The County Line - Spring Issue 2003
Reappraisal Not a Dirty Word
in Alabama
Reappraisal is not a
dirty word. Really, it's not.
In some counties, it may be
difficult to find very many folks to agree with that statement.
But it is true.
In addition to not being dirty,
reappraisal may also be the only bright spot on the state's
financial horizon.
Recently, there has been much
discussion and debate about Alabama's out-dated tax system.
From the governor to business leaders (who have their
own view of a "fair" tax system) to legislative
leaders and others around politics there is agreement
that our tax system is unfair.
Some say it discriminates against
those who are poor because it taxes income at such a low
level and relies on sales taxes, which place an unusual
burden on the disadvantaged.
Others point to the corporate
tax system that allows large - extremely profitable -
companies to shift Alabama income to other states. And,
in the process, avoid paying Alabama's corporate income
tax.
And others point to the ad
valorem tax exemptions, ratios and rates that allow property
owners to claim agricultural exemptions on profitable
inner-city land and that allow homeowners and others to
pay only a fraction of the property taxes levied on similar
property in neighboring Mississippi.
Many groups throughout the
state are working hard on proposals to make significant
changes in this tax structure. But as the 2003 legislative
session moved toward the completion of a quarter of its
allowable meeting days, no credible reform plans had been
unveiled. Lawmakers were looking at the prospect of filling
a $500 million state shortfall with piecemeal efforts
rather than comprehensive change.
Making fundamental changes
will take time, elbow grease and political muscle.
But in the midst of all this
gloomy news, something positive is coming from Montgomery.
And it is that "not-dirty" word: reappraisal.
For those not very well versed
in the process of levying property taxes in Alabama, this
reappraisal word probably needs a bit of explanation.
Property taxes are based on the property's value (at least
in theory) and that value changes over time. And, therefore,
it is necessary to re-evaluate the property values so
that the property is taxed on its current value, not its
value from three or four years ago.
Only one Alabama county reappraises
its property on an annual basis, Montgomery. Officials
from that county say overall property values - and therefore
ad valorem revenues - increase each year based on the
age-old assumption that the value of property seldom decreases.
With this annual increase
in property value assessment, the tax bills of all property
owners move at a more orderly and incremental pace. Few
property owners see large increases in the estimated value
of their property. And, surprisingly, few property owners
are upset enough to contest the annual increases usually
produced in Montgomery.
But Montgomery is the exception.
Other counties conduct this reappraisal activity about
every three or four years. Because property is allowed
to sit for several years without being adjusted to market
value, the increases in taxes (when they come) are more
startling. And, not surprisingly, the public clamor against
the reappraisal process is much stronger than in Montgomery.
The state Department of Revenue
has embarked on a worthwhile project to move all counties
to a yearly reappraisal of property. The process will
not be without some political opposition - we in Alabama
seem to oppose change, no matter what its form - nor will
it be accepted quietly by those who will pay the increase
in small doses rather than all at once.
Earlier this spring about
20 or so counties attended a meeting to discuss this issue
with state employees. Some county officials did not leave
the meeting excited about this idea. Others, however,
could see the wisdom in shifting to an annual re-evaluation.
For Alabama counties, this
reappraisal process is one of the few bright spots on
the financial horizon. Less than five counties have the
authority to raise taxes to increase revenue in the county
general fund. And, honestly, there has been little move
within legislative ranks to add counties to this "financial
home-rule" list.
Without such authority, counties
must come to the legislature on an issue-by-issue basis
to seek additional revenue. And, again honestly, few issues
have been received very well in Montgomery except for
the construction of new jails or roads and bridges.
Little support can be mustered
for increasing taxes to fund the rising cost of paying
county employees, maintaining and insuring county buildings,
and delivering essential services.
For more counties, the only
increase in revenue is found when property values are
adjusted to more accurately reflect the market values
and the ad valorem taxes on that property, therefore,
increases.
Stated more directly, without
the reappraisal of property most counties would be delivering
services in the year 2003 with about the same revenue
as they received in 1990. Those who ask that government
be operated as a business, should look around and find
a business that is charging essentially the same price
for its product as it did more than a decade ago. But
that's another issue to explore on another day.
Moving to annual re-evaluation
of property will require an investment in equipment, technology
and employees on the county level. The cost will be substantial
in some communities, but will be split between the state,
counties, cities and other groups that receive the proceeds
of property taxes.
Montgomery County's experience
has shown that the investment is worth it to the taxpayers.
And, Montgomery County's experience has also shown that
once the public gets over the initial shock, it will realize
that reappraisal is not really a dirty word.
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