Tie Assessed Property Values to Market Values

Tax lightning is still striking New Mexico property owners. One of the problems associated with tax lightning is the convoluted way in which property is assessed and thus taxed in New Mexico.

Our own Micha Gisser, professor emeritus at UNM, wrote in the Albuquerque Journal about one component of the solution, that is, returning assessments to market values. This more logical system, as outlined by Gisser, would operate along the following model:

The market values of all homes are estimated as frequently as reasonably possible. By law, the assessed values of all homes are set equal to their estimated market values. The property-tax rate is by law defined as the ratio of the total required revenue to the aggregate estimated market values of all homes.

This sounds like a good system moving forward, but I’d like your comments.

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2 Replies to “Tie Assessed Property Values to Market Values”

  1. I SENT THE FOLLOWNG E-MAIL TO PROF GISSER WITH REFERENCE TO HIS ARTICLE

    It was with a great deal of interest that I started reading retired professor Micha Gisser’s article, “Assessed Values Should Be Tied To Market Values.”, Albuquerque Journal May 13, 2010. My initial thoughts were, at last, someone one who really understands the situation. However, my expectations were premature and short-lived as he simply continue to spout the same tired and troublesome rhetoric advanced by our tax and spend legislators. I felt a response was called for.
    Professor Gisser stresses the words “Market Value” yet fails to provide a precise definition for market value. I learned in real estate school that “market value” is that price agreed to between “A WILLING BUYER AND A WILLING SELLER.” Now it appears that market value is drifting to mean an amount dictated by the county assessor. For the record, I passed the New Mexico Real Estate Brokers Exam on my first sitting. That means either I am a somewhat intelligent individual or the Brokers Real Estate exam is a farce!
    The ongoing controversy with this so-called “Tax Lightning” issue demonstrates, at least to me, that no one has a true understanding of the situation, not our loophole legislators nor our know-more but understand- less judges, not the county assessor and not even Professor Gisser. What should have been found to be “unconstitutional” is the so-called 3% CAP on the yearly-assessed property values. In actuality, this is not a 3% cap but rather a deceptive loophole to increase property values year after year without question and without limits. Have you ever tried to appeal your property tax valuation. You have a snowball’s chance in Hell of prevailing.
    As a practical example, a house is purchased by a “willing buyer” from a “willing seller” for $100,000.00. In the 30 years it would take an average mortgage to be paid off, the county assessor’s presumed value on this house will have increased from the initial $100K TO $242,740 with a corresponding increase in property taxes, each and every year. Mortgage or not, all properties are increasing in value year after year after year without any provision for obsolescence. Common sense tells us that a thirty or forty year old house does not have the same amenities of a new home! Tax assessors do not even consider that.
    The argument made in the “Tax Lightning” litigation was that although these numerous “willing buyers” did agree to purchase these properties at what was mutually agreed to be a fair price, “fair market value”, that for property tax purposes, the houses are not worth the price the “willing buyer” paid the “willing seller.” How ridicules is that and yet, the two clueless judges swallowed that argument, hook, line and sinker. I do not recall any stipulation ordering the real-estate agents to return any portion of the 6% commission earned on those transactions. All of those “willing buyers” qualified as “Tax Lightning Victims” even though they were “willing participants” in the transaction.
    The problem with Professor Gisser’s solution is the “cure is worse than the disease”. An overly simplistic approach that would be financially devastating to the majority of homeowners. A bill was introduced in the last legislative session to assess all properties at this “magical market value” level. The first reaction from a Santa Fe legislator was that if this bill were to become law, Santa Fe would see a mass exodus, as people would be unable to afford or to pay those levels of property taxes. Even Professor Brescia reached the same conclusion. “Tax Lightning Strikes Again”, Albuquerque Journal – May 11, 2010. Market Value is a vague and largely meaningless term but is an extremely insidious concept, much to the delight of real-estate agents and tax assessors but as always, detrimental to the homeowner.
    House Bill 623-2001 states that property tax values, with certain exceptions, shall not be increased by more than 3%. Nowhere does in HB623 does it state that property values SHALL BE INCREASED EACH AND EVERY YEAR BY THE AMOUNT OF THE CAP. Yet, this is exactly what county assessors are doing. Luckily for all property owners, this mythical cap was not set at 5% or 10%. Since this provision has been in effect since 2001, property values have risen 30% with a corresponding increase in property taxes.
    The examples Professor Gisser provided are extremely amateurish and provide no meaningful comparison to the property tax problems facing us today. Really Prof Gisser, $6 and $14 tax bills?
    These are hard economic times and not everyone has the good fortune of being a retired professor of economics from a taxpayer-supported institute of higher earnings! With $6 and $8 property tax bills, one can see why the grass is so green in Tanoan.
    Problems are so easy to solve with other people’s money, the essence of Economics 101.

  2. One challenge is adding in improvements to properties and excess wear and tear. This requires checking building permits and driving by the properties with video cameras.

    I fear that the skills needed to measure and value changes are beyond the ability of the assessor’s staff, so there is too much room for “judgment” which will favor some and penalize others.

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