 tax listing forms 5. Revaluation education YouTube videos 6. Frequently asked questions brochure Revaluation Goals With any large project goals are established. As part of contingency planning, those goals must be prioritized as part of a larger strategic plan. The tax office has an opportunity to accomplish many goals with the 2017 revaluation, and a list of primary goals is provided below: 1. Update 2009 real property tax assessments to reflect market value as of January 1, 2017 a. Ensure accuracy of records through field visits, questionnaires, etc. b. Build community support through collaboration and education 2. Capture building use data, i.e. commercial, residential, industrial and their subcategories a. Will allow tax office to better assist Economic Development and Chambers of Commerce with studies and analyses 3. Review exempt properties in Orange County a. Currently approximately $713 of exempt property in Orange County b. Important for Asset Management Services, Risk Management and the State's annually- required AV -50 report To ensure the accuracy of tax records, a full list and measure revaluation should be undertaken every third to fourth revaluation, depending on the frequency of the county's revaluation cycle. With the advancement of technology, a full list and measure process will become more strategic. Appraisers will continue to have boots on the ground, but tools are becoming available to greatly improve accuracy and efficiency of the property taxation process. One such tool, for example, is through Pictometry. This company offers Sketch Check, a program that integrates recent aerial photos with a county's Geographic Information System (GIS) and county tax records to identify anomalies. While the tax office is not using this tool for the 2017 revaluation, it and similar technology will be considered for future revaluations and field work. 5 Pi tom try Sketch Check TM Verify Your Sketch Data Quickly and Cost Effectively with Plcrorrretry2� Sketch Check Validating sketches is essential to producing fair and equitable valuations_ yet the sheer volume of sketches can make sketch verifications a daunting and time - consuming task_ There:s a solutioi7_ Pictometry Sketch Check takes your CAMA -based sketches and creates geo- referenced shape files that are compared vilth high- resolrition orthogonal imagery_ Any discrepancies between the images and the sketch are not only flagged but also categorized by degree of inconsistency The result is a prioritization of the parcels that need attention, enabling YOU to achieve in months what might have taken you years_ Pictometry Sketch Check enables you to quickly and efficiently analyze your sketches_ ensure fair and equitable property valuations, and share valuation GIS data with multiple departments including E9 -1 -1_ zoning and planning_ Features & Benefits: • Remotely determine the accuracy of sketches in your G.AMA system data • Dramatically reduce field visits, labor and fleet maintenance expenses • Boost tax base by adding missed property changes • Prioritize parcel review with our categorized scoring table • Reuse GIS shape files for E911, zoning & planning Correcting Records Should egregious record inaccuracies be discovered during the process leading up to the county's 2017 revaluation, those changes would take effect in the corresponding year. All records for the revaluation will be keyed into the system with an effective date of January 1, 2017. Any resulting change in tax assessment would take place with the revaluation date and the tax bill to be mailed in July /August 2017. The North Carolina General Statutes (NCGS), specifically 105 -381, allow a refund of taxes for only three instances: 1. A tax imposed through clerical errors; 2. An illegal tax; 3. A tax levied for an illegal purpose. Much debate centers on taxpayers that may have been taxed for an area or square footage that did not exist. For example, a taxpayer may have been taxed for a finished bonus room that actually was unfinished or for a finished basement that actually was unfinished. Chris McLaughlin at the UNC School of Government opines that such situations are not legally refundable. In his opinion, these are deemed appraisal judgments and fit neither of the three refund options. Should a taxpayer be taxed on a house or structure, however, that did not exist, that would be refundable under an illegal tax. The line appears to be that a refund may be issued when a taxpayer is taxed on a structure that does not exist, but when the quality, individual features or property characteristics are inaccurate, Mr. McLaughlin holds that the taxpayer has the opportunity to appeal these each year during the appeals process. The NC Department of Revenue takes a position that the statute is unclear regarding these instances. One reason it may be impractical to refund for such occurrences is that an appraisal is one's opinion of value. Different appraisers can form different opinions of value, albeit supported by market data, and different appraisers may even measure square footage to be slightly different. Because of this, the NC Real Estate Commission considers any differences less than 5% immaterial. Similarly, the International Association of Assessing Officers (IAAO) recommends the following standards of accuracy for data collection: • Continuous or area measurement data, such as living area and exterior wall height, should be accurate within one foot (rounded to the nearest foot) of the true dimensions or within 5% of the area. If areas, dimensions, or volumes must be estimated, the property records should note where quantities are estimated. • For each objective, categorical or binary data field to be collected or verified, at least 95% of the coded entries should be accurate. 