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County View: The facts pertaining to property tax valuations in Boone County

February 6, 2009 Columbia Business Times article by Tom Schauwecker

Mushrooms are kept in the dark, covered with manure and one hopes they grow. This article will cast light on the laws governing property taxation in Missouri and shed the manure spread by the ill-informed with hope that knowledge grows.

Real property tax classifications and effective tax rates

There are three sub-classifications of real property defined in Missouri law: agricultural, residential and commercial. The effective tax rate for agricultural property is about 0.70 percent, residential is nearly 1.2 percent, commercial is approximately 2.2 percent. Agricultural property valued at $100,000 would incur an annual tax liability of $700. Residential property with a market value of $100,000 is liable for $1,200 each year. Commercial real estate having a market value of $100,000 would result in a tax bill of $2,200. Missouri voters gave the General Assembly a blank check in August of 1982. A constitutional amendment overwhelmingly approved by Missourians resulted in three dramatically different tax bills for properties with identical valuations.

*Agricultural land is an exception to the fair market value basis of valuation and taxation. Agricultural land valuation is based upon a "use value" established by the University of Missouri College of Agriculture and approved by the Missouri General Assembly. The State Tax Commission of Missouri publishes and defines eight soil grades, which range in "use value" from $30 per acre to $985 per acre. Property taxes average from $2 to $5 per acre for agricultural land in Boone County. Few, if any, states enjoy a lower rate of taxation on agricultural land than Missouri.

Agricultural land and "billionaire tax breaks"

There is a 133-acre vacant tract of land located on the southeast corner of Nifong Boulevard and Sinclair Road near Mill Creek Elementary School. The City of Columbia by ordinance zoned this property as A-1 Agricultural upon annexation. A portion of this tract lies within the 50-year flood plain.The property tax classification is agricultural. The "use value" based upon soil, subject to periodic flooding, slope and cover is $300 per acre. A review of case law indicates that the current classification and valuation are appropriate.

Land in transition and "developers not paying fair share"

Missouri statutory and case law bestow favorable property tax status on all vacant land. Missouri law was amended in 1994 and states that filing of subdivision plat shall not affect the tax classification or increase the appraised value. All contiguous lots and lands for which a plat has been filed shall be combined and valued as a single parcel if no improvements have been made to such lots or lands.

There is a time value to money. A dollar today is worth more than a dollar received a year or two from now. There is an ample supply of vacant commercial and industrial land in our local market. State law requires the assessor to consider current supply, demand and the absorption period of vacant tracts with unknown potential in the valuation process. Recent deeds in lieu of foreclosure indicate the speculative bubble for vacant land in Boone County may have burst.

Regional Economic Development Inc. has identified the No. 1 "shovel ready" site as the vacant 103 acres located on the northeast corner of Providence Road and Southampton Drive near Rock Bridge High School. The City of Columbia by ordinance has zoned this parcel as O-1 Office. The infrastructure is super adequate. Sewer, gas, electric, water and streets are in place and complete. This parcel was subject to appeal at the Missouri State Tax Commission. The property tax classification of agricultural was deemed to be appropriate. The valuation was reduced from $10,000 to $8,500 per acre in a ruling by the State Tax Commission of Missouri. This decision was rendered shortly after the voters of Columbia approved the lease/purchase of Stephens Lake for $61,242 per acre. The tax commission decision set a precedent for the valuation and classification of commercially zoned tracts of land with unknown potential.

Subsidized housing and "the $700 duplex"

"The methodology set forth in Maryville Properties v. Nelson, as modified by the Western District Court of Appeals, is the correct methodology to determine market value of subsidized properties." Boone County negotiated a settlement that is 10 percent higher than valuation prescribed by case law. The developer is a Boone County resident.

The State Tax Commission of Missouri and "school funding deficits"

The Missouri State Tax Commission is charged with the responsibility of monitoring the assessment accuracy in each of the 114 counties and the city of St. Louis. A biennial Assessment Ratio Study is used to accomplish this oversight function in Missouri. Residential, commercial and agricultural properties are subject to review. The tax commission has certified to the Department of Elementary and Secondary Education for 20 consecutive years that Boone County valuations are accurate as prescribed by law. Local school districts receive about 80 cents or 80 percent of every property tax dollar we pay. The assessed valuation of Boone County was $650 million in 1989. Last year the total assessed valuation of Boone County was $2.2 billion. Need I say more?

