By Ethan Weinstein
Earlier this year, the town of Mendon performed property reappraisals for the first time in 16 years, and the increased assessments have blindsided some residents.
“I estimate that 95% of the properties went up in this reappraisal,” said Mendon Town Assessor Spencer Potter.
Some homeowners took to the Killington Locals+ Facebook page to express their frustration. “Did anyone else with Mendon property get a ridiculous increase in their appraised value? I have a 10 square foot triangle of unbuildable swamp in the back of my lot that is in Mendon, and the value was reappraised from $300 to $4,600 (over 15x increase),” wrote Daniel Hebert. His post garnered over 100 comments, many by other dismayed Mendon residents.
Asked about the anger surrounding this widespread increased valuation, Potter responded by email saying, “the public reaction to this reappraisal is typical for reappraisals.”
Public anger stems from a belief that increased appraisals will correspond to an increase in property taxes.
Ed Clodfelter, senior appraiser at the New England Municipal Resource Center explained that this is typically a misconception. “I don’t think property owners understand that an increase in value may not lead to an increase in taxes. As assessors, we do not concern ourselves with taxes; our job is to determine values. But as values increase, the grand list increases; the budget is held steady causing the tax rate to decline.”
Clodfelter, who completed 10 reappraisal projects in 2020 and seven thus far in 2021, said that he is seeing value increases statewide.
In his mind, the bigger problem in Mendon is not the spike in property values but how long the town waited to reassess properties. “What towns don’t seem to appreciate is that updating values sooner eliminates the big jumps in value,” he said. “I do some work in Washington State, they update their values every year as does Texas, I believe. They do not have these big swings in value that people cannot understand.”
The effect of reappraisals on property owners is complicated and that leads to misconceptions. Here are the factors in play:
What triggers a reappraisal?
Two metrics can trigger a reappraisal: a town’s Common Level of Appraisal (CLA) deviates 15% above or below the baseline of 100%, or a town’s Coefficient of Dispersion (COD) exceeds 20%. But what do these two numbers mean?
In 1997, Act 60 created the CLA metric as a way of insuring every town paid their fair share to the state’s education fund. The act levied a statewide education tax, with a town’s school tax rate determined by the school district’s spending-per-student. The total amount of money paid toward education is based on the value of your property (Unless that individual qualifies for income sensitivity, which overrides property-based taxes for up to $400,000 in property.)
To calculate a town’s CLA, the state compares the sale prices of properties to the town’s grand list of those same properties over a three year average. If a town’s homes are consistently selling for more than their town valuations, that town will receive a CLA below 100. If the opposite occurs, a town receives a CLA above 100. When a town has a CLA below 100, as was the case for Mendon, residents pay an increased property tax to make up for their undervalued property. If a town’s CLA drops below 85 or rises above 115, the town must perform a reappraisal, equalizing the town’s CLA to near 100. In effect, the CLA means that you are always paying a fair amount in property taxes toward education regardless of the appraised value of your home.
COD is also a metric that compares the prices that properties actually sell for with their appraised values, but this time the metric is used to check for consistency and accuracy of the appraisals themselves. If all the properties in a town consistently sell for 10% less than their fair market value (FMV), the town has a COD of zero, as properties in that town sell in a uniform fashion. But if there is a wild disparity in sales — some properties sell for far under their appraisals, others wildly over — the town’s COD increases. If there’s a large disparity in sale prices compared to appraised values, a town’s appraisals may be unfair. Therefore, an increased COD also can trigger a reappraisal when it rises above 20%.
Why reappraisals do not (necessarily) increase taxes
Property taxes in Vermont contribute to two main sources: education spending and municipal spending. Education accounts for about 2/3 of the bill. Education funding goes into a statewide pot. The tax rate for education spending is determined by the local school district’s education spending per-student. All homestead tax payers in a town pay the same tax rate. Non-homestead tax payers pay a uniform rate statewide. The total amount paid in taxes toward education is determined by the value of the homeowner’s property.
So, if a reappraisal increases a person’s home value by 30%, but the average property in town by only 15%, then yes, that person will likely pay more. But if your property increases in value in line with your town’s average, you will not be paying more in property taxes toward education — the town’s CLA will return to 100 and no longer have to be the equaling coefficient.
But for Mendon property owners, the new reappraisal will likely increase property taxes levied for education spending. Mendon’s CLA was .96 in 2021, yet the latest reappraisal seems to have increased many property valuations by more than 4%, meaning that tax payers will be paying more toward education.
In regards to municipal spending, a town first determines a municipal budget and then sets tax rates based on property values accordingly. Say a town needs to raise $1 million. The town determines the total tax amount on each property based on the value of those properties. If property values increase unilaterally, a town’s tax rate will actually decrease, while the total levied tax will remain the same. In other words, just like with education spending, as long as one’s property increases or decreases in value at roughly the same rate as your neighbors’, one will not pay more in taxes.