How will New Canaan property taxes be affected