Saturday, September 22, 2007

Debunking today's LTE at Std Ex. & Acquisition Value...explanation/discussion

Letter to the editor, Standard Examiner.

I'm writing in response to the Aug. 28 guest commentary, "Politicians -- do something!" by Richard Evans. Mr. Evans stated "Talking with our state legislator Sen. Allen Christensen was very enlightening. He told me the real estate lobbyists have so much money and power that if he does anything to reduce our property taxes he could lose his job."

This statement is completely inaccurate. First, I personally spoke to Sen. Christensen and he informed me that Mr. Evans' comments didn't accurately reflect what he said.

Second, and even more importantly, such a statement shows that the author is totally uninformed as to the actual position of Realtors regarding property taxes. Realtors oppose any irresponsible or unfairly assessed property tax. For decades, individual Realtors have donated hundreds of thousands of dollars out of their own pockets to fight for lower property taxes. We have also battled to maintain the current 45 percent residential property tax exemption.

Realtors helped champion the creation of Truth in Taxation and have continually and dogmatically opposed laws that would result in an increased property tax. Moreover, Realtors regularly testify in front of county commissions and city councils to argue against inappropriate increases to any tax or fee that affects homeowners.

It is the mission of Realtors to defend private property rights and to help assure the availability of affordable housing by preventing increased property taxes wherever possible.

Michael J. Ostermiller

Machman’s commentary,

The first part was simply "attack the messenger because you don't like the message." Both the Senator and Mr. Evans were and are "spot on!".

As for the remainder of Mr. Ostermiller's now trite and overused public statement...

This is the 3rd time I have heard these exact words. They were spoken by our local Rep. Gage Froerer, now by Mr. Ostermiller and also by one of the top lobbyists during a statement before the revenue and taxation committee on 19 Sept. It seems to be a prepared political statement written by the people who are in fact behind the bogus “current market value” scheme and frankly are part of the problem. That is unless they have a "revelation" or something which changes their collective mindsets. They wittingly or unwittingly hold to all that is wrong with our current property taxation system, which is “the disease”.

And there is an element of truth to Mr. Ostermiller’s and that particular real estate lobby effort’s canned statement. Lower property taxes do in fact encourage more real estate turnover and thus commissions. It is almost ironic that he or they would seem in opposition to a proposal which will in fact stabilize and lower property taxes. Thus encouraging more opportunity for more people to actually be able to afford to buy homes or upgrade. Their position is oxymoronic. And "acquisition value" taxation is not regressive, nor does it unfairly tax second homes which also is a positive for the real estate industry. It is entirely possible that the apparent opposition can be made to realize this. And many other advantages of “acquisition value” based property taxation when their group assembles every two weeks to analyze the pros and cons of any specific legislation as to how it affects the Realty Association membership and protects commissions.

While there are truly honest and worthy people of character in the real estate business/association, there are a few forces in Salt Lake City which effectively manipulate these good people and all of us in the process. This is a canned public statement. Propaganda is one of their “tools” they use. They have and can spend millions when we have only this medium and a few hundred dollars. But what of the positive advantages for “acquisition value”? Is this merely resistance to change? Or ignorance on their part or mine? Can these zealously protective of their commissions association members be convinced that "acquisition value" taxation is actually beneficial to their cause...lowered property taxes, housing costs and increased real estate activity? We can try. You can try. We all must try.

They rather obviously also “helped” put together “informational handouts” for the Legislature’s Revenue and Taxation Committee and distributed them to attendees. It is almost all pure propaganda based upon 1997 information and antiqued Truth in Taxation theory which is neither followed nor enforced by local governments or the State Tax Commission. Note, Davis County Assessor admitting it had not reassessed Bountiful for (10) ten years. That would mean they not only broke the law for ten years, they were not over-seen or regulated by the State Tax Commission for ten years. And that is a simple more speculation or guessing. The Counties are rampaging totally out of control and without regard to anything written clearly as State "Truth in Taxation" Law.

The “propaganda” portion of the information cites 2005 statistics and “Legisbrief” (from National Conference of State Legislatures) information also from 2005. It isolates us all from the information and realities of the 36 States which have changed over to an acquisition value based taxation system.

Think of the good they (this real estate association lobby group) could actually do for themselves, their image and all of us. Perhaps you honest brokers in real estate need to mobilize and confront this group in Salt Lake City (and Layton? Call Mr. Ostermiller) I think of all the good people I know in real estate. And think they would all like to be on the honest side of political influences and lobby efforts representing them.

The propaganda package also contains two memos from Michael E. Christensen, Director of the Office of Legislative Research & General Counsel which suggests how legislators might what to mitigate our concerns over the statewide property tax explosion.

