HomeMy WebLinkAboutAgenda - 10-05-2004-8aORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: October 5, 2004
Action Agenda
Item No. g-q
SUBJECT: 2005 Revaluation -Schedule of Values
DEPARTMENT: Assessor's Office PUBLIC HEARING: (YIN) Yes
ATTACHMENT(S):
2005 Revaluation Update
Map -Parcels in Use Program
INFORMA°T'ION CONTACT:
John Smith, ext 2101
TELEPHONE NUMBERS:
Hillsborough 732-8181
Chapel Hill 968-4501
Durham 688-7331
Mebane 336-227-2031
PURPOSE: To conduct a public hearing on the schedule of values for the 2005 real property
revaluation.
BACKGROUND: At its meeting on September 9, 2004, the Orange County Board of
Commissioners scheduled a public hearing for October 5, 2004 on the schedule of values for
the 2005 revaluation, The schedule of values, standards, and Hiles will be used to appraise all
real property in Orange County for the January 1, 2005 revaluation, and throughout the period
until a subsequent revaluation (scheduled for January 1, 2009) is conducted. The schedule of
values covers all components of real property that contributes to its value -- both land and
improvements to that land,
In accordance with the North Carolina General Statutes requiring that the Assessor shall submit
the proposed schedules, standards, and Hiles to the board of county commissioners not less
than 21 days before the meeting at which they will be considered by the board, the proposed
2005 schedule of values was submitted on September 9, 2004. Adoption is scheduled for the
October 19, 2004 regular meeting of the Board of Commissioners, A copy of the schedule of
values is available for review in the County Assessor's Office,
Staff have prepared the attached update, which generally outlines the process and reasons for
conducting periodic revaluations of real property, The report also points out a few important
statistics related to overall County valuation (for example, average increase in the range of 15-
25 percent since the 2001 revaluation) and the use value program (for example, about 41
percent of County acreage remains in use value, which typically reflects about 6 percent of
market value). The County Assessor will provide a brief presentation about the revaluation
process and respond to Board questions before the public hearing is formally conducted,
FINANCIAL IMPACT: There are no financial impacts associated with conducting the public
hearing,
REGOMMENDATION(S): The Manager recommends that the Board conduct the public
hearing as scheduled.
2005 REVALUATION UPDATE 3
Prepared for Orange County Board of Commissioners' Meeting
October 5, 2004
By late December 2004, the Orange County Assessor's Office will be mailing out approximately
50,000 notices of new real property values to all owners of real property in Orange County. These
notices aze part of the process involved in the revaluation of all real property that takes effect
.Ianuary 1, 2005.. These new tax values, as required by North Carolina General Statutes, are based
on 100% of market value. The schedule of values as presented to the BOCC for adoption
represents the standards by which values are estimated for the next four years. A schedule of values
is basically a guideline that sets out dollar rates and adjustments for estimating values of heated
living square feet, porch, garage areas, lazed values, etc.
For most property owners, their home is their largest investment,. Since the previous revaluation in
2001, the overall Orange County real estate market has remained strong. With the application of
the 2005 schedule of values, most homeowners should see that their investment has increased in
value an average of 15 - 25 percent in the last four years.
The revaluation process has not been completed, and analysis and fine tuning will continue for the
next several months, However, current projections indicate that residential property in northern
Orange County will for the most part have increases that fall within the typical range of 15 to 25
percent, but with most concentrations toward the lower end. Residential properties within the city
limits and close proximity of Hillsborough and Chapel Hill will likely see higher than typical value
increases. Additionally, there will be other areas within the County that see significant increases.
Revaluation not only adjusts value to the current market but also equalizes tax burden according to
value. With the consistently growing real estate market in Orange County, values increase every
year. However, since tax value remains fixed between revaluations, market values quickly surpass
tax values.. Let's say that in some areas ofthe County, the increase per year is 3 or 4 percent, In
same other azeas, though, the increase may average 8 or 10 percent per year. hi that situation, after
a yeaz or two, in addition to having tax values that are below the market, you have situations of
inequity. Now, let's say that my house was tax valued at the last revaluation for $100,000 and that
I'm paying $900 a year in taxes. My friend who lives in a different neighborhood has a house that
was also tax valued for $100,000 with annual property taxes of $900.. Suppose that over the last
few years my house has increased in value to $140,000 but my friend's house has only increased to
$115,000. We're still both paying $900 in taxes, but I'm no longer carrying an equitable tax
burden. By doing a revaluation every 4 years, Orange County is able to correct these situations of
inequity.
