HomeMy WebLinkAboutAgenda - 06-02-20; 12-5 - Information Item - Memorandum-2021 Property Tax Revaluation Update ORANGE COUNTY 1
NORTH CAROLINA
TAX ADMINISTRATION
Nancy T Freeman,Director nfreeman@orangecountync.gov 228 S.Churton Street,Suite zoo,Hillsborough,NC 27278 919-245-2100
Memorandum
To: Orange County Board of Commissioners
Cc: Bonnie Hammersley, County Manager
From: Nancy T. Freeman, Tax Administrator
Date: May 18, 2020
Re: 2021 Property Tax Revaluation Update
North Carolina state law, G.S. 105-286(a), requires that counties conduct a countywide revaluation of real
property at least once every eight years. Orange County last conducted a countywide revaluation effective for
January 1, 2017 and current tax assessments reflect market value as of that appraisal date. Orange County's
next revaluation date will be January 1, 2021, which reflects a four year cycle.
A revaluation is mandated by the N.C. General Statutes, but is also necessary to realign the values of real
property throughout the County to maintain equitable and uniform property values among property owners.
Market values are shaped by property sales, and our office's responsibility is to look at those sales, interpret
the market data, and estimate market values for all properties within Orange County.
We have been compiling data for the 2021 revaluation over the last eighteen months. We've compiled sales,
contacted property owners and consulted with professionals to ensure that we have a full understanding of
what is happening in the Orange County real estate market. We will continue to monitor the local trends and
make necessary adjustments through the end of 2020.
Sales Analysis
We measure mass appraisal effectiveness by calculating the median sales ratio. It is computed by dividing the
assessed value by the sales price. A sales ratio of less than 1 indicates that the tax assessment is lower than
the property's recent sales price and vice versa. The sales ratio shows what percentage of market value is
represented by current tax assessment. A median sales ratio of 0.95 indicates that tax assessments represent
95% of current market sales. This ratio is a measure of central tendency. There are ratios higher and lower
than the median, and the data spread is indicated by the Coefficient of Dispersion (COD). 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. The chart below displays sales analysis data for 2018 and 2019. The
median sales ratio has fallen over the last three years, and this indicates that sales prices have been on the rise
since the 2017 revaluation.
Orange County Government I www.orangecountync.gov 1 919.732.8181
Current Market Conditions
Our research has shown that although sales prices have been on the rise since 2017, the number of sales is
declining. Data indicates that the number of sales is continuing to slow for the first quarter of 2020 as
compared to the number of sales for the same time period in 2019. Most notable is the decrease in the month
of April, which has declined by about 50% whereas the average decline for the prior three months was about
24%. In addition, in looking at the raw data for the first quarter, we see that overall sale prices have been
higher in 2020 than 2019 with the exception of April, where there has been a noticeable decline in the sale
prices.
We believe the more significant change in data for the end of the first quarter is most likely due to the
shutdown necessitated by the Covid-19 Crisis. This crisis has had an impact on our economy and may also have
an effect on property values for the 2021 Revaluation. We must continue to monitor sales to know if the
Covid-19 Crisis will have a lasting impact on the sales market for the January 1, 2021 revaluation date. We will
look to sales data from May through the end of the year to dictate the market’s reaction to the
shutdown/restart. The effect may be seen in the number of sales decreasing more, the length of time a
property is on the market increasing, and the sales price dropping.
While the value of most properties is established by the sales approach, another method of establishing the
value of properties is by using the income approach. The shutdown due to the Covid-19 Crisis may have an
effect on properties whose values are typically established based on income, such as commercial properties.
This may lead to additional appeals as commercial properties strive to provide data that reflects the effects of
the crisis on their businesses, such as restaurants, hotels, and multi-family housing.
Revaluation Process
Field reviews for the 2021 revaluation are in process, 66% completed, and are expected to be complete by
October 2020. Although the appraisers have been working in the field, for their safety and to comply with the
restrictions put in place to flatten the curve, the appraisers have worked from their vehicles to do as much
field work as possible. As of May 11th, we have been able to provide needed personal protective equipment
2019 Median Sales Ratio – 0.889
2018 Median Sales Ratio – 0.91
2019 Qualified Sales – 217
2018 Qualified Sales – 421
2019 Coefficient of Dispersion – 9.85
2018 Coefficient of Dispersion – 12.99
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and have allowed the appraisers to begin full field visits once again. In early March we mailed Data Validation
Forms to all real property owners in Orange County. Currently we are entering data based on the information
provided by property owners, and these field visits will allow us to verify information.
In 2017 reappraisal standards were created and approved by the N.C. Department of Revenue with a goal of
being able to ensure more equitable and accurate reappraisals state-wide. As part of the new standards we
are required to create an Appraisal Manual, which includes information on appraisal and data collections
procedures. The manual has been completed.
Our Schedule of Values is almost completed and is scheduled to be finalized by September. The Public Hearing
for the Schedule of Values will be in September, and should be adopted at the October 15th meeting of the
Board of County Commissioners.
Our final review of all property values will be completed in December or January in order to accurately include
the effects of the Covid-19 Crisis. And following, the revaluation notices are scheduled to be mailed in
February 2021. Informal appeals will begin and conclude at the end of March 2021. Board of Equalization and
Review hearings will take place from April 2021 to June 2021.
Conclusion
Market statistics show Orange County’s values have been steadily rising, which is evident by our declining
sales ratio. However, we are seeing a lower number of sales than in previous years. In addition, we are just
beginning to receive sales data that reflect the impact of the Covid-19 Crisis on the values for the 2021
revaluation, and we do not yet know if they will continue, or if the economy will recover without lasting
damage. Regardless of whether the current crisis only has a temporary impact on the values, or if it results are
more permanent, we do expect this unprecedented event to increase the number of value appeals for the
2021 revaluation.
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