Having to pay more taxes on property that’s worth less doesn’t exactly thrill Oxford resident Alice Rice.
‘When times are tough, that’s not the time to put more burden on people,? said the 1962 Oxford High graduate. ‘It’s hitting me pretty hard.?
Although the assessed value on Rice’s home on Thomas Road dropped by $18,980 this year, the taxable value increased by $3,560.
Residential property values fell by an overall average of 16.39 percent in Oxford and 15.02 percent in Addison, yet taxable values increased by 4.4 percent.
‘Truthfully, I just feel they found a loophole in order to get more money,? Rice said. ‘I just figure your value goes down, your taxes should go down.?
Actually, it’s more of an oversight than a loophole in what taxpayers know as Proposal A.
Approved by state voters in March 1994, Proposal A caps a property’s taxable value (unless there’s a transfer of ownership or new construction) and limits increases to the rate of inflation (or the Consumer Price Index) or 5 percent, whichever is less.
For years, property owners reaped the benefits of Proposal A as market and assessed values (which represent 50 percent of market value) climbed steadily, yet taxable value increases remained limited to inflation.
But that all changed when the real estate market fell apart because Proposal A doesn’t do anything to provide property tax relief when the market value falls.
There’s no provision requiring taxable values to stay the same or decrease just because market values drop.
For people who have owned their home for many years, the decrease in assessed values didn’t lower their taxable values because there’s such a great disparity between their State Equalized Value (which in Oakland County is equal to assessed value) and taxable value due to the capping effect of Proposal A.
A drop in the higher SEV won’t affect the much lower taxable value at all unless it drops below the capped value, which is the prior year’s taxable value adjusted for inflation. Taxable value is the lesser of SEV or capped value.
As a result, taxable values keep increasing on these properties with the rate of inflation.
For Rice, who’s lived in her Oxford home with her husband, William, since 1985, the assessed value dropped from $104,520 to $85,540.
But since the assessed value (or SEV) didn’t drop below the Rices? capped value of $84,470 (which was last year’s $80,910 taxable value plus 4.4 percent), the capped value became the new taxable value.
In essence, the home’s worth less, but the property taxes are 4.4 percent higher.
That’s a bitter pill to swallow for the Rices, considering Alice’s worked as a shipping clerk at Advanced Auto Trends, Inc. on Metamora Rd. for 23 years and William’s been disabled since 1987 and unable to work.
‘Everything’s gone up. My wage hasn’t gone up, but everything else has,? Alice said. ‘It’s not making it very easy and it’s going to make it practically impossible for me to ever retire.?
According to Dave Hieber, manager of Oakland County’s Equalization Division, what’s happening to the Rices isn’t what’s happening to the majority of property owners.
He estimated about 55-60 percent of the homeowners in the Oxford/Addison area actually experienced a reduction in their taxable value because their SEV dropped.
‘If your SEV and taxable value were the same or very close last year, and (the SEV) drops by 16 percent, your taxes go down 16 percent, basically,? he said.
SEV and taxable value start out as equal whenever ownership of a new or existing home is transferred. Taxable value is then capped the following year after being adjusted for inflation.
Communities that experienced a lot of new growth in recent years, such as the Oxford/Addison area did, have a larger percentage of properties where SEV and taxable value are the same or very close, according to Hieber.
Since taxable value is determined by which ever is less, SEV or capped value, if SEV decreases and drops below the capped value, it becomes the new taxable value.
The Rices will probably experience a drop in their taxable value next year if their assessed value/SEV falls again or even stays the same.
Right now, their home’s SEV is $85,540, while their taxable value is $84,470.
That’s presuming rising costs don’t force the couple from their home.
‘I have four vacant homes on this corner (where Thomas and Ludwig roads intersect),? Alice said. ‘This is a hard hit area out here.?