The mythical Vermont town of Bayer completed a reappraisal in 2005. By all measures, the reappraisal accomplished the goal of setting the Grand List to market values as of April 1, 2005. The data used to establish these values was complete and accurate. The tax bills went out and the town settled down.
It is now late 2012 and a lot has happened in the almost eight years since the reappraisal. The most dramatic was the bursting of the housing bubble. In some states like Florida and Nevada the value of homes fell more than 50%. In many areas of the country the only sales recorded were bank foreclosures. Vermont experienced a relatively modest decline. The Town of Bayer had a few foreclosures with sale prices well below the assessments. Generally, Bayer had very few sales of any kind. When there was an “arms length” sale it was often slightly below the assessment.
Mortgage rates fell to historic lows and a few residents of Bayer were able to refinance. If you were buying or refinancing you had to get an appraisal to support the loan. Those appraisals almost always came in lower than Bayer’s Grand List assessments. The Listers in Bayer started to get grievances supported by appraisals and sales. The volume of appeals was low, 1%-3% of the accounts each year. Over four or five years the Listers lowered around 10% of the total accounts in the Grand List because grievances supported the fact that the assessments were above current market values.
The Listers in Bayer started to see that different types of properties were affected to different degrees by the housing bubble collapse. Bayer has some vacation and residential condos. The condos took a bigger hit than the general housing market. High end homes had very few sales, but when they did sell the price was for the assessment amount or slightly higher. The retail commercial market suffered more foreclosures than the residential market. Many of the foreclosed commercial properties have sat vacant and on the market for years.
The residents of Bayer were not hit by major layoffs. They did became very cautious however. There has not been a new home built in Bayer for three years. Generally, the residents of Bayer maintain their properties. Instead of buying a larger, fancier home they occasionally put on an addition. Some homes had internal upgrades, remodeled kitchens and baths. Bayer does not require building permits for internal work. It has been nine years since many of the homes have been inspected by the Listers. Bayer also has a few properties were the owners are not in foreclosure but they are close. The maintenance of these properties has been put off and the buildings are showing it.
The memory of the 2005 reappraisal is still fresh to the residents of Bayer. No one wants to go through another reappraisal sooner than they have to. Most residents of Bayer recognize that the 2005 reappraisal was done well. The problem: the 2005 reappraisal was a snapshot of the conditions in 2005 and conditions have changed. Conditions have changed and the majority of the Grand List has not. Many of the accounts that grieved have been lowered by the Listers because the owners made a compelling case. However, the Listers are very aware that properties similar to the ones that grieved have not been lowered. The Listers are also aware that some types of properties have lost more value than others. The Town of Bayer has several different slices of the real estate market and they have not moved in unison over the last eight years. Finally, the Bayer Listers know that many of their neighbors have remodeled and renovated without getting building permits.
The current Bayer Grand List generally reflects the market conditions in 2005, it does not uniformly reflect the market conditions in 2012. Some individual accounts have been lowered via grievances while others remain at 2005 values. Some types of properties have lost more value than others. By April 1, 2013, much of the the data collected for the 2005 reappraisal will be outdated and is now incorrect. Since 2005, inequities have crept into the Bayer Grand List. This has happened not because someone did something wrong. The Listers correctly lowered the assessments for the legitimate grievances. The market does not move the same for all types of properties and no one could have forced the market to behave differently. The Town of Bayer’s zoning ordinance does not require building permits for internal work and it is unrealistic to expect property owners to get permits when they are not required. Inequities creeping into Grand Lists are inevitable. The Grand List is a snapshot of conditions in the past and conditions have changed. Individual accounts have grieved, market slices have moved differently and some properties have been modified without permits. The Bayer Listers need to do another reappraisal.
The State of Vermont tries to measure this condition. The State uses a measure call the COD. From the 2012 Annual Report of the Division of Property Valuation and Review:
“The coefficient of dispersion (COD) is a measure of the equity across assessments in a municipality’s grand list. It is a much better measure of fairness than the CLA. The higher the COD, the more likely it is that similar properties are being assessed at different levels resulting in inequities in assessments within a grand list.”
The State uses a 20% cut off for acceptable CODs. Bayer’s COD is 18% reflecting numerically what the Listers know internally. Until the COD for Bayer goes over 20% the State will not require a reappraisal. The Listers also know that the State only uses properties that have sold. The volume of sales is low in Bayer as is the rest of Vermont. The majority of the Grand List is not included in the State’s study. The State’s study is also a lagging indicator. The sales that occurred in May 2012 will not be included in the study until the 2013 Report is released in December 2013.
Creeping inequities are natural to a Grand List after a reappraisal. Conditions that existed at the time of the reappraisal do not remain static. Markets change, data changes. The Bayer Listers know they need a reappraisal even if the State’s COD has not crossed the 20% level.