The Governor has ordered reassessment of Marion County’s real property. In the meantime, Gov. Daniels has enlisted former Governor Joe Kernan and Supreme Court Chief Justice Randall Shepard to head up a commission to “find long-term solutions to the property tax crisis, including the possible elimination of township-county assessors and other government streamlining ideas.” Gov. Daniels hopes to get the commission’s report by December. The Governor has also apparently instructed Marion County property tax payers to pay their 2006 level of tax as opposed to what they apparently owe in 2007.
A couple of observations: First, as Advance Indiana points out, this would seem to create a potential conflict for Justice Shepard if some of his recommended legal changes get adopted, then challenged, then reviewed by the Indiana Supreme Court. Second, does anyone know where the Governor gets the authority to order reassessment for Marion County and to freeze Marion County tax payers’ bills at the 2006 level for the time being? I assume he wouldn’t do anything this monumental without having solid authority, but it seemed like a relevant question. Also, is Marion County in risk of defaulting on anything important as its tax revenues are being dried up – first by the elimination of the inventory tax, second by the reduction of payments by the State in the form of the property tax replacement credit and homestead credit, and third by the Governor’s tax freeze on Marion County property tax levels?
In a post entitled, Sir, The Taxpayers Are Revolting, Doghouse Riley gives us a brief history of our current property tax situation:
There’s a fairly straightforward explanation for what’s happened to Indiana’s property taxes: the state Supreme Court found the assessment system unconstitutional; successive state legislatures found it more prudent, from a re-election standpoint, to punt the issue; a single-party gained control, including an incompetent, self-aggrandizing Governor who used the budget process to make himself look good; and most directly, the ill-considered abolition of the business inventory tax with no specification as to its replacement. Yet there’s a continual drumbeat of “don’t point fingers, just solve the problem,” notably from the Indianapolis Star, as well as other Daniels die-hards who realize their man has fucked up Big Time. Daniels, who has been lauded–by no one so much as himself–for his “fearless” leadership, simply refused to have anything to do with the issue, hoping, perhaps, that astronomical local tax increases would gnaw a chunk from the man once considered his most likely ’08 challenger, Indianapolis mayor Bart Peterson. Now he sits on a state budget surplus, not to mention what he’s raked in selling off taxpayer assets, and does his best Hamlet–assuming Hamlet was played by a 58-year-old with a comb-over (which he sometimes was) and assuming he tried to get his picture in the paper every day (which he didn’t).
[tags]property taxes[/tags]
Doug–
The history of Indiana’s property tax is more twisted.
In 1986, the General Assembly created an assessment manual that required local tax officials to assess real estate based on the real estate’s resemblance to “model” real estate.
These “models” were generic descriptions of real estate (a model bungalow, a model shed, a model warehouse, etc.) whose values were determined according to cost tables based on 1985 valuation data from Marshal Swift Valuation Service (and which were never updated after).
So, for example, if you owned a one-story bungalow, the 1986 assessment manual featured a “model” one-story bungalow whose assessed value was assigned by the manual according to the Marshal Swift cost table.
The theory was that assessors could skip the hassle of collecting market data and, instead, just assess all property based on these “models,” using the values assigned to the models in the cost tables.
Sounds good in theory. If everyone with comparable property were assessed using the same “model,” then their assessments should have been uniform.
In practice, it created disparities between, say, a new bungalow that cost little to maintain and an old bungalow that cost a lot to upkeep. Under the 1986 assessment manual, the two bungalows were assessed the same.
A group of homeowners in the Town of St. John, Lake County, filed a lawsuit in 1994 or thereabouts, alleging that because the assessment of real estate was based on these models and cost tables, then it was impossible for homeowners to show that they had been assessed unfairly.
In fact, the manual precluded any evidence of what a home’s fair market value was.
An aggrieved homeowner with a lousy assessment could only flyspeck the assessment manual and try to show that an error in the mechanical application of these models and cost tables resulted in an assessment that was higher than it should have been.
Judge Thomas Fisher of the Indiana Tax Court (which was also created in 1986 to hear appeals in this topsy turvy property tax system), declared the entire system unconstitutional on grounds that the Indiana Constitution required property to be valued based on market data.
