Dare County postpones property revaluation – good for some but not for others

The good news for some of us is that the Dare County Board of Commissioners decided this week to postpone property revaluation for a year.

The bad news for some of us is that the Dare County Board of Commissioners decided this week to postpone property valuation for a year.

If you own property on the oceanfront, this was not the news you wanted to hear.

If you own property in subdivisions or other residential areas off the oceanfront, it is good news.

At the meeting of the commissioners on Tuesday, Sept. 6, county manager Bobby Outten outlined the revaluation situation for the board members.

The state of North Carolina requires that counties revalue property at least every eight years.  The purpose of a revaluation is to reassess properties at 100 percent of market value as of the revaluation effective date. 

A revaluation will change the county?s overall tax value, sometimes significantly, which can in turn affect the property tax rate for the county budget. 

Dare County?s last revaluation was in 2005 when property values were skyrocketing because of a robust real estate market. The market has since seen a dramatic downturn. Foreclosures, the county says, are at record highs, and typical qualified sales used to establish values in a revaluation are scarce.

Though counties are required to revalue property only every eight years, Dare County decided in 2005 to revalue every five years. 

Remember that 2005 was at a time when real estate values were rapidly escalating, and many properties, especially those on the oceanfront, were worth much more than what they were listed for on the county?s tax rolls. And they had been undervalued for tax purposes for at least four years before the 2005 revaluation.

Thus, Dare County decided to revalue more frequently than the required eight years.

In the summer of 2005, the real estate bubble began bursting, and property values started a downward spiral.

According to Outten?s presentation to the commissioners this week, the tax department has reviewed 65 percent of the 35,400 residential properties in the county.  Preliminary numbers indicate that:

• The value of property in Dare County has decreased 17 percent since 2005.
• The value of property in those areas on the oceanfront has decreased by 24 percent.
• The value of property in residential and subdivisions and areas not on the water decreased by 12 percent.

Revaluation aims to adjust value of property and property taxes to maintain a ?revenue neutral? mode.

Basically this means that the county will revalue to take in the same amount in taxes, adjusting rates accordingly.

This was good in the real-estate boom years.  Values went up, and property taxes were adjusted down to keep the revenue the same or ?neutral,? though in those years many of us saw our tax bills increase.

Now, however, with a struggling real estate market, property values are plunging, so keeping the revenue ?neutral? means someone will pay.

Outten told the commissioners that 73 percent of county properties reviewed, mostly in the non-oceanfront areas, would see a tax increase.  The average, he said, on a property valued at $246,000 would be $46 a year. The most any property would increase, he said, would be $57 a year.

Meanwhile oceanfront property owners would see their taxes reduced ? by an average of $290 a year.

Outten told the commissioners that they had three options:

• Continue with the revaluation for 2010.
• Postpone the revaluation for a year until 2011 ? at a cost to the county of $43,000 for refiguring parts of the revaluation.
• Or postpone the revaluation until 2013, at which point the revaluation is required by state law, at an additional cost to the county of about $246,000.

Outten said that postponing the process for a year might give property values more time to stabilize, though the difference was not expected to be significant.

The discussion by the commissioners centered on the fact that the increase in taxes, though not huge, would fall disproportionately on year-round residents who live in residential areas off the oceanfront. And it would come during tough economic times when unemployment in the county is high.

?I hate to see people with lower incomes bear the burden of the tax increases,? said Commissioner Jack Shea.

?If you?re not making anything, that $50 is a lot,? said Hatteras Island Commissioner Allen Burrus.

The commissioners acknowledged that the situation might not change much in another year, but said they hoped more people would be working in 2011.

And that?s the sentiment that carried the day.

Commissioners voted unanimously to delay the revaluation for a year.

Outten told them, ?You have to know your phones are going to ring.  Ours already have.?

The county manager was referring to oceanfront property owners who have noticed that they are paying taxes on higher values than their properties are now worth on the market.

The commissioners decided they would rather hear from those property owners than the folks who live and work here and are struggling with the economy.

And it is also true that oceanfront property owners, in the earlier years in this decade, were paying much lower taxes on their property, which was undervalued.

Seems it all evens out over time.