I started a statistics blog for September (FOUND HERE) and touched on property taxes. I had more thoughts than I realized, so I separated the article; here are my thoughts on property taxes for Washington County and the St George area. Keep in mind; that this is MY opinion. Perhaps you may feel different, and that's okay. I'm not attempting to push "my" plan; I'm only exampling our county taxes and a possible (brainstorming) solution.
Historically (at least for longer than the 13 years that I've been here), Washington County has conservative property valuations, being a bit lower than the actual value. However, this year, the Assessor's office decided to change that (unannounced) and beef up the values. Washington County residents faced valuation increases on their property this year, some as much as 20-25% (my property was among the 22% bracket).
For buyers considering purchasing in this area, this won't impact you (and there is no reason to be alarmed). We've always used the "market value" or "sale price" to calculate projected annual property tax. The pinch was specific to owners who already own property in Washington County. Bringing conservative values in line with actual values isn't the problem either. My issue (and I know I speak for many) is increasing taxes at such extraordinary percentages. I feel taxes should not be allowed to rise this much in one year.
I feel the County requires property taxing law changes. A "constant" is necessary, and a relatively unqualified opinion should not determine values. Perhaps, the "constant" should reflect your actual purchase price. Remember, Utah is a "non-reporting state," so our property values for taxes are not explicitly based on the sale price. Property owners should expect a predetermined (and preferably voted) set percentage cap in which property taxes can rise yearly. A capped increase will allow owners personal budgeting expectations.
Property values rise (or fall) without any cap from the County's standpoint. However, it's also true that many owners do not benefit from increasing values (if they do not sell their home). Perhaps a transfer tax initiative should be considered. For example, suppose a property owner is to sell their home at a cost exceeding (a set percentage above) the taxed valuation (that was initially based on the purchase price). In that case, the owner will pay a transfer tax at closing (again, having capped percentage). At least with a method like this, the County would still collect taxes they were unable to receive (due to the cap and rising value ratios), and property owners are only paying if they choose to sell... and only if they are selling for MORE than their tax valuation. Again, this would allow sellers to make informed choices and know what they'd pay in advance, and it would be a more fairly executed taxation.
This transfer tax method may also reduce the burden on the owners who did not sell. As it is now (and another concern with our current valuation process), the County looks at neighborhood comps to make their assessments on valuation. Neighbors that choose to sell and turn a hefty profit are walking away with fat pockets, and the remaining neighbors are getting sucker-punched by the County. The County uses the sold comp for higher values, essentially penalizing the neighbors who didn't sell.
I recently pulled the homes on my street to further elaborate on the current unfair tax status. My house was the smallest among the four I looked at, and two others had a much larger budget when constructed (meaning the two other homes had significantly upgraded finishings). One sold relatively recently for almost DOUBLE what we paid to build. One of the homes in my comparison was similar to mine in the way of upgrades—but it was still larger and had an entire second home on the property. Of these four homes, guess who paid the HIGHEST….ME! Of course, I filed a dispute, but what is the reason for me to pay the most in taxes? The house that sold recently for almost double what I paid was paying less in taxes (price per sqft) than we were. My own experience is ONE example; I know this affects more. There should be a baseline or starting point (what you paid for the home, for instance) and not just "some guy" in an office without any formal real estate experience deciding what each neighbor should pay…and who gets a 10% increase…versus the owner that receives a 25% increase, because a neighbor or two cashed out and sold.
NOTE: There was a transfer tax bill up for review; however, from what I understand, this bill was designed to be imposed against the purchaser, not the seller (https://le.utah.gov/~2019/bills/static/HB0441.html line 7756). My opinion is that the transfer tax should be to the seller, and the purpose is only to offset unpaid taxes based on being undervalued.
Hopefully, residents will initiate action on this. Nobody likes taxes, but the current structure is unfair and based on the opinions of those in the Assessor's office. There must be a number "constant" and a cap. Sending Assessor office workers out to the homes of people who dispute their value to inspect how nicely upgraded the owner's home may be when in fact, the same Assessor will NOT be physically visiting the homes that they are using as a comparable sale is unfair (and YES….this is what they are currently doing). They are taking "opinions" and applying another opinion of the percentage. They also rate homes in order as they feel. So if one person builds a home completely "basic" (no upgrades), that property may be rated a "1," which means they will pay the least (and will increase the least amount over reassessment periods). Now, if that homeowner works over the next few years to make his "basic" home unique with upgrades and ends up selling for triple what he paid only four years before….that homeowner achieved the luxury of low taxes the entire time he owned the home, and he left with a well-deserved profit. The other homes on the street will pay higher taxes due to the neighbors' windfall, and the fat profit guy has moved on.
What are your thoughts? Does your state have a transfer tax? Are you here locally and yourself got sucker-punched because your neighbor was Mr. Fat Pocket that sold? I'd love to hear your thoughts on this topic. Remember, nothing happens when nothing is done.
If you jumped to this article from the September 2019 stats blog, here is the link to finish that article: September 2019 Housing Market Report.
I am Paula Smith, Associate Broker with RealtyPath of St George. I have been a licensed, full-time real estate agent in Southern Utah since 2006. I have been selling residential real estate during the market changes and witnessing our St George area grow to become one of the fastest-growing cities in America. I keep my finger on the pulse and not only pay attention to what is going on but also accurately predict future market conditions.
Allow me to be of assistance and earn your business. If you've got a home in Southern Utah that you're thinking of selling and you'd like a property market report, I can send that to you.
If you're ready to buy or sell, I'm prepared to make it happen. 435-773-3751