Judge Fisher said that under Article 10, section 1 of the Indiana Constitution, “all property is to be assessed and taxed equally and uniformly based on the property wealth it represents. In order to effectuate this directive, Indiana’s statutory system of real property taxation must be based on a system which uses market value as the measure of equality and uniformity.” Town of St. John v. State Bd. of Tax Com’rs, 665 N.E.2d 965, 974 (Ind.Tax 1996).
Judge Fisher ordered the State to devise a constitutional system by 1998.
The State appealed, and the Indiana Supreme Court reversed the Tax Court.
The Supreme Court said the Indiana Constitution does not require property to be assessed based on fair market value, but allows the General Assembly discretion to devise how to achieve uniform and equal assessments and rates of taxation.
Chief Justice Shepherd dissented, asking how the General Assembly was supposed to devise a fair property tax system if it did not have to base such a system on fair market value? The Chief Justice stood with the Tax Court.
Justice Boehm did not participate in the decision, because his wife Peggy was a Commissioner of the State Board of Tax Commissioners, which was partly responsible for the screwed up system. 675 N.E.2d 318.
On remand, the Tax Court said, Ok, the Indiana Constitution may not require fair market value as the basis for our property tax system, but it does require that the system be based on some sort of objective, real world evidence that taxpayers can meaningfully challenge. The Tax Court ruled the system was unconstitutional (again). 675 N.E.2d 318.
The State appealed again, and the Supreme Court affirmed the Tax Court in part, and reversed the Tax Court in part.
The Supremes said again that the State was not confined to using fair market value to determine whether property assessments were just.
The Supremes agreed with the Tax Court, however, that the “models” and cost schedules used in the assessment manual were constitutionally screwed up, because it was impossible to challenge their application.
And then the Supremes said, “the Property Taxation Clause of the Indiana Constitution does not establish a substantive right to individual assessments evaluating property wealth, nor does it mandate the consideration of independent property wealth evidence in individual tax appeals. Because persons filing tax appeals possess no constitutional entitlement to present what the Tax Court described as ‘competent real world evidence,’ we reverse the Tax Court’s order that the State Board must consider such evidence.”
http://www.in.gov/judiciary/opinions/previous/archive/120401.bed.html
The long and the short of it is: By law, your assessment does not have to be based on fair market value.
Your assessment is what is called “true tax value,” which is expressly defined as anything BUT fair market value.
For those legal beagles still with me, true tax value is at IC 6-1.1-31-6, which says:
“With respect to the assessment of real property, true tax value does not mean fair market value. Subject to this article, true tax value is the value determined under the rules of the department of local government finance.”
http://www.in.gov/legislative/ic/code/title6/ar1.1/ch31.html
You think the courts ordered a reassessment based on fair market value? Boy, are you ever wrong.
The General Assembly, on the authority of the Supreme Court, ordered a reassessment based on whatever the Department of Local Government Finance says your assessment should be based on.
Good luck figuring it out without a law degree and appraiser’s license.
F.
I was rather surprised that Kernan and Shepard would agree to join a committee studying the property tax issue, so I checked the press release (http://www.in.gov/dlgf/news/07182007-reassessment.html) from the Governor’s Office announcing their appointment. There is important difference in what the Indianapolis Star is reporting and what the Governor’s press release said relating to the Commission. The Governor’s media release states:
“As he addressed immediate property tax problems in Marion County, Daniels also announced a plan to seek long-term solutions for reform and restructuring of local civil and school government. He named Indiana Supreme Court Chief Justice Randall T. Shepard and former Governor Joe Kernan to co-chair a commission that will examine and make recommendations on such topics as what local government offices could be eliminated to achieve efficiencies and cost-savings and how local governments might restructure or consolidate to reduce overhead and other expenses.”
There is absolutely nothing here about having Shepard and Kernan look into property taxes. They are to deal only with looking for efficiencies in local government. It looks to me that the Governor has pulled a bait and switch on the Chief Justice of the State and a former Governor. He talks them into joining a Commission on Local Government organization and, having gotten their cooperation, uses them as props for this announcement on freezing Marion County Property taxes.
The Indianapolis Star, which is either a completely witless enabler for the Governor’s antics, or just plain incompetent, screwed up the story.
Thanks Falks, Good info.