In light of recent events — a mill increase stay and a new property assessment system — city finance director Bob Bartholomew, spoke at Thursday’s Juneau Chamber of Commerce luncheon about the new processes adopted for assessing property value and tax.
Most local governments in the U.S. and Alaska have chosen property tax as one of the main ways to raise local government revenue, Bartholomew said. “And the state of Alaska almost mandates it, basically, through state statute.”
Bartholomew added, “we wouldn’t have to do it, but if we did we would have to pay the equivalent of property taxes or some other form of funding source to education.”
Per Alaska Statue Title 29, under municiple government taxation, the “full and true value is the estimated price that the property would bring in an open market and under the then prevailing market conditions in a sale between a willing seller and a willing buyer both conversant.”
Alaska is a non-disclosure state, meaning that when a homeowner sells their home the city knows, through the deed transfer, the sale took place but both buyer and seller are not required to disclose the sale price.
The city uses a mass appraisal approach to evaluate the 13,000 parcels in Juneau.
“When the state assessors come down and evaluate performance they look at a whole litany of things,” Bartholomew said. “But one of their main measurements is can we show that our overall assessed values across the city are between 97 percent and 103 percent market value.”
Bartholomew added, “our goal is to stay on the lower half of that. We don’t believe we need to be above 100 percent of market.”
This year CBJ implemented two significant changes to how it values property.
Firstly, the process for valuing the land changed to a cluster model which lumps Juneau into 21 different neighborhoods.
They begin by adjusting based on the size of a property owner’s lot. A median lot in each of the 21 neighborhoods sets the standard for lot size. Then size, shape, topography and view come into consideration.
“I’d say the biggest challenge is, they don’t have all the information they need for all those different characteristics of all the parcels,” Bartholomew said. “So that’s what leads to lots of adjustment or the need for adjustments is that you don’t have all the things you need to value it then you’re going to be father from the market. That’s one of thing things I think we’re challenged with this year.”
Secondly, the CBJ made a change in the valuation of structures by adopting a strict adherence to the cost approach which values land over structure.
In past years they used the cost method, but today focus more on what it would cost to build the structure on that land, then the property. After that they would appreciate it for how old it is.
Then what’s left is comparing it to the current market.
“There are lots of variables. There are challenges to determining market, but that is the overall challenge—to pull those pieces together, assess 13,000 properties, and send that information out,” Bartholomew said.
“I think the bottom line is the implementation could have been better,” Bartholomew said. “I think that, basically, we needed to get more information out. We needed to probably have more information in the database for the specific characteristics that affect individual properties and by not doing that as well as we could have it led to more people taking advantage of the appeal process.”
When the CBJ rolled out this new process and after issuing the values of the newly appraised properties, 614 appeals were received by the Assessor’s office. In past years the number ranged between 350 and 400.
“What’s happening in that process is people are bringing in information they believe shows that that value is too high or too low,” Bartholomew said, “and the assessor’s offices is going through that.”
Last night, the city finance committee decided against raising the mill rate that is used to calculate property taxes. It will remain at 10.55 mills.
A mill is defined as one-tenth of a penny or one-thousandth of a dollar.
When the 2013 budget was prepared it included a 4 percent increase in value. The assessment in 2012 for all property in 2013, including new property, there was a 2.8 percent increase in value.
Since the value didn’t increase as projected by the CBJ, the mill rate will remain the same. The committee’s decision Wednesday to not increase the mill rate will balance out the $1 million loss projected for fiscal year 2014.
• Contact reporter Kenneth Rosen at 523-2250 or at email@example.com.