It should be noted that it has been Orange County's historical practice to pursue "revenue neutral"
revaluations -the BOCC adopts lower tax rates that apply in the next fiscal year after the
revaluation process produces higher overall values. Orange County has adopted a revaluation
schedule that allows for revaluation every four years instead of only every eight years (the statutory
minimum), as is the practice for most North Carolina counties. Orange County property owners
benefit from this shorter revaluation cycle through reduced "sticker shock" and more equitable tax
values.
Another aspect of the schedule of values relates to the "Land Use" program as legislated by the
State of North Carolina. In the 1970s, many farmers felt that they were being "taxed off their land".
To correct this situation, the North Carolina General Assembly created this program, which allows
certain qualifying properties to be taxed on their "use value" rather than their market value. The
Legislature created a Use Value Advisory Board and gave that Board the responsibility of
determining the use value schedules. As a matter of practice, Orange County has always adopted as
its use value schedule the average of the high and the low use value rates as determined by this
State advisory board. The 2005 schedule of values continues this long-standing practice of
employing use values determined by the State.
When the 2001 use value schedule is compared to the 2005 use value schedule recormnended by the
State advisory board, the open land (agricultural) component is increasing while the forestry and
horticultural rates are decreasing on average, Agricultural rates are going from air average 2001
rate of $119 per acre to an average of $326 per acre, Forestry rates are going from an average 2001
rate of $26.3 per acre to an average of $17.3 per acre. Horticulture rates are going from an average
2001 rate of $696 per acre to an average of $585 per acre. The reason for these trends is that the
2001-2002 General Assembly changed the basis upon which agricultural land rates are calculated.
Previously, values were based on the growing of corn and soybeans. The new approach uses a
basis of capitalized lease rates of farmland.
The result of these legislated changes is that some components of the 2005 use values will be
significantly greater than in the past. For some properties that have a combination of acreage in the
use value program and components not in the program (improvements such as homes, barns, farm
buildings, etc.), the vast majority will see higher values offset to some degree and will see overall
value increases in the 20 to 25percent range. For Orange County overall, we expect that as with
the 2001 revaluation, acreage in the use value program will be taxed, on average, at roughly 6
percent of market value.
While the Board of Commissioners will not set new tax rates until ,June 2005, we expect the actual
impact to most tax bills from revaluation itself to be minimal (because of the previously mentioned
"revenue neutral" approach to Orange County revaluations). The average change in use value-
related tax bills for 2005 owing to revaluation -and based on an assumption that current tax rates
will be reduced by 10 percent for revenue neutrality -reflects an increase of $12. Using that
assumption, approximately 99 percent of a112005 use value based tax bills are projected to change
between an increase of $200 and a decrease of $675. Approximately 95 percent of those tax bill
changes will likely fall between atr increase of about $150 and a decrease of about $100.
Revaluation is a complicated mathematical process. As has always been the case with past
quadrennial revaluations, when there are related concerns or questions, the Assessor's Off ce will
be available to provide assistance. For the convenience of Orange County citizens, the Orange
County website contains answers to the most frequently asked tax and revaluation questions. In
addition, beginning in November 2004 notifications will be mailed out inviting civic groups,
homeowners associations, realtor groups, etc. to schedule a County representative to present our
revaluation video to their organization and to be available for questions and answers afterwards.
Beginning also in November, the Assessor will meet with local i°ealtors, sitting down with them as
they review the 2005 projected value estimates. During past revaluations, we have used input fi°om
these real estate professionals to validate our statistical findings against their experience in the field,
and to fine tune our calculations before finalizing new values That sane month, we expect to
provide periodic press releases and to make available on the County's Geographic Infannation
System (GIS) website the projected value estimates for individual properties. This information will
be presented in a manner familiar to current users of the public terminals in the Orange County
Register of Deeds office.
The 2005 schedule of values is very much like past schedules. Our procedures and processes as
outlined here are basically the same as those followed in the previous four revaluations (1987,
1993, 1997, and 2001) that have been quite successful. During past revaluations, the Assessor's
staff have been pleased that a relatively small number -perhaps 2-.3 percent - of property owners
have found it necessazy to file formal appeals. This relatively small number of appeals is likely
attributable to the fact that Orange County revaluations are done "in house" with staff who actually
live in the local areas (as opposed to hiring private revaluation firms that bring in outsiders) and can
see and understand local trends. For property owners who have questions or concerns about
valuation notices they receive at the end of the year, we encourage them to contact us for an
explanation. Often, we can clear up concerns with a simple phone call, or can make an appropriate
correction to a particular property value based on additional information that the properly owner
maybe able to provide,
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