Aha! I found a decent explanation, finally, about Prop A and how it functions in a declining real estate market. As described here, we experienced a 6% drop in our 2007 property assessment. Now I can’t show where the appraiser got their information, but I can now show why some folks’ assessment will jump, wilst others drop.
Oakland County published this wonderfull brochure entitled “A Guide to your Property Taxes and Proposal “A”. Open it up and give it a read when you’ve got a clear head and a little time to wrap the noggin around it.
The short story for State of Michigan property owners: “Taxable Value is the lesser of the State Equalized Value or Capped Value, except the year following a transfer (sale).”
On page 7 of the Oakland County Guide there is this quote:
This example illustrates a transfer of a property in 2001. The property became uncapped and then recapped in 2002. The year of recapping the State Equalized Value (SEV) becomes the new taxable value. The SEV will increase or decrease as it adjusts to market conditions. The capped value increases by the Consumer Price Index (CPI) assigned for that year. The Taxable Value is determined by using the SEV or Capped Value, whichever is the lesser, except the year following a transfer. (emphasis added)
So, there are two forces at work here on our assessments. One is the housing market and how it affects appraisal values for your community. The other is the Consumer Price Index (CPI). The CPI is what the CPI is and if you purchased long enough ago that the difference between your SEV and Taxable Value will not be affected by the percentage drop in the area housing market, your assessment will jump by the CPI percentage.
If the difference between your SEV and Taxable Value will be obliterated as a result of the drop in the area housing market, then your assessment will drop, because they assess based on the lower of your SEV or Capped Value.
Clear as mud? Right? Right.
Discuss amongst yourselves…..