UNDERSTANDING PROPOSAL A  IN A DECLINING MARKET IN 2009

History of Assessing in Michigan

Prior to Proposal A, property taxes were based upon the State Equalized Value (SEV). With Proposal A the taxes are now based on a property’s Taxable Value (TV). Marysville Millage Rate in 1994 was 53.3383. A house valued at $100,000, had a SEV of $50,000. This would have resulted in yearly taxes of $2,666.92. SEV Formula - $50,000 multiplied by 53.3383 divided by 1,000 = $2,666.92.

What Changed in 1994? PROPOSAL A

Adopted March 15, 1994, Michigan voters approved the constitutional amendment known as Proposal  A.  Maintained a State Equalized Value, but also created a Capped Value and a Taxable Value. This was designed to limit the growth of the Tax increases by the Inflation Rate Multiplier (IRM) until ownership in the property was transferred.

Capped Value

Capped Value = Previous Yrs. Taxable Value minus Losses multiplied by Inflation Rate Multiplier plus Additions. Bulletin #6 of 2008 From the State Tax commission, has determined the 2009 Inflation Rate Multiplier to be 4.4%. Increases are limited to the Inflation Rate Multiplier (IRM) or 5 percent, whichever is less calculated by the State of Michigan. Copies of that Bulletin and how the Inflation Rate Multiplier was arrived are available in the Assessing office, or on the Sate Website: http://www.michigan.gov/documents/treasury/Bulletin_6_of_2008_Inflation_Rate_for_2009_254420_7.pdf  For more FAQ’s Visit http://www.michigan.gov/treasury/0,1607,7-121-1751---,00.html

Taxable Value

The Taxable Value is the lesser of the Capped Value or State Equalized Value. Taxable Value is the value taxes are based on. To calculate taxes = Taxable Value multiplied by Current Millage Rate divided by 1,000. Example - $50,000 (TV)X41.7309 (2008 100% P.R.E. Millage Rate)/1,000 = $2,086.55

Establishing a State Equalized Value

Although Homeowners no longer pay taxes based on the SEV, the Assessor must still Value the property. The SEV is still based upon Market Value. The Assessor may use a One-Year or Two-Year Sales Study to determine market value.

A Look at a Two-Year Sales Study

During times of an inclining (appreciating) market a 2-year sales study is used to establish the SEV. Sales from April 1 to March 31 of the two years prior to which the values are established set the SEV’s. For example, if a two-year study were used to establish the 2009 SEV’s, sales from April 1, 2006 – March 31, 2008 would have been used. Therefore by the time you would have received your 2009 Notice of Assessment the sales used to establish the SEV would have been 11-34 months old.

A Look at a One-Year Sales Study

During a declining market a 1-year study may be used to better reflect current market conditions. Sales from Oct. 1^st thru Sept. 30^th of the year prior to which the value is established set the SEV’s. The sales used to establish the 2009 SEV’s were from oct. 1, 2007 – Sept. 31, 2008. Therefore, by the time those notices arrive, the sales used to establish the SEV’s were 6-18 months old. A 1 year study was used to establish both the 2008 & 2009 SEV’s in the City.

State Equalized Value vs. Taxable Value

Since Proposal A the City of Marysville’s Residential SEV’s have increased approximately 57%, while the Taxable Value has increased 41.5%. Under proposal A, the year after a transfer of ownership takes place the taxable value “uncaps” or “pops-up”, and may increase more than the Inflation Rate multiplier of that year or 5%. Taxable Value for that year then becomes equal to that year’s SEV.

Effects of Proposal A on Transferred Property

The year after a transfer of ownership, the Taxable Value Uncaps, and becomes equal to SEV. In this example, property that sold in 2000 would pay $2,901.10 in 2001, due to this “uncapping”. If the property did not sell the taxes would have been $2,271.81 in 2001.

