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Assessed property values based on sales not investments

Property values usually track factors that affect housing supply and demand in a local community – good schools, low crime rate, moderate taxes and a highly skilled work force. This combination attracts business to the area initiating economic development, which in turn offers good jobs with low unemployment.

Consistent rankings in the top ten worst cities in the nation have placed Rockford on the opposite end of these successful attributes and as a result Rockford property values reflect the disparaging ratings.

By next year, Rockford property values will have decreased by over 25% in four years!

The city’s political and business leaders must acknowledge these shortfalls, as a first step toward finding the solutions by determining the root cause of each problem in order to achieve competitive excellence with comparable cities.

One recent suggested solution is that the method of assessment of property values should more realistically reflect the investments made by businesses and homeowners.

Assessed values are based on the sales ratios of comparable properties averaged over a three year period, not the amount of investment made in residential or commercial property.

The assessment method used by Winnebago County is based on state law, not the local assessor’s whims. If property values were assessed based on the investments made and not the sales ratio, a state multiplier would be applied to all property within the county, if property values weren’t 33.3% of the assessed value based on sales of comparable counties in the state.

The reason property values are in decline isn’t the assessment method but low demand for homes and commercial property that have depressed sales and prices. Businesses and highly skilled workers aren’t moving to Rockford because of high taxes, crime, and an educational infrastructure that has provided less than 20% of the work force with four year degrees.

Also, tax caps have turned the tax cycle upside down. An unintended consequence of state tax caps occurs as property values decline, which allow taxing bodies to increase tax rates in order to maintain the previous year’s tax levy plus inflation without voter approval.

Tax caps, in a declining market, currently provide taxing bodies a minimum floor for tax increases in subsequent years, driving property values even lower, and taxes higher as a percent of the property’s Fair Market Value. State law must be revised to stop this tax increase in declining markets.

Another factor leading to higher property taxes is Rockford’s 32 Tax Incremental Finance districts, which have essentially become a backdoor tax increase on those not within the TIFs in non-blighted areas.

TIF’s are long term investments that rely on subsidized property values increasing the tax increment. The current TIFs are estimated to drain the city’s General Fund of over $2.75M annually until 2024 and not break even until 2034, an additional tax burden on property owners.

Ironically, residential and commercial property owners have exacerbated the problem themselves by filing thousands of complaints over the last four years to lower their taxes, which has contributed to a huge reduction of over $900M in the Equalized Assessed Value of property in Winnebago County.

Other reasons demand for property has declined in the Rockford area is crime, poverty and unemployment. Poverty rates up to 33% in Winnebago and Boone County and a lack of qualified workers doesn’t exactly attract jobs to the area.

Root causes of poverty and crime are students choosing to drop out of school at a rate of 25% to 50%, and birth rates to single mothers approaching 60% in some areas of Rockford creating a culture dependent on government programs and subsidies as a way of life, instead of a temporary support.

Lack of personal responsibility and generational ignorance of the system are root causes for these life choices, not external factors, such as poverty or short supply of living wage jobs, especially for those who lack even a GED or relevant job training.

Almost 80% of new jobs require new skills and those skills lead to better jobs, a living wage from businesses moving into the area creating economic development, demand for housing and higher property values.

 

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11 Comments

  1. AmazingScott

    That’s a great write-up Ted, it really helps me to grasp the big picture, but I disagree with your last 2 paragraphs. The root causes for poverty are a LOT deeper than what you say, and it is multi-generational at this point. Lack of personal responsibility isn’t the problem, it’s the symptom.

    We need to look at ways to break the cycle of ignorance and ‘poverty thinking’. When you do without for so long you start to lose sight of the things that you no longer have. Not material things so much but the intrinsic things like education and the little bit of pride you can take in owning and maintaining a nice home. It’s a lot more difficult to put your finger on those intrinsic things but that’s what we need to fix. That’s what I think.

    • Ted Biondo

      Amazing Scott – I made some changes to the last paragraph – tell me what you think. You may not agree with all of it, but I do agree with you that it is a systemic problem – that some people simply do not know how the system works. But it has got to be stopped. I refuse to live where many decisions are made for the lowest common denominator of society.

