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Published 3/9/06 in the Newton Citizen
By Jay Jones, Staff Reporter
jay.jones@rockdalecitizen.com

CONYERS — Property owners in Newton and Rockdale counties will have something to think about this fall if a proposed state amendment that would limit assessed property value increases to 3 percent is approved by legislators.

House Resolution 162 would place a cap on property value increases at 3 percent or the rate of inflation, whichever is less, from one year to the next. The resolution received favorable review by the state House Ways and Means Committee last month. It could reach the House floor for a vote before the General Assembly adjourns later this spring. The current system of assessing property values is based on using fair market value.

If the resolution is passed, Georgia voters would be asked to vote on a referendum in November that would change the way property value is assessed for tax purposes.

The proposed limitation on assessments would apply to taxation by all state, county, municipal and school tax districts and would apply to all real property. The highest the local tax assessor could value property would be 3 percent over the previous year or by the rate of inflation, whichever is less. Over the past five years, the rate of inflation has ranged from 1.6 to 3.4 percent, as measured by the Consumer Price Index.

Local governments and school systems would be most affected by the change, since property taxes make up a large portion of their revenue. It is for this reason that the Association County Commissioners of Georgia has said it opposes the legislation and has urged elected county officials to contact their legislators to voice their opposition.

Newton County Chief Appraiser Tommy Knight said the proposed cap “will create a property tax system that is unfair and inequitable.”

Knight has submitted a letter stating his opposition to state Rep. Doug Holt and state Sen. John Douglas.

The major problem with the legislation is the assumption that all property increases in value at the same rate, Knight said.

“As chief appraiser, I see and analyze all property values within Newton County. From these statistics, I can assure you all property does not increase at the same rate. Commercial property in a developing area may increase as much as 50 percent in one year, while surrounding residential areas increase at a 3 to 6 percent rate,” Knight said.

In some cases, the cap could result in commercial owners being assessed on a lower percentage of value than a residential homeowner, Knight said.

Knight said it’s also possible for two property owners side by side to have appraised values that are vastly different — conceivably by hundreds of thousands of dollars for commercial owners — though both are paying the same millage rate to the same levying authorities.

“Everybody in the neighborhood could be paying different amounts, and I can’t for the life of me figure out how anybody could think that would be fair,” he said.

Knight said the bill also works under the assumption that all areas of the state are growing at the same rate.

“In Newton County we are experiencing a strong local economy; however, there are many areas in the state that are not as fortunate. These local governments will suffer the most and perhaps be forced to cut local services due to the proposed property tax limitations,” Knight said. “Perhaps the most unfortunate of all, it would create a tax system where new property owners and businesses would pay a higher amount for local government services.”

Rockdale County Tax Assessor Lamar Sims said if the measure is approved, he foresees more property owners appealing their tax bills based on the fact they are paying higher taxes than their neighbors.

Also, the expected drop in revenue for local governments by not calculating taxes based on fair market value likely would cause county and school officials to increase millage rates, Sims said.
That suits state Rep. Edward Lindsey, R-Atlanta, just fine. As sponsor of the legislation, he said the intent of the proposed state amendment would be to have property taxes based on a person’s actual investment and not by market values that are out of their control.

“The going rate in the area is not the investment that person has put in their property,” Lindsey said. “Is it fair for the guy who paid $100,000 for his house to pay taxes that are based on five times the value of his property because someone paid $500,000 for a house next door? He’s never realized that gain and that is the fundamental failure of the current system.”

Lindsey said that local schools and governments have enjoyed what he called “back-door tax increases” through higher assessed property values. Capping property values at 3 percent would put more weight on the process of increasing millage rates — a process that requires public hearings.

Placing limits on property assessments is not new. Several states, including California and Arkansas, have such caps.

Alan Essig, executive director of the Georgia Budget and Policy Institute, wondered whether 3 percent is even the right level. Arkansas caps at 5 percent, while Washington, D.C., has a cap of 12 percent, he said.

Essig said the proposed amendment stems from problems in Fulton County where property values have skyrocketed in recent years and where people are facing being taxed out of their homes.

The problem he sees in the 3 percent cap is that it’s not tied to people’s ability to pay taxes. Essig said the legislation does not target homeowners who are truly in danger of being taxed out of their homes, but rather anyone who has a rapidly increasing property value.

Essig suggested that a “circuit breaker” could be an alternative that ties the value of homes to people’s income.

“With the circuit breaker, if property taxes exceed 3 or 3.5 percent of a homeowner’s income, they would be eligible for a tax break through Georgia’s income tax,” Essig said. “It’s a question of whether we measure excessive taxation by how rapidly a property value increases, or by how much income goes to property tax payments.”