Continuously serving Kosciusko County since 1854
Editor's Note: The following information concerning reassessment was provided to county assessors by Bill Waltz, a commissioner on the Indiana Board of Tax Review.
Kosciusko County Assessor Laurie Renier requested publication of the material in an effort to explain the increase in assessed valuation.
Indiana property owners will receive notice of the new assessed value assigned to their property by the township assessor.
Taxpayers finally will learn just how the much-discussed general reassessment will affect their pocketbooks. The ultimate tax bill is arrived at as a result of a somewhat complicated set of factors.
Each individual property pays a percentage share of the overall tax burden, the amount of money needed to pay for the local government services funded with property taxes. The share is affected by reassessment.
An increase in a property's assessed value does not automatically translate to higher taxes. If every property's assessed value increased exactly the same percentage, the distribution of the overall burden would not change regardless of how much the assessed value is increased.
In this scenario, property taxes would rise only in direct proportion to increases in local government spending.
The problem in a general reassessment is that not everyone's assessed value goes up by exactly the same percentage. Properties whose assessed value is increased by a smaller percentage than others end up paying a smaller percent share of the total property tax obligation for the particular taxing district.
The percentage shares are essentially recalculated based on the new assessed values, and all properties take on a different percentage share than before the reassessment. The end effect depends on how much a property's assessed value rose in relation to all the other property in the same taxing district.
These resultant percentage changes redistribute the burden, causing segments of the overall tax burden to shift from groups of taxpayers whose percentage share decreased to those taxpayers whose percentage share increased.
Anticipation of these shifts and on where or to what extent they will occur, has dominated much of the discussion related to the impending reassessment.
Taxpayers will have 45 days from when they are notified of their assessed value to decide if they believe it is incorrect and want to file an assessment appeal. It is important to remember that it is the assessed value that is at issue in an appeal - not the propriety of an increase that is the consequence of a shift, not the tax rate that is applied to the assessed value to determine the tax and not the amount of the tax itself.
Shifts occur because of relative changes between many properties. Rates, and ultimate tax liabilities, are the result of the governmental units' budgets and the associated mathematical computations.
Taxpayers should ask themselves, "If I were in the market to sell my property, would I be willing to sell the property for the assessed value arrived at by the assessor?"
If the answer is "no," then the assessed value is lower than the market value as they perceive it. An appeal in this instance is likely to fail.
If the answer is "maybe," then the assessed value is probably pretty close to market and likely pretty accurate. But, again, a successful appeal is doubtful.
However, if the answer is "yes," then the taxpayer probably ought to appeal because that means it is assessed over the market value as they perceive it. If market evidence is presented supporting the taxpayer's reaction, they have a good chance of winning the appeal.
Some folks may not realize how valuable their property is if it has appreciated over the years and they have lost touch with the market. That should be considered.
Does this mean Indiana has a market value-based assessment system?
For the vast majority of properties, the answer is yes. Indiana has adopted a market value-in-use system. This means the assessed valuation process must take into consideration the market value of the actual use of the property, as opposed to its potential "highest and best" use. This distinction has application in only a couple of different circumstances.
First, when land with high development potential is instead used for farming, it will be assessed based on its actual agricultural use instead of its higher valued development potential.
The only other time that value-in-use can come into play is when dealing with a special-purpose industrial facility. These types of properties are not frequently exchanged on the open market very often due to the fact they are made to accommodate the special and particular uses of the owners. The unique characteristics of properties give them unique value to the owner while at the same time making them less desirable to interested buyers who would have to significantly change the property to use it.
Except in the two specific circumstances above, the value-in-use concept will not have application. Commonly recognized and applied approaches to determining fair market value will provide the means for evaluating the correctness of an assessment.
Typically, residential property is used as a home, commercial property is used to its highest income-producing capability and industrial property is used for its best-suited industrial purpose.
The assessment of the vast majority of properties can and will be judged on market appraisal principles.
This means comparing them to evidence of the sales prices of similar or comparable properties for residential and common types of commercial or industrial properties; an income-producing analysis for many commercial investment type properties; and a replacement construction cost less appropriate depreciation for properties where comparable sales and income production data is not available.
The generally recognized market-based approaches for determining value will be applied under the new system spawned by a mandate from the much-publicized tax court and Supreme Court decisions in the town of St. John case, that found the old assessment system unconstitutional.
Indiana now is entering a new era free of the indiscernible standards - almost meaningless numbers, illogic and mystery of the old system that primarily nobody but assessors understood.
Taxpayers, for the first time in decades, have a hope of looking at the numbers that appear on their tax assessments and being able to make an evaluation of whether their assessment is close to what it ought to be.