For example, it shows last year (2006) 35 municipalities, 4 counties, 25 “special districts”, 17 School Districts or a total of 81 taxing agencies proposed increasing a property tax rate which exceeded its certified tax rate. When all was said and done 77 of the 81 taxing agencies increased our property taxes.

This year 69 taxing entities are raising our tax rates higher than an already far too high tax rate. Hmmm…. Wonder what will happen this year? I think we all know by now.

Lots of talk about payola schemes and Band Aids for special interest groups like us “senior citizens” to tamp down the outrage. Direct threats from legislator’s to assessors to put pressure on Boards of Equalization to approve appeals etc. All designed to placate, yet none to address the “disease”.

But what about the working poor or “middle class”? You who can neither retire or take time off to object or get involved, appeal property “Market Values”, or attend any meetings because you are working and moonlighting yourselves to death. You are the “silent majority” and the ones out there doing the real work of keeping home and family and community together by working more hours, more jobs, and part time weekend and evening “moon lighting”.

Most of our representatives and senators still are not getting it (at least 22 as a minimum). It is an across the economic and demographic spectrum - broad all encompassing problem. And it is caused by “the disease” which has infected everyone in this State. Not just “Shirley” or seniors, or our beloved Valley, or my Town.

And finally it shows when all the complicated mumbo jumbo and statistical manipulation, rationalization, intellectual compartmentalization, and just plain excuses are done; the bottom line is “The effective Property Tax Rate” for Utah was just under one percent (.95) in 2005. That is an average for the past 12 years.

But a closer look shows the tax rate average is only for “Primary Residential” (post realtor association supported 45 % rate reduction legislation, giving credit where credit is due). It does not include all residential properties which are well over 1% tax rate Statewide. In fact Weber County average Property Tax Rate is the highest in the State at 1.5% for 2006. And our intrepid Commissioners and assessor promises to set yet another record this year. Add to that the outrageous disparate property assessments and all of us (not just Huntsville Town or the Ogden Valley) but the entire County are being bilked out of far too much in taxes. And the long list of “Other taxing agencies”, especially the School Districts are reaping windfalls while at the same time actually increasing tax rates even more! (re the Weber Basin Water Conservancy District…just because they can). They are aiding and abetting this tax rape.

So what makes Weber County so super special? Weber School District so special? Why do the Commissioners raise the budget from $100 Million to $126 Million in a single year? They would not tell us – so much for “Truth in Taxation”?

Assessor Madson is paying a whopping $163 more property tax than last year. How does that make you feel?

So D-Bell, what the %$#@*&^(!! Is this “Acquisition Value” based taxation system? How are we going to put a stop to this out of control oppressive nonsense. How are we going to solve this County and State-wide problem? Here is what I think.

Solution, yes, get rid of all those at the local level (including School District Board members) who are responsible ultimately, just as soon as their terms expire. But that takes time. Time for even more irresponsible damage to be done to us all. We need to pass legislation which enables recall petitions for malfeasance in office.

We need to put all local governments (Counties) and School Districts on a diet. Demand comprehensive tax reform which effectively does just that by limiting their ability to gorge on our bank accounts. Separate School Districts, Weber Basin Water Conservancy Districts, Mosquito Control, Fire Protection Districts, etc. from County Tax collections. Put them on their own diets, accountable to their own constituency, through local Bond issues. Make them publicly explain budgets which are reasoned and rational.

For our property tax situations, if an “acquisition value” taxation system is put in place, 100% of all property would be taxed every year. But assessed value could only increase 2 or 2.5% per year (Oregon uses 2.5 %, Michigan 5%, it varies by State). And the tax rate would be only 1% of the stable yearly value increase.

Examples always help understand:

I buy your house for $250,000. The Title Company at closing sends a Form 1099 (or whatever) to the State Tax Commission registering the new value of my new house. The “value” is automatically decreased by 6% for a Real Estate Commission (or the going rate actual at the time) or not if sold by owner, and curb appeal “lip stick and rouge” improvements to entice the sale (if any can be documented within the time the property is declared up for sale). Neither are true market value components of the actual house I bought from you.

So the Form 1099 says Sale Price $250,000, adjustments for Realty commissions(6% or whatever the going rate is at the time if applicable) $15,000, and curb appeal enhancements (if any) $25,000. Total corrections $40,000. True Acquisition Value: $210,000.

This amount ($210,000) is recorded as the true acquisition value and my property tax will be $2,100, if I bought your house on 1 January. It would be prorated down say by 50% if I purchased the house on 1 June, when it would halved and only $1050. The new baseline acquisition value, to which only 2.5% maximum (using Oregon’s system in our example) can be added the next year.

