The annual cycle of property reassessments will yield disappointing news for county revenues — as nearly every jurisdiction will see a drop in assessments for residential property in this assessment cycle.
From the Baltimore Sun coverage:
Nearly all Maryland homeowners due to receive new property assessment notices being mailed today will see a lower assessed value on their houses, reflecting what officials say is the largest decline in the state assessment office’s history. n On average, residential property values dropped 19.7 percent over three years, according to C. John Sullivan, director of the state Department of Assessments and Taxation.
“I’ve never witnessed anything like it. It’s unprecedented,” said Sullivan, who has worked in the state’s assessment agency since the mid-1960s.
The decline is the downside of the sharp increases in home values during the housing bubble in 2005-2006, a slide that is expected to continue into next year.
Commercial properties increased slightly in value, however, meaning that overall property values dropped 16.1 percent statewide since 2006, the last time these same areas were evaluated, he said.
The news of assessment drops adds to the challenges faced by counties in managing a difficult budget time. Recent disappointments in income tax distributions, widespread foreclosures and distressed properties, and state-imposed budget cuts have all accumulated to create unprecedented fiscal challenges for Maryland’s counties. This softening of the property tax base — the single largest source of revenues for counties — adds to these fiscal woes.
The effect on county revenues is not a direct function of changes in assessment, due to the numerous protections in Maryland law to “cushion” taxpayers from property tax increases. The three-year assessment cycle means that only roughly a third of properties were reassessed this year. In addition, the Homestead Tax Credit program tends to create a “cushion” in property assessments — while homeowners’ tax bills to not rise dramatically during a strong real estate market, they also do not drop immediately during times of relative weakness (as the yet-untaxed value of homes is still being phased-in).