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Fair to re-value

The knife cuts the butter both ways or it should. Here is why. In a revaluation, overall taxes for the county (or the city) do not have to rise or fall if the rate is set at a revenue neutral level. However, in a rising market, some properties will rise faster and thus pay a relatively larger share of the tax burden after a revaulation. For example, beach property values rose faster than property values in Castle Hayne. In the last revaluation, some of the burden shifted to these areas where values were rising faster. Similarly, in a falling market such as we have been experiencing lately, higher priced property values probably (although not certainly) fell at a faster dollar rate than more modest properties. They may not have fallen by as much on a percentage basis. Here is an example with round hypothetical numbers. Let's say that the total value of the property in the county is $100 million and the tax rate is $0.50 per $100. Then the county would receive $500 thousand ($100 million * 0.005 or $1 million * 0.5) in revenue. If the property value in the county fell at a collective 20% rate, then the value of the property in the county is now $80 million. For the county to still realize $500 thousand in revenue, the rate would have to be set at $0.625 per $100 (the new lower base of $80 million * 0.00625 (the new higher rate) =$500 thousand). The key point here is that while the tax rate increased, there is NO increase in actual taxes paid. If a $100,000 house pays the old rate of .005 then the property owner paid $500 ($100,000 * .005 = $500). If the revaluation finds that the property decreased by the county average of 20% and is now worth $80,000 and the county sets the new rate at the revenue neutral rate of .00625 then the property owner still pays the same $500 ($80,000 * .00625 = $500). Therefore, if the county commissioners play it straight and set the rate at a revenue neutral rate, then taxes should not change with a revaluation. In our example, $500 in taxes = $500 in taxes before and after revaluation. But, and this is a big BUT, on an individual basis, taxes paid will remain the same only if the value of the individual property rises and falls at exactly the same percentage as the average for the county. If the value of a particular property in percentage not dollar terms falls faster than the average for the county, then a revaluation actually lowers actual taxes paid for that individual property. Similarly, if the % value of particular property falls less (or actually rises faster) than the county average, then actual taxes paid increase. Back to our hypothetical example. Again, average county property values have fallen 20%. If our $100,000 house falls only 10% rather than 20%, then taxes paid rise to $562.50 ($90,000 (new value) * 0.00625 (new rate) = $562.50) or $62.50 more than pre-revaluation. If our $100,000 property falls 30% while the average county property falls 20%, then actual taxes paid decrease to $437.50 ($70,000 (new value) * .00625 (new rate) = $437.50 or $62.50 less than pre-revaluation. The bottom line is that if the goal is to fairly apply the tax burden based upon property value, then frequent, accurate revaluations provide for the fairest distribution of the tax burden. No one gets a free ride for many years nor is someone overpaying for many years.

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