  2. AmazingScott

    I am impressed by the move, and while I think it goes much deeper than that I do agree that there is a degree of personal responsibility involved- you can lead them to education but you can’t make them think. Parents who make bad choices raise children who make bad choices (or worse), and we can’t put 100% of the blame on the child, some has to go back to the parent.

    That’s the 40+ year problem with the Rockford schools- the idea is (or should be) that it is the primary responsibility of the parent to teach the child and the public schools are there to assist; what we have now is a 2nd or 3rd generation of parents who have abdicated their responsibility with the mistaken idea that the schools will take care of everything. The results are as alarming as they are predictable.

    The fact remains that there are a lot of good and decent people trapped in a cycle of poverty- bad luck always seems to give them the sharp end of the stick. Poverty can be a cycle that is difficult to break out of, and that can be hard to see if you aren’t right there experiencing it.

    My point is that there is value to our community to help as many of these people as we can to break free from that cycle. I think that will eventually be the solution to Rockford’s woes, not pointing the finger of blame and thinking that people somehow deserve whatever it is that they’re experiencing. The lack of personal responsibility is the symptom of our community’s failure to include them in our vision for our community- most of them are worth salvaging. So let’s not be so quick to dismiss them…

  3. I’d have to agree with Ted that a loss of the nuclear family, encouraged by the welfare laws, has much to do with creating a generational dependency class, as well as dragging down our economy. In addition, the level of welfare payments, and other government subsidies, makes subsisting on government handouts quite comfortable, as compared with the poor in other countries. The “safety net” has become a hammock, and all you have to do is support Democrats and RINOs to maintain the status quo.

  4. AmazingScott

    Um, ok snuss- if you think that injecting your political agenda will help fix what ails Rockford, then good luck with that. If you think that subsisting on welfare is a relatively comfortable life in anyone’s world, then you are a fool who has lost all perspective. Good luck with that too.

  5. Scott, the “political agenda” is exactly what causes these problems. Creation of a dependency class causes a lack of motivation, which leads to failing in school, and then in life.

    Ted, on an unrelated note, you might find this high school senior’s speech inspiring, and informative:

    http://www.youtube.com/watch?v=PprP5TCZBRI

  6. BTW, Scott, would you find $38,000 a year “comfortable”?
    Especially if it is tax-free?

    When welfare pays better than work

    Here’s an offer for you: $38,004 per year, tax free. No work required. Apply at your local welfare office.

    The federal government funds 126 separate programs targeted towards low-income people, 72 of which provide either cash or in-kind benefits to individuals. (The rest fund community-wide programs for low-income neighborhoods, with no direct benefits to individuals.) State and local governments operate more welfare programs.Of course, no individual or family gets benefits from all 72 programs, but many do get aid from a number of them at any point in time.

    Today, the Cato institute is releasing a new study looking at the state-by-state value of welfare for a mother with two children. In the Empire State, a family receiving Temporary Assistance for Needy Families, Medicaid, food stamps, WIC, public housing, utility assistance and free commodities (like milk and cheese) would have a package of benefits worth $38,004, the seventh-highest in the nation.

    Read more at: http://nypost.com/2013/08/19/when-welfare-pays-better-than-work/

    FYI, that is better than the starting pay for a teacher.

  7. AmazingScott

    That’s New York where a bar waiter makes $100k and pays 4000 a month in rent, please. In Illinois the number is much lower and you know it.

  8. @ Scott: That is the average for the entire State, not just New York City. Also, have you ever heard of rent control?

    The U.S. Census Bureau says renters in New York City were only paying a median of $1,125 in 2011.

    Read more: http://www.businessinsider.com/the-8-reasons-why-new-york-rents-are-so-ridiculously-high-2013-7#ixzz2lHx2bsR3

    High rents don’t matter, if you are on welfare.

  9. AmazingScott

    In IL where we live the number is less than $1000 a month, not exactly easy living by any means. No high rents, that’s for sure. I think those only exist in your mind. It amuses me that you keep reciting the same little lines over and over (like “High rents don’t matter, if you are on welfare.”), as if you thought it might make them true. Keep trying- it isn’t working yet…

  10. If the government is subsidizing the housing costs, the rent amount doesn’t matter. The government (taxpayers) pays for most, or all, of it.

    http://portal.hud.gov/hudportal/HUD?src=/states/illinois/renting

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