How can the Taxable Value Increase and the SEV Decrease

The longer a property has been owned and capped (since 1995), the greater the gap is between the  SEV and Taxable Value. If there is a gap between the SEV and Taxable Value the Taxable Value will increase by a maximum of 4.4%, which is the IRM established by the State of Michigan for 2009. However, if the 2009 SEV is equal to or lower than last year’s Taxable Value, then the 2009 Taxable Value will be the same as the 2009 SEV. The Taxable Value cannot exceed the SEV.

Actual Sale Price Is Not Necessarily the True Cash Value of a Property

The law defines the True Cash Value as the usual selling price of a property. The Legislature and the Courts have stated that the actual selling price of a property is not a controlling factor in the True Cash Value or State Equalized Value as calculated by the Assessor. For this reason, when analyzing the sales for the assessment changes non-representative sales were excluded from the analysis.

Foreclosure and Lending Institution Sales

Inherent in the definition of usual selling price is the assumption that the sale does not involve any element of distress from either party. In fact, the State Tax Commission has issued guidelines concerning the use of foreclosure and lending institution sales in the yearly sales analysis. These guidelines were issued in 2006 and were used to determine which of these sales could be included in the Assessors assessment analysis. Those sales that met the criteria were used in the analysis.

1111 Delaware Ave, Marysville (810) 364-6613

 Assessing Department

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Overview of Assessments
Proposal A has simplified property taxation for the individual property owner by providing specific state mandates. Taxable Value will increase each year by the   Inflation Rate Multiplier as determined by the state, but state law allows no increase greater than 5% per year. The State Tax Commission determines the Inflation Rate Multiplier each year. The Taxable Value is what we pay taxes on, not the assessments. 

Once the assessments are established, the Marysville City Assessor's primary job is to maintain the assessments by reviewing sale records, home improvement projects, developments, and market trends yearly and update physical records on each property for the parcels.  Assessment notices are sent out to all property owners in late February/early March.

City of Marysville's  Board of Review (BOR) will meet during the month of March to hear appeals regarding any problems with individual property owners. To schedule an appeal to the BOR, call the Assessor's department at City Hall between 8:00 am - 4:30 pm, Monday through Friday.  The assessment notice will specify the dates and times.  Individuals may can also appeal by letter during that time. Please note that all appeals must be made prior to the last meeting of the Board of Review. The individual property owners have the right to appeal before the Michigan Tax Tribunal, but only after 1) appearing at the Board of Review in March, and 2) providing a letter to the Tribunal before the last day of June.

In Michigan, the State Constitution requires that all assessments reflect 50% of Fair Market Value. Also, it requires that the taxable value may increase by the Inflation Rate Multiplier or no greater than 5% per year.   There are some exceptions to the taxable value rule. 

HOMESTEAD AFFIDAVITS and PROPERTY TRANSFER AFFIDAVITS effect the taxes you pay.  Any time you make any type of Ownership (name) change to your property, you may need to file a Property Transfer affidavit and a Homestead affidavit.  When in doubt please contact your Assessor's Office either in person, by telephone, or on-line at assessor@cityofmarysvillemi.com
 

UN     DERSTANDING PROPOSAL A  IN A DECLINING MARKET IN 2009

 

 

History of Assessing in Michigan

 

Prior to Proposal A, property taxes were based upon the State Equalized Value (SEV). With Proposal A the taxes are now based on a property’s Taxable Value (TV). Marysville Millage Rate in 1994 was 53.3383. A house valued at $100,000, had a SEV of $50,000. This would have resulted in yearly taxes of $2,666.92. SEV Formula - $50,000 multiplied by 53.3383 divided by 1,000 = $2,666.92.

 

What Changed in 1994? PROPOSAL A

 

Adopted March 15, 1994, Michigan voters approved the constitutional amendment known as Proposal A.  Maintained a State Equalized Value, but also created a Capped Value and a Taxable Value. This was designed to limit the growth of the Tax increases by the Inflation Rate Multiplier (IRM) until ownership in the property was transferred.

