How do they figure property taxes?

KENTWOOD, Mich. (WOOD) - Some Kentwood home owners will probably like what they see when they open letters later this month from City Assessor Deb Ring.

"Sixty-six percent will see either a reduction or no change in their taxable value," said Ring. That's because recession-punctured property values are starting to reflect in property assessments on which many local taxes are based.

In Wyoming the assessor says about half of residential owners will see a decrease in their taxable values. In Grand Rapids, where the City just completed an overdue reassessment upward for most properties, nearly 40 percent will see a decrease in taxable value, according to the assessor.

Because of a complicated formula approved as a constitutional amendment by voters in 1994, there is a difference between the actual value of your property and how much of it you can be taxed on. The amendment was passed when property tax increases were in the double digits and people were screaming for relief.

But now, it's the owners who have benefited the longest from that constitutional cap on their taxable property values who won't see immediate relief as their real values fall. That's because of the gap between their actual property values and their taxable values.

Actual value was rising until recently, but the constitutional amendment created a formula that limited how much of that increase would be reflected in their taxes, creating a separate and lower "taxable value." The longer you have owned your house, the bigger the gap.

So while actual property values are now dropping, they are not dropping enough in a single year to make a difference.

That's because the formula for computing the taxable value has to base the next year's number on whichever is lowest -- half the current actual value, or the current taxable value. In cases where people have owned their homes a decade or more, the lowest number is still the taxable value.

In any case, people will be finding out in the next couple of weeks what their own new assessments are. If they don't like them they can appeal to the local Board of Review.

On the Net:

Assessor - Understanding Proposal A (pdf)

City of GR Appeal Process