Slight tax increases anticipated

Boone County Assessor Tom Schauwecker said 2005’s property reassessments will show signs of the burgeoning real estate market but predicts relatively conservative tax increases.

Schauwecker foresees no sweeping changes but said assessed valuations will shift the tax burden.

“Agricultural landowners will be winners because their valuation is fixed by the state,” he said. “The losers will be the residential homeowners and commercial landowners.”

This spring, Schauwecker sent 56,000 change-of-value notices to property owners in Boone County.

“The low interest rates are fueling the rise in real estate prices, and these notices-of-change letters reflect the dynamic nature of our local real estate market,” Schauwecker said.

Rising appraisals are a double-edged sword. Higher assessed values bring higher tax bills, but accompanying rollbacks in area property tax levies dull the blade.

While Schauwecker was hesitant to predict how much values might rise across the board and how tax bills might be affected, he said a 15 percent increase in values would bring roughly the equivalent of a 12 percent increase in property taxes.

The Hancock Amendment to the Missouri Constitution limits the amount of revenue taxing entities can collect. When assessed values rise, then, tax rates will fall.

Still, Schauwecker said “it is very important that people understand (that) they won’t see a dollar-per-dollar tax increase.” That’s because residential and commercial property account for only 80 percent of the total tax base.

While taxing entities cannot “reap a windfall” from reassessments, their revenue does not remain static. They can collect more money as a result of new construction and inflation.

The Columbia City Council will conduct rate-setting hearings in July and August in preparation for a budget that will be finalized in late September. Those tax hearings will establish the effective tax rate after the reassessment rollbacks. A rollback in the city’s property tax is unlikely, however, because its levy is only 41 cents, half the 82 cents it is authorized to collect.

“What people need to understand is that adjustments are going to vary from city to city and even within Columbia,” Schauwecker said.

Boone County property owners can expect rollbacks in school districts that have levies that are at the legal maximum. But rollbacks are unlikely in library and fire districts, he said.

Increases in assessed values are considerable this year primarily because it has been another in a series of banner years for the real estate market, Schauwecker said. It is not uncommon, however, for the assessor’s appraisals to be somewhat lower than the actual sale price the market will support. Schauwecker said one reason for that is a Missouri law that effectively caps increases in assessed values by requiring that assessors physically inspect any property whose assessed value might rise by more than 15 percent.

“The General Assembly has essentially placed individual fee appraisal restrictions on the mass appraisal process,” he said. “They raised my cost of doing business.”

“From a taxpayer’s point of view, the cap is friendly because it limits the increases in their assessments,” Schauwecker said. “But not for someone who is really trying to assess in a market like we’re in right now. The market doesn’t

just move in 5, 10 or 15 percent increments in a cycle’s time.”

Schauwecker said another reason for discrepancies between actual sale prices and appraised value is that Missouri is one of seven states that lacks a sales disclosure law.

“I have knowledge of only about six of every 10 sales that go on,” Schauwecker said. “If I could change one law that would enhance the accuracy of our appraisals, it would be to require Missourians to disclose what they pay for real estate. It’s like sending a heavyweight boxer into the ring with one arm tied behind his back.”

Inflated market values will effectively raise the valuation of a home as well.

“An appraisal is more of an art than a science,” Schauwecker explained. “The test is to put it in the market.”

Schauwecker estimates that most of his assessments are within 95 percent of fair market value.

Carol Van-Gorp, CEO of the Columbia Board of Realtors, said business continues to boom in Columbia.

“Despite professional predictions of a slight softening in the market, so far 2005 surpassed even 2004’s record-breaking sales,” she said.

By the end of March, 427 single-family homes, both new and existing, had sold in Boone County for a total of $64.6 million. During the same period in 2004, 388 homes sold for a total of $59.2 million, Van-Gorp reported.

“Real estate is a function of supply and demand,” Schauwecker said. “And lower interest rates put pressure on the sales market.”

Boone County’s growth falls in line with a 5.8 percent regional increase in the sale of single-family homes in the Midwest. The Federal Reserve sees the housing boom as less of a national trend than as pockets of regional growth.

Such bubbles are still vulnerable, but Columbia’s performance in real estate markets is still strong and steady, Van-Gorp noted.

There is a downside, Van-Gorp said. As prices of new homes rise, so do those for existing homes.

“Affordability is a real concern,” Van-Gorp said.