 

Capped Value

 

Capped Value = Previous Yrs. Taxable Value minus Losses multiplied by Inflation Rate Multiplier plus Additions. Bulletin #6 of 2008 From the State Tax commission, has determined the 2009 Inflation Rate Multiplier to be 4.4%. Increases are limited to the Inflation Rate Multiplier (IRM) or 5 percent, whichever is less calculated by the State of Michigan. Copies of that Bulletin and how the Inflation Rate Multiplier was arrived are available in the Assessing office, or on the Sate Website: http://www.michigan.gov/documents/treasury/Bulletin_6_of_2008_Inflation_Rate_for_2009_254420_7.pdf  For more FAQ’s Visit http://www.michigan.gov/treasury/0,1607,7-121-1751---,00.html

 

 

Taxable Value

 

The Taxable Value is the lesser of the Capped Value or State Equalized Value. Taxable Value is the value taxes are based on. To calculate taxes = Taxable Value multiplied by Current Millage Rate divided by 1,000. Example - $50,000 (TV)X41.7309 (2008 100% P.R.E. Millage Rate)/1,000 = $2,086.55

 

Establishing a State Equalized Value

 

Although Homeowners no longer pay taxes based on the SEV, the Assessor must still Value the property. The SEV is still based upon Market Value. The Assessor may use a One-Year or Two-Year Sales Study to determine market value.

 

A Look at a Two-Year Sales Study

 

During times of an inclining (appreciating) market a 2-year sales study is used to establish the SEV. Sales from April 1 to March 31 of the two years prior to which the values are established set the SEV’s. For example, if a two-year study were used to establish the 2009 SEV’s, sales from April 1, 2006 – March 31, 2008 would have been used. Therefore by the time you would have received your 2009 Notice of Assessment the sales used to establish the SEV would have been 11-34 months old.

 

A Look at a One-Year Sales Study

 

During a declining market a 1-year study may be used to better reflect current market conditions. Sales from Oct. 1^st thru Sept. 30^th of the year prior to which the value is established set the SEV’s. The sales used to establish the 2009 SEV’s were from oct. 1, 2007 – Sept. 31, 2008. Therefore, by the time those notices arrive, the sales used to establish the SEV’s were 6-18 months old. A 1 year study was used to establish both the 2008 & 2009 SEV’s in the City.

 

 

State Equalized Value vs. Taxable Value

 

Since Proposal A the City of Marysville’s Residential SEV’s have increased approximately 57%, while the Taxable Value has increased 41.5%. Under proposal A, the year after a transfer of ownership takes place the taxable value “uncaps” or “pops-up”, and may increase more than the Inflation Rate multiplier of that year or 5%. Taxable Value for that year then becomes equal to that year’s SEV.

  

 

Effects of Proposal A on Transferred Property

 

The year after a transfer of ownership, the Taxable Value Uncaps, and becomes equal to SEV. In this example, property that sold in 2000 would pay $2,901.10 in 2001, due to this “uncapping”. If the property did not sell the taxes would have been $2,271.81 in 2001.

 

How can the Taxable Value Increase and the SEV Decrease

 

The longer a property has been owned and capped (since 1995), the greater the gap is between the  SEV and Taxable Value. If there is a gap between the SEV and Taxable Value the Taxable Value will increase by a maximum of 4.4%, which is the IRM established by the State of Michigan for 2009. However, if the 2009 SEV is equal to or lower than last year’s Taxable Value, then the 2009 Taxable Value will be the same as the 2009 SEV. The Taxable Value cannot exceed the SEV.

 

Actual Sale Price Is Not Necessarily the True Cash Value of a Property

 

The law defines the True Cash Value as the usual selling price of a property. The Legislature and the Courts have stated that the actual selling price of a property is not a controlling factor in the True Cash Value or State Equalized Value as calculated by the Assessor. For this reason, when analyzing the sales for the assessment changes non-representative sales were excluded from the analysis.

 

Foreclosure and Lending Institution Sales

 

Inherent in the definition of usual selling price is the assumption that the sale does not involve any element of distress from either party. In fact, the State Tax Commission has issued guidelines concerning the use of foreclosure and lending institution sales in the yearly sales analysis. These guidelines were issued in 2006 and were used to determine which of these sales could be included in the Assessors assessment analysis. Those sales that met the criteria were used in the analysis.