7 • For each subjective categorical data field collected or verified, data should be coded correctly at least 90% of the time. Subjective categorical data characteristics include data items such as quality grade, physical condition, and architectural style. It seems that both the NC Real Estate Commission and IAAO adhere to similar standards. Both recognize the imperfections that may occur when measuring a property, judging its quality of construction, or forming an opinion of value. In local government, the General Assembly has placed significant burden on the taxpayer to appeal any inaccuracies or valuation concerns each year during the appeals process. This process allows a local government's tax base to be finalized without jeopardizing budgeted revenue and fiscal standing. Conclusion Market statistics show Orange County real estate markets to be improving. While we notice manifestations of properties selling for more or less than tax assessment, those will occur in any market in any year. The majority of current qualified market sales hover around current tax assessments. Furthermore, the economy is improving with more market activity, shorter selling times and higher selling prices. Should Orange County move forward with a 2015 revaluation, it likely will occur at a time when tax assessments and market values are in unison already. The sales ratio has been gradually declining in recent years indicating that market values are rising. Resolution — 2012 -048 Attachment 2 8 ORANGE COUNTY BOARD OF COMMISSIONERS Resolution Establishing the Year of the Next General Reappraisal Whereas, Orange County conducted its most recent General Appraisal of Real Property effective January 1, 2009; and Whereas, the Orange County Board of Commissioners advanced its scheduled General Reappraisal of Real Property to January 1, 2013, pursuant to North Carolina General Statute (NCGS) 105 -286 (a) (3); and Whereas, after careful consideration, the Orange County desires to modify this schedule to postpone the effective date of the next General Reappraisal to January 1, 2015, as permitted by NCGS 105 -286 (a) (3); and Whereas, the Orange County Board of Commissioners also desires that the Orange County Tax Administrator make an annual report to the Board regarding conditions in the market for real property; Now, Therefore, Be It Resolved, that the Orange County Board of Commissioners does hereby postpone the effective date of the next General Reappraisal to January 1, 2015; Be It Further Resolved, that the Orange County Tax Administrator shall each year make at least one report to the Board of County Commissioners regarding conditions in the market for real property; and Be It Further Resolved, that the Clerk to the Board shall forward a copy of this resolution to the North Carolina Department of Revenue as required under NCGS 105 -286. Adopted, this 1 day of May, 2012. Bernadette Pelissier, Chair Orange County Board of Commissioners Attest: E Clerk to the Board RES- 2013 -041 Attachment 3 Orange County Board of Commissioners A Resolution Establishing the Year of the Next General Reappraisal WHEREAS, Orange County conducted its most recent General Appraisal of Real Property effective January 1, 2009; and WHEREAS, the Orange County Board of Commissioners advanced its scheduled General Reappraisal of Real Property to January 1, 2013, pursuant to North Carolina General Statute (NCGS) 105- 286(a)(3); and WHEREAS, after careful consideration, on May 15, 1012, the Orange County Board of Commissioners modified this schedule and postponed the effective date of the next General Reappraisal of Real Property to January 1, 2015, pursuant to North Carolina General Statute (NCGS) 105- 286(a)(3); and WHEREAS, after careful consideration, the Orange County Board of Commissioners again desires to modify this schedule to postpone the effective date of the next General Reappraisal to January 1, 2017, as permitted by NCGS 105- 286(a)(3); and WHEREAS, the Orange County Board of Commissioners also desires that the Orange County Tax Administrator continue to make an annual report to the Board regarding conditions in the market for real property; WHEREAS, the Orange County Board of Commissioners desires to return to its adopted four -year revaluation cycle after the 2017 revaluation; Now, Therefore, Be It Resolved, that the Orange County Board of Commissioners does hereby postpose the effective date of the next general reappraisal to January 1, 2017; Be It Further Resolved, that the Orange County Tax Administrator shall continue each year make at least one report to the Board of County Commissioners regarding conditions in the market for real property; and Be It Further Resolved, that the Clerk to the Board shall forward a copy of this resolution to the North Carolina Department of Revenue as required under NCGS 105 -286. Adopted, this 7th day of May, 2013. Barry Jacobs, C *aro Orange Count ' sioners