Working Toward Reassessment

When it comes right down to it, the bottom line of the Indiana property reassessment is - What is your property worth?

And secondly, how will changes to the reassessment affect you?

The manual with the guidelines for the reassessment is long, complicated and wordy. The state has attempted to explain it to local officials, who have tried to explain it to taxpayers.

Here are at least a few of the major issues involved.

Kosciusko County Assessor Laurie A. Renier said, "Reassessment is a mass appraisal of real property, the process of valuing a group of properties as of a given date using common data, standardized methods and statistical testing."

The general reassessment of all real property in Indiana is required as of March 1, 2002. The next general reassessment is statutorily required for March 1, 2006. The current assessment manual contains the rules for assessing real property located in Indiana for the March 1, 2002, through March 1, 2005, assessment dates, and includes a number of changes from prior reassessment manuals issued by the State Board of Tax Commissioners. Guidelines used are based on the Jan. 1, 1999, reassessment data. Land values are based on sales disclosures used 18 months before Jan. 1, 1999.

In the past, the state used true tax value and an assessed value. Property taxes were paid on an assessed value, which was a third of the true tax value. Now, Renier said, true tax value and assessed value "are one and the same. There's no third. It's now 100 percent value."

The change occurred in March 2001 under House Bill 1001. A small group of taxpayers in Lake County didn't agree with the way property values were set by the old reassessment system and took it to court, where Indiana Tax Court Judge Thomas G. Fisher ordered the changes. "Now we're closer to a market value," Renier said.

In the 2002 Real Property Assessment Manual, true tax value is defined as "the market value-in-use of a property for its current use, as reflected by the utility received by the owner or a similar user, from the property, less that portion of use value representing subsistence housing for its owner."

Renier said, "The state's telling us the bottom line is, 'What is your property worth?' It's not 100 percent market value but it's real close to market value."

Of House Bill 1001, State Sen. Kent Adams said neither he nor State Rep. Dave Wolkins voted for it.

"It was an effort to add to the lack of revenue in the state," Adams said. But, he said, they didn't support it because there were too many uncertainties and questions and now the state is still back where it was a year ago.

Even though HB 1001 includes a property tax cut, the state recently found out the homestead credit has been applied incorrectly for the last 13 years, Adams said. If the state had waited a year instead of approving HB 1001, the homestead credit issue could have been better addressed.

Originally, March 1, 2002, was the date the reassessment was supposed to have been completed, Renier said. "What the reassessment is - is March 1, 2002, pay 2003. We're still working. Only one county in the whole state of Indiana of the 92 (counties) has sent Forms 11s, which is Wells County."

Form 11s are notices of assessment, land and improvements that are sitting on property. By statute, Renier said, the county is mandated to send the forms. Some counties plan on using the tax bills as their notice. She said Kosciusko County hired a vendor to do three studies for the county to make sure all the land values are uniform and equitable since they are based on sales disclosures.

"We've got to get our values to the auditor before tax rates can be set," Renier said. While the county is a little bit behind where they would like to be at this point, she said, within the next month they have a lot of finalizing to do.

Any delays to the reassessment and the final tax rates will have a major impact on local school corporations and other taxing entities.

"It will affect everybody because if the tax rates aren't set and the tax bills aren't generated, and the monies are not collected May 10, then the auditor can't distribute the checks to all the various school corporations, the libraries, the towns. It's a domino effect," she said, and very important the reassessment gets finished as soon as possible.

Even if Kosciusko County finishes its reassessment on time, the county still can't set its tax rates until its neighboring counties finish theirs.

"We have Tippecanoe Valley School Corp., Wa-Nee School Corp., Whitko Community Schools - those schools are all in (other counties as well as in Kosciusko County) and we can't set our tax rates here without those other counties being done." If Kosciusko County were done today, the county would have wait for the other counties - Fulton, Marshall, Whitley, Wabash, Elkhart - to be finished. And those counties would have to wait for the surrounding counties they share a school corporation with to be finished and so on.

"Like I've said, it's just a domino effect," Renier said. "We definitely don't want to delay at all with reassessment. We need to be done with this and focus on the next reassessment - that starts March 1, 2006, and we usually start 16 months to 24 months before."

The impact on school corporations, Adams said, depends on what Gov. Frank O'Bannon does. O'Bannon, he said, said he will borrow money from other funds to make sure Indiana schools continue to get their tax draws, at least for this year. But Adams said they have to wait and see if the governor does that.

"We'll know more in a month. We'll know more in April," he said.

Another issue to consider for the reassessment is exemptions.

"That's one thing you want to stress - people really need to file their exemptions. There's homestead credit exemptions, there's mortgage exemptions, there's age exemptions, there's blind and disabled exemptions. The homestead credit this time is going to be $35,000 off of that true tax value. ... In the past, it was $6,000. And to qualify for their homestead credit, it has to be their permanent place of residence, it can't be a rental, it has to be one they live in and occupy. And the unfortunate thing is if they file it now, it's too late for what they are going to pay on this 2002 pay 2003. They should have done it last year."

As for mobile homes, Renier said, mobile homes that sit in a mobile home park are assessed as personal property and are assessed annually. Mobile homes are assessable as of Jan. 15. Those mobile home owners can file up to March 1 for a homestead credit or any other exemption and still get it this year.

"It's kind of different because mobile homes are annually assessed and real estate you are always paying a year behind. But the mobile homes, they can file for their exemptions now," she said.

Mobile home values have not changed since 1989. Mobile homes in a park or on real estate are now priced out of the same book. "And that's entirely different than what it used to be." Depreciation is also different than what it was before, she said.

Of the homestead credit, Adams said, some homeowners will see more advantage from it than others under the new reassessment guidelines, while others are still going to see an increase in their tax bill because the state is going to market value. One group who will likely see that increase, he said, is people living in older well-kept homes because they are being assessed at market value. Lake property owners also will likely see an increase in their tax bill regardless of whether their home is old or new.

With all the changes, one thing remains certain - nothing is quite the same as it was before.

"I really, truly don't believe that our tax bills are going to be (a lot higher). Everyone's thinking, 'I've been paying $600 and it's going to go to $2,000,'" said Renier. "I don't think that's going to happen. The county can only generate so much money. There's a maximum levy that it can go up."

But, Renier said, the way that business and agriculture is assessed also has changed and some of the total property tax burden will be shifted away from those areas and onto homeowners.

Adams said no one really knows what to expect this year until all is said and done. Since the assessed value in Kosciusko County will go up, that means the tax rate will go down, but it is still uncertain how much anyone will pay.

"There are no answers today that I have," he said.

Adams said the changes to the reassessment have been in the works for approximately six years but the state has dragged its feet on the issue. It is not the counties' fault, the fault lies with the state.

He said, "I think by April, when we get this whole thing through, we'll know what we have to do." There are tough questions and no easy answers. "The challenge is great."