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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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