Reassessment 2009 and "Homeowners spoil for fight over taxes"

Market is down. Assessments stay up. These headlines were printed above the fold on the Metro page of the St. Louis Post Dispatch on Jan. 25, 2009. Not a day goes by that I am not asked when I’m "going to lower taxes." Missouri assessors will make difficult decisions this year in the midst of a turbulent real estate market. The Missouri General Assembly amended a 10 percent usury limit during the late 1970s. Mortgage rates exceeded this threshold and Missouri markets were frozen, nothing sold. We survived 16.25 percent interest rates on one-year adjustable rate mortgages in 1982. Federal income tax reform dramatically altered the demand for multi-family housing in 1987. No one has experience with current market conditions. We are carefully analyzing sales in the fourth quarter of 2008 and the first quarter of 2009 before we decide what changes are appropriate this year.

Tax Increment Financing and "blight"

A local government may declare an area "blighted" and freeze property taxes paid by developers at pre-development levels. Any new or "incremental" property tax revenue from improvements is diverted to help pay off bonds issued at the start of the project. Half of new sales, utility and earnings taxes generated by the project may also be used to pay off infrastructure. TIFs expire after 23 years. The Columbia City Council passed a resolution authorizing the use of this "economic development tool" in the Central Business District.

The Cordish Co. developed the Power and Light District in Kansas City, Mo., utilizing a TIF in 2008. Cordish is contesting the property taxes for its entertainment district. Last year the Jackson County assessor’s office placed a value of $61 million on the Power and Light buildings. Cordish filed a lawsuit Dec. 31, 2008, claiming its property was worth only $12 million, not $61 million. Kansas City taxpayers will make up the difference if revenues fall short of debt service requirements. How does Columbia avoid this risk?

"Tax collectors and the prostitutes"

Some perceptions never change. In ancient times a tax collector was aligned with the enemy or occupying force. Tax collectors cheated people of their money. Prostitutes and tax collectors were considered public sinners. You can view my "sins" on the Parcel Information Viewer found on the assessor’s home page located at www.showmeboone.com.

Tom Schauwecker has been the Boone County assessor for 20 years. His e-mail address is TSchauwecker@ boonecountymo.org


Homeowners spoil for fight over taxes

Sunday, Jan. 25, 2009 St. Louis Post-Dispatch article by Paul Hampel
Reprinted with permission of the St. Louis Post-Dispatch, copyright 2009

Protests over property reassessments in St. Louis County don't usually begin until tax bills arrive in the spring.

But a groundswell of opposition has arisen several months early this year. Many homeowners, expecting their assessments to fall along with the housing market, have been irritated by a county official's expectation that assessments would be down only slightly, at best. And some values would even rise, county revenue director Eugene Leung said last month.

Since then, legislators and County Council members have been fielding complaints from constituents.

"I've had calls to my office and have also heard people complaining when I've been out and about in the community," said County Council member Steve Stenger, D-south St. Louis County. "The predictions from our local government that values will remain stable, or even go up — people are definitely troubled."

Council member Greg Quinn, R-Wildwood, predicted a severe backlash come May, when the tax bills are mailed, if assessed values don't decline.

"I'm already hearing a lot of complaints from people who thought their assessments were too high last time (2007) and who are going to be very angry if they don't drop this time," Quinn said.

Complaints prompted state Sen. Eric Schmitt, R-Glendale, to file legislation that will require assessors in St. Louis County and the city of St. Louis to be elected, rather than appointed. Schmitt called the current system "flawed and out of touch."

Schmitt said Leung's assertion "defies common sense."

"People know that their homes are not worth what they were two or three years ago," he said.

At present, only three jurisdictions in the state — St. Louis, St. Louis County and Jackson County (Kansas City) — have assessors who are appointed. All other counties elect their assessors.

St. Louis County's assessor is Phil Muehlheausler; his city counterpart is Ed Bushmeyer.

County spokesman Mac Scott said county officials had not had a chance to examine Schmitt's proposal.

"But of course, we're always interested in ways that we can improve county government," he said.

Bushmeyer said he was not acquainted with the legislation and did not have an opinion on it.

STEADY VALUES?

