Writing in his “Quarterly Fiscal Affairs Report,” state Comptroller Justin P. Wilson notes Tennessee was spared the high home foreclosure rates and decreased property values seen in many other states. Even so, local governments have seen a hit when it comes to their chief revenue source — property taxes.
“The results of the most recent county reappraisals are the clearest evidence of how the bursting of the real estate bubble and recent mortgage crisis affected property values across the state,” Wilson said. “Though Tennessee did not experience the tremendous value losses and foreclosure rates seen in states such as California, Arizona, Nevada, and Florida, we did not escape unharmed.”
Wilson goes on to write that in “a pre-2008 market, the 26 counties that conducted reappraisals in 2013 would most likely have seen double digit appreciation of property values over the last four or five years. Instead, property values in these counties were little changed from their previous appraisal: approximately half of the counties had minor decreases in the value of their county-wide assessment, while the remainder showed a very modest increase.”
Wilson deduced the factors behind the weak growth in property values include sluggish new residential and new business construction, decreased sales of existing housing and a general tightening of lending practices.
“Local governments in Tennessee have historically relied heavily on property tax revenue as a steady stream of income from a base of assessments that increased annually through appreciation and growth,” the comptroller wrote. “Such growth allowed many local governments to avoid significant tax increases for several years.”
Lean economic times and declining property values, Wilson said, have left some governments with a difficult choice — raise property taxes (which he notes polls have found to be “the most hated tax” in Tennessee) or cut services provided to citizens.
State law requires periodic reappraisals of all property on the tax rolls. Once completed, county officials are asked to recertify the tax rate. That requires the property tax rate to be adjusted — based on the amount of new dollars coming in — to match the amount collected under the last tax rate adopted by the county.
Technically, it would take a hike to the property tax for the county to claim all those new dollars. Otherwise, the property tax burden is spread out among new homes and rising property values. This generally results in a lowering of tax bills, which is why Washington County’s property tax rate is one of the lowest in the region.
Sullivan County was among the 26 counties that conducted property reappraisals this year. Washington County is on a five-year cycle, which means the county will soon learn how our property values fared during the Great Recession.
Robert Houk is Opinion page editor for the Johnson City Press. He can be reached at email@example.com.