Wednesday, March 18, 2009

Anyone Missing a German Shepherd and a Black Lab?

Around 12:45 this afternoon this friendly young German Shepherd male and an even friendlier Black Lab male were picked-up by our code enforcement staff on Putter Drive. Since both animals lacked tags, the Village took them to the Isabella County Animal shelter. The black lab had a small white scar under his left eye.

Friday, March 6, 2009

Understanding Proposal A

Proposal A was adopted by the voters of Michigan on March 15, 1994. Proposal A changed the property tax system significantly. The reliance on local property tax to fund schools was reduced via the voter approved measure. There is now a six mill levy for the State Education Tax (S.E.T.) levied on all taxable property. In addition to the six mill levy, local school district voters also can approve an additional 18 mills which is then levied on all non-homestead properties. The 18 mill levy is subject to the provisions of the Headlee rollback, linked to inflation and increases in the Taxable Value (TV) of the properties in the district.

The method of determining the amount of value subject to property tax also was changed via Proposal A. Homeowners may claim exemption from the local operating millage (18 mills) levied by the local school district. The exemption requires the homeowner to own and occupy the homestead.

A “Homestead Exemption Update” must be filed with the local assessor if the property is sold or transferred. A “Property Transfer Affidavit” form must be filed by the new owner whenever a transfer of real estate takes place. There is a penalty if this is not done within 45 days of the transfer. If the property changes use and is no longer a homestead, the owner must rescind the exemption claim in writing within 90 days. This includes the sale of the property and enables a new homestead exemption to be claimed where you purchase your new home.

Determining the value of the home to tax was also changed by Proposal A. The old system used State Equalized Value (SEV) while the new system uses Taxable Value (TV). Here are definitions for the various values shown on your tax assessment and tax bill:

Assessed valuation: This is 50% of the true cash value of the property as determined by the local assessor. This amount appears on the assessment notice.

State Equalized Value: This value is the result of county and state equalization of the assessed valuation after all factors are applied. If the factors are all 1.0000, the assessed value and the SEV are the same.

Taxable Value: This is the valuation the millage will be levied against. It is calculated by starting with last year’s taxable value, adding the inflationary increase allowed for the year, deducting the taxable value of any losses, adding the value of any new construction. The taxable value cannot exceed the assessed value. This value is also re-adjusted to the SEV upon sale or transfer of the property.

What this did over time was create two problems. The first was for local units of government that were limited on the amount of property value increase that could be captured on the tax roll. This was in fact one of the main selling points for Proposal A. By raising the sales tax from 4 to 6 percent, the measure tried to effect a trade off for local units of government. In that, the proposal was supposed to protect local revenue by limiting the capture from property values while increasing the capture from sales tax revenue.

This formula worked for the 6 years after Proposal A was adopted. In 2000 the State of Michigan began to withhold revenue sharing payments to local governments to offset state budget shortfalls. According to the Michigan Municipal League, this broken promise on the part of the state has cost local units of government over 3 billion dollars.

Proposal A also created problems for homeowners. Under Proposal A, the taxable value of property was capped in a measure to help protect senior citizens and others on a fixed income from large swings in annual tax bills. In previous years some communities experienced real estate difficulties in selling properties that had never been uncapped. This "pop up" can often times double or triple the annual tax obligations of a property if it is located in a hot real estate market, or has been owned by the same person for a long period of time.

In recent years a different issue has surfaced for homeowners. Due to state and national economic problems, property values have declined while the taxable value has increased. This frustrating problem has been caused by the capping of taxable value under Proposal A. As properties have increased in value over time, the taxable value has only risen at the rate of inflation, or 5%, whichever was lower. In recent years when assessed value has decreased, it has not done so to a point where it has been lower than the capped taxable value. Once the assessed value falls below the taxable value, only then will actual tax bills decrease.

This week is your chance to file protest letters with your local Board of Review on your proposed 2009 assessed and tentative taxable value. Last week you should have received a notice from your local township assessor about the proposed changes for 2009 with instructions on how to protest. If you have questions, please contact your assessor or stop by our office for help.