Property values rising, but doesn’t mean higher tax bills will follow

Ken Brownlee
Ken Brownlee

Phil Castle, The Business Times

While commercial property values generally have increased in Mesa County, that doesn’t necessarily mean property tax bills will follow suit.

“Just because your value goes up, it doesn’t mean your taxes go up,” said Mesa County Assessor Ken Brownlee.

More goes into the calculation than just the valuation, Brownlee said. Other determinants include the mill levy set by the county, school district and other taxing entities. Moreover, the state constitution and state laws limit property tax increases.

Brownlee also welcomes property owners who believe their latest valuations are incorrect to appeal. “If somebody thinks we’re too high, we want them to come in and talk to us.”

Property values are assessed on even-numbered years and valuation notices sent out subsequent years. The latest notices are based on the assessed value of property as of June 30, 2014 as well as the condition and use of those properties as of Jan 1, 2015.

The value of residential property is based on a market approach that takes into account the sales of comparable properties.

The value of nonresidential property, including businesses and agricultural land, is based on comparable sales, but also construction costs and income derived from the use of the property, Brownlee said.

Questionnaires also are sent out to nonresidential property owners to collect information about their properties, although there’s no requirement to turn in the questionnaires and only 20 percent to 25 percent of owners do, he said.

Because the appeals process hasn’t yet been completed, Brownlee said he can’t yet discuss the total value of the 88,000 parcels in Mesa County. Generally speaking, though, values have increased for both residential and nonresidential properties, he said.

That corresponds with what’s been a gradual rebound in the local real estate market — although nothing like what’s happened along the Front Range of Colorado, where some properties have jumped in value 60 percent, Brownlee said. “We haven’t seen anything like that.”

CoreLogic, a research firm that analyzes home prices in markets across the United States, calculated that home prices in Grand Junction increased 9.1 percent between March 2014 and March 2015, the latest period for which numbers are available. That gain takes into account such so-called distressed sales as foreclosure sales and short sales. Excluding distressed sales, home prices increased 8.6 percent.

Rising residential and nonresidential property values result in higher valuations, but not necessarily higher property taxes, Brownlee said.

Taxes are based not only on the value of property, but also the assessment rate and mill levy imposed by various taxing authorities, Brownlee said.

The so-called Gallagher Amendment to the Colorado Constitution approved in 1982 sets different assessment rates on residential and nonresidential property in Colorado.

For 2015, the assessment rate on residential property is 7.96 percent, while the assessment rate on nonresidential property is 29 percent, Brownlee said.

Multiplying the actual value of a property by the assessment rate for that type of property results in the assessed value. Residential property with an actual value of $100,000 would have an assessed value of $7,960. Nonresidential property with a similar actual value would have an assessed value of 29,000.

The difference in assessment rates can result in a situation in which a property with a modest house has a lower assessed value than a similarly sized vacant lot, Brownlee said.

The other component in the calculation is the mill levy, or tax rate applied to the assessed value of a property. One mill is equivalent to $1 in taxes per $1,000 of assessed value.

Various taxing authorities set the mill levy, Brownlee said, including cities, counties, school districts and water and sanitation districts. In Mesa County, property taxes imposed by Mesa County School District 51 account for more than half of property taxes, he said.

As property values increase, mill levies sometimes decrease to either limit the property tax increase, maintain taxes or even lower taxes, Brownee said.

The so-called Taxpayer Bill of Rights (TABOR) amendment to the Colorado Constitution limits increases in property tax revenue to a calculation that takes into account inflation and growth. Otherwise, voters most approve increases in taxes, including property tax. In addition, a state law limits increases in property tax revenues to no more than 5.5 percent from the previous year.

Meanwhile, property owners who believe their properties have been valued incorrectly have the right to appeal those decisions, Brownlee said.

Brownlee said his staff handles the first step of the appeals. Those who still disagree with valuations can further appeal the decisions to a county board of equalization, arbitration or the courts, he said.

The June 1 deadline for appealing valuations is rapidly approaching, though, so Brownlee encouraged those considering appeals to call his office to schedule an appointment.

Out of the 88,000 tax parcels valued in Mesa County, there are usually around 2,500 appeals, Brownlee said.

Correctly valuing commercial property and other types of nonresidential property is especially important, Brownlee said, because the assessed valuation of nonresidential property is almost four times higher than that for residential property. “It’s more significant with commercial appeals.”

The important thing with appeals is to correctly value property. “We want to get it right.”

But people often gain an appreciation for how that value is determined, Brownlee said. “They might not be happy, but they understand. And that’s what we want to do.”

For more information about the Mesa County Assessor’s Office, including information about how property values are determined and the appeals process, call 244-1610 or visit the Web site located at www.assessor.mesacounty.us.