The assessed value of county property jumped 22 percent in 2007, sending many tax bills soaring. Media accounts reporting double-digit drops in home prices over the last year have led many homeowners to expect a similar drop in assessments.

But Leung, in an interview last month with the Post-Dispatch, said major drops in values may have occurred in other markets but not the St. Louis area.

"Values here held steady," Leung said then. "It's a desirable area."

He said most of the county's 365,000 residential properties could expect to see a 2 to 3 percent decrease in real estate values. (The county gets about one fourth of its annual budget of $504.6 million from the property tax.)

Leung declined a request for an interview for this story.

The county's calculus for determining "comps," or comparable home sales, ignores market conditions, critics say.

The county excludes sales to settle an estate, sales involving banks or other financial institutions, sales of homes that the county deems to have been on the market too long and, most notably, sales of foreclosures.

Leung said that the county does not include foreclosures in its comps because they are "anomalies" that do not reflect the market as a whole.

But in a document the county published last month as part of its application for federal stimulus money, the county said, "Nearly 5,000 foreclosures are anticipated in 2008, leaving the market saturated with vacant properties furthering the decline of property values."

Scott, the county spokesman, said that statement did not contradict what Leung said last month.

"Foreclosures are counted, they're just not thrown in the hopper with all the other comps," Scott said. "They are looked at separately, essentially by hand, by an appraiser."

Scott said county appraisers would make judgment calls on the effect of foreclosures on nearby properties.

Property owners and real estate agents say that foreclosures have had a strong negative impact on the market here.

Nick Kasoff owns 10 properties in north St. Louis County. Most were foreclosures that he purchased from banks.

Kasoff, 42, of Ferguson, said residents trying to sell homes in the midst of the current recession couldn't compete with foreclosure prices.

He recently bought two foreclosed houses on a "nice little street in Ferguson" for $48,500 and $41,000.

"There's a guy three doors down who's trying to sell his for $65,000, but he doesn't have a prayer," Kasoff said. "There's so much foreclosure property out there and it's selling for such low prices that owner-occupants can't compete."

Linda Boyd-Shell, owner of Boyd-Shell Realty in St. Charles, concurred.

"The property values of the neighboring houses go down when you have foreclosures nearby," she said. "Case in point: I listed a nice house in Affton for $149,900, which it should easily go for, but it's been sitting on the market for six months. And the reason is that there are two foreclosed houses just down the street that are going for $99,000 and $110,000."

Banks took back more than 4,200 homes in the county last year. That's a 12 percent jump from the previous year, but not quite the 5,000 that officials had predicted in the stimulus-related document. In St. Charles County, the assessor's office recorded 1,132 repossessions, up 26 percent. Year-end figures were not available for St. Louis.

CALL FOR CONSISTENCY

Schmitt's proposal calls for elective assessors statewide as soon as 2010.

"This would bring some accountability to that office," said Schmitt, 33, a freshman senator. "When the market was good, property values rose. Now the market's not strong, so residents are expecting some consistency."

Schmitt's bill faces an uphill fight, said state Sen. John Griesheimer, R-Washington.

"I share his frustration, but it would have a very hard time on the Senate floor," Griesheimer said. "I can see, number one, St. Louis County and Jackson County legislators rallying around to filibuster it."

State Sen. Joan Bray, D-University City, said she would oppose it. "I would fight that, and I think I have colleagues in urban areas that would fight it," she said.

Bray said she was concerned that, if assessors had to run for election, they would submit assessments that are artificially low, "because they would be unduly influenced by the ballot box."

However, Bray voiced skepticism over Leung's assertion that values in St. Louis County had held steady.

"We just sold a home and I know how much less we got for it than we would have a year and a half ago," she said.

In fact, Bray sold the home in the 7100 block of Washington Avenue in University City in October for $475,000. That's about 15 percent less than the $560,100 market value that St. Louis County set on the property in 2007.

Even if the county did significantly decrease real estate values, taxing entities such as school districts, which get the bulk of property tax revenue, would not necessarily feel the pinch.

That's because they are allowed by law to collect the same amount of revenue as the year before, even if property values plummet. To do so, they may "roll up" their tax rates.

"That's true," Schmitt said. "But in that event, members of those boards would have to take a stand. And they'd be accountable to voters."

Reprinted with permission of the St. Louis Post-Dispatch, copyright 2009.


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