This (2.5%) is also the average of annual historical cost of living increases which most use when planning our budgets and it might well change over time at which time the maximum would also change. It could be tied to the Social Security cost of living index, inflation rate for Utah specifically, or some other recognized and verifiable index.

So next year what can I expect to pay in property taxes? $210,000 X 2.5% = $5,250, so the reassessed taxable value is now $215,250 and my taxes are now $2,153.

When I sell your old house and now my home, this process is reset using the new sales price or acquisition value.

And in order to stabilize communities and families our homes can be transferred to family members at the same steady and reliable market values. This means if I sell (or transfer) the ole homestead to say my daughter or one of the grand kids it will continue at the same tax rates as before and under the same rules. Two and one-half percent maximum increases in value annualy and one percent property tax rate on the same acquisition value.

-Notice that there are no primary or non primary Band Aids applied. No contentious 45% discount for primary residences. No cheating and no whimpers about “We just don’t have enough staff to police every parcel in our County.”
-Note also the hundreds of millions of dollars (our dollars) wasted on 29 County Assessor Offices would be significantly reduced if not completely eliminated. A PC or MAC can handle these simple calculations.
-Note remaining assessors could actually concentrate on Green Belt or FFA designated compliance issues, commercial and corporate tax issues and enforcement of tax law - for a change.
-We could budget and plan as we should be empowered to do via our Constitutional guarantees.
-No more violations of the Equal Protection Clause of the 14th Amendment.
-Local Governments would have a very clear understanding of revenue and better plan and budget.
-Revenues would actually increase (except for the Draconian Weber County policies) in 28 of 29 Utah Counties since all property is taxed equally and fairly on the real or actual value of a property at the point of sale.
-Contentious and disruptive behavior would cease or at least minimized since the State Constitution would be amended to say annual fair and equitable of all property.
-There would be no shifts or unpredictably in areas where the hottest real estate activity is occurring.
-No more circuit breakers or caps or deferred taxation schemes tied to individual outside business interests. No more pandering to special interest groups.
-No more Conflicts of Interest or appearances of COI.
-Schools would benefit by virtue of stabilized communities where families with children can actually afford their homes and not be displaced by second home and vacation/recreational residences.

(please feel free to suggest and add others “pros and cons” using the comments button)

Cons: (as I reread these I can't help but see these as actually "pros"....)

-Initial shock effects to School Districts and other taxing agencies used to “sucking the public boob”.

-Counties have to live within a real budget for a change. Some services might have to be cut back. Perhaps reduced library hours, emergency vehicles might not send out three huge fire trucks for a simple stroke or medical emergency call, like a kid getting bruised at a football game, etc.

-The Pineview Res. boys at Karen’s CafĂ© everyday for breakfast until about nine or ten o’clock, might have to change their schedules, for example.

-Boutique taxes like RAMP Grants, Bond issues, Sales tax hikes, etc. would be seen in a clearer light as independent issues.

-School Districts already under assault by Charter School competition would have to produce more and cut nonsense class work like under water basket weaving, etc.

-Assessor offices and possibly others would see reduced staffing and commensurate lowered budget allocations.

-People would actually understand their property taxes. Defaults and non payments would very likely decrease. Collection expenses would drop.

-Two and three Sheriff Deputy Vehicles responding to a traffic stop might have to be cut to one.

-Prison expenses might have to be mitigated by the inmates having to actually work on infrastructure maintenance for example. And hundreds of other cost cutting measures might have to be instituted by local taxing agencies.

-Someone suggested using retiree volunteers for some County "services".

Now surely you can add to the lists! Just click on the comments and then use the anonymous feature or your own “handle”.

And on the positive front…

Hatch and Bishop introduce APPLE Act again
The Salt Lake Tribune
Article Last Updated: 09/21/2007 01:20:31 AM MDT

Sen. Orrin Hatch and Rep. Rob Bishop are continuing their efforts on an education funding proposal linked to public lands. They introduced the APPLE Act for the second time in the House and the Senate on Thursday. The proposal would allow Utah and other Western states to take over 5 percent of the public land within their boundaries as long as that land is not in a national park or forest, a wilderness area or used for a military purpose. The money earned by selling or leasing that land would be invested in a fund in which the interest earned would go to education. "Utah should be commended for the resources it puts toward education, but our hands are tied as long as the feds have so much of our land locked up and off the tax rolls," said Bishop, a former high school history teacher. Scott Parker, Bishop's chief of staff, said he knows the bill is a long shot, but Bishop believes it is the right policy to help Utah schools. "He has said he will fight for this one until it becomes law or he dies, which ever comes first," Parker said. Bishop and Hatch argue that Utah routinely is at the bottom of the list in per pupil spending because education is funded by property taxes, which are hard to collect when 65 percent of the land is federally owned and therefore not taxable. - Matt Canham

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