Following the trend in communities all over Oakland County, preliminary numbers were released last week indicating average residential property values declined by 6.8 percent in Oxford Township and 2.82 percent in Addison Township.
There’s concern that as property values fall, taxable values will, too, affecting revenues for local governments.
The biggest effect will be in communities like Oxford Township where there’s been a lot of new construction and property transfers since 2004, meaning there are many residential properties where the assessed (or State Equalized Value) and taxable value are the same.
Oxford’s 6.8 percent was the fourth largest decline in property values in the county. Rochester had the biggest with 7.17 percent.
For properties in newer residential developments like Waterstone, Willow Lake and The Hills of Oxford, it could mean big trouble. ‘A lot of those new ones are going to be affected,? said Oxford Township Treasurer Joe Ferrari.
But Ferrari said the impact on the township’s general fund budget shouldn’t be too bad because the township ‘always budgets conservatively.?
‘We usually under-budget anyway,? he explained. ‘Whatever the millage rate is (multiplied) by the taxable value, we always go under that by probably 10 to 20 percent as a general rule of thumb. Just to kind of anticipate things like this.?
Ferrari also wasn’t too worried because approximately 55 percent of the general fund budget is derived from the state, the other roughly 45 percent comes from a 0.95-mill property tax. ‘Most of our money, at least for the general fund, comes from revenue sharing,? he said.
Ferrari said it’s the township’s separate budgets for police, fire, parks and recreation, and the library that will be impacted the most by this drop in property values and a subsequent drop in taxable values.
‘Each of the individual funds will have a tougher go because they’re all millage-based,? the treasurer said.
There are two things on the horizon that do concern Ferrari. One is the fact that, given the current poor economic conditions, a 6.8 percent drop in property values is ‘only the start.?
‘If we were to level off at that point, I think we could probably absorb that,? he said. ‘But that’s only going to be the start of it.?
The other is what’s going to happen with state revenue sharing. Is the state going to cut it? Between property taxes and revenue sharing, Ferrari said, ‘We could absorb a reduction in one or the other, but not both.?
Ferrari noted there are areas ? such as the older part of the village and older township subdivisions such as Red Barn and Stony Lake ? where a drop in property values won’t affect the taxable value at all due to the ‘large spread? between them because homeowners have owned their property for long periods of time.
On these older properties, the assessed value (or SEV) is much higher than the taxable value. ‘It would take quite a big decline in the market to get those two to match,? Ferrari said.
Such is the case for a great majority of Addison, which has experienced little in the way of new construction or property transfers.
‘We don’t have the expansion you’ve had in other townships, including Oxford,? said Addison Treasurer Dan Alberty. ‘If the turnover (of existing homes) is low and the building of new homes is low, it won’t affect us as much as it will some of these other communities.?
‘Our taxable values for so many people that have been here since 1994 (when Proposal A went into effect) or close to that or I would say 25 percent (less than the assessed values),? Alberty explained. ‘So in most cases, in our township, I don’t think it will be that big.?
Under Proposal A, a property’s taxable value remains capped until it’s sold, then taxable value increases to equal the assessed value. But unless a property is transferred to a new owner, tax increases are limited to 5 percent or the rate of inflation, whichever is less.
Having the assessed value decrease by nearly 3 percent won’t affect most properties? taxable values in Addison at all. ‘Unfortunately, people are going to get the feeling that their taxes are going to go down 3 percent and that’s not going to happen,? Alberty noted. ‘They’ll still be some kind of rate of inflation applied to the taxable value next year, so there will probably be some kind of increase next year.?