Greater Hartford Real Estate Blog

I recently received an email from a reader interested in the West Hartford market. Because their question was related to property taxes, something people are fixated on most of the time, I thought I would share the conversation with the masses…

When looking online, every once in a while I am thrown off when i see two similar houses that have two totally different “estimated tax” amounts. A good example i found this morning is:

Any idea why that is?

Here’s most of the reason why the estimated tax amounts are so different in this case:

The local Multiple Listing Service automatically calculates taxes for the agent when they enter the listing into the MLS database. The system does not appear to do the calculations correctly if the town is doing some type of phase-in, or if the mill rate recently changed. In this case, West Hartford is doing a phase-in and the mill rate recently changed.

What agents should do to properly calculate the taxes is manually calculate them on their own or call the town tax department and ask for the current year’s property taxes for the parcel excluding any special adjustments for veteran status, senior citizen discount, etc. Agents really need to be more diligent about tax amounts because it’s something that buyers look at closely. The local MLS also needs to fix the program for automatically calculating taxes, but those requests seem to fall on deaf ears.

These are the most common reasons why you will see estimated tax amounts vary widely on seemingly similar properties, user and system error.

So, the correct taxes for Property A (based on the new mill rate of 37.09) is $5,698 and the correct taxes for Property B is $4,448, a difference of $1,250 this year.

And why the actual $1,250 difference in this case? There are a few reasons to explain that as well.

The assessment which drives the taxes is based off of some of the things the reader mentioned like square footage, lot size, # beds, # baths, etc. It’s also driven by what the Assessor sees as external and internal condition and the improvements the owners have made. The one major difference that I see between Property A and Property B is that on the Assessor’s website, Property A is called out as having an updated kitchen. That means when the owners of Property A improved their kitchen, they pulled town permits. That then alerts the town to place more value on the assessment for that property. Often we’ll see homeowners make improvements without notifying the town because they may get “penalized” with higher taxes. This type of system deters people from pulling town permits when they have improvements done on their home and creates a whole separate host of issues.

Additionally, when the town did its revaluation in October 2006, residents had the opportunity to challenge their assessment. Some homeowners choose to challenge, while others do not. So the homeowner on Property B may have challenged and received a modified lower assessment, while the owner on Property A did not.

Finally, the location may make somewhat of a difference. Property A is in a neighborhood that would have slightly higher home prices, so the Assessor probably has some way to factor that into their analysis.

In order to be perfectly clear on the tax amount for a property, call the town hall’s tax collection office and ask for the property taxes with no exemptions. Just don’t call on a Friday because they’re closed.

Property taxes are a sensitive subject in Greater Hartford. Just about every year there is a budget referendum in at least one local town as angry residents fight yet another property tax increase. The debate in some towns is more heated than in others (but we won’t mention any names).

You may be happy to know that rising property taxes are a hot topic in other cities and states as well. An editorial in this weekend’s Wall Street Journal highlights a number of areas that are experiencing increasing taxes at the same time as they see falling home prices. In Arizona, where there is a state property tax, property values have fallen 17% on average in the past year. But taxes are on the rise. Ouch!

Unfortunately the root cause of property tax tension throughout the US is likely to get worse. The economics of running a town are deteriorating. Let’s consider the revenue and expenses separately.

Nearly all of town revenue comes from property taxes. Although real estate has historically been an appreciating asset, that is perhaps not the case today. Let’s assume that property values have stagnated. Therefore town revenue has also stagnated.

Expenses, on the other hand, are rising even more quickly than their historical rates. Education (much of a town’s budget) is rising at 2.5x general inflation, healthcare (another significant piece) is rising at 2.0x general inflation. We all know about energy prices, which impact many of the services the town provides (police, fire, trash pickup, snow plowing, heating city buildings, …).

Revenue is stagnant while expenses are accelerating. We all better sharpen our pitchforks and ready our torches because in the current global economic environment, this dynamic looks like it will only get worse.  Other than protest, is there anything we could or should do?  Or should we just ride it out?  This is shaping up to be a big problem throughout the country.

Tax revenue funds the services that cities and towns provide to their citizens. I think we all get that.

Earlier this week, the Courant reported on West Hartford’s town budget proposal. The initial budget proposal is up 7% from the 2007-2008 budget, to $216 million. Click here for the proposed budget. Click here for the Town Manager’s presentation of the proposed budget.

A portion of the article addressed the property tax increases that West Hartford property owners will see in 2008. Unlike 2007, the first year of a 5-year tax phase-in, property owners will not see uniform increases of 4%. According to the article, “About 63 percent of West Hartford homeowners would see a tax increase of 10 percent or less, and 37 percent would see a tax increase greater than 10 percent, under Francis’ proposed budget.”

This morning I finally had time to sit down and see which bucket I would fall in with the property that I own in West Hartford. I pulled out my handy little phase-in tax spreadsheet and plugged in my assessment values.

Well, lo and behold, I fall into the group of tax payers that may see a property tax increase of greater than 10%. My taxes would actually increase 35% from 2007 to 2008 if the budget remains the same and the proposed mill rate of 38.11 holds.

How are people on fixed incomes supposed to deal with these increases? Particularly given the fact that the proposed budget doesn’t even expand town programs, it just maintains the status quo.

I’ve found that there is a lot of confusion about how taxes are calculated. If you’d like help calculating yours, feel free to get in touch. I can send you my spreadsheet, or I can calculate them for you.

Also, the West Hartford Town Council has scheduled public hearings on the proposed budget for March 27 at 2 p.m. and April 3 at 6 p.m. at the West Hartford Town Hall legislative chamber. You might want to stop by if you’re interested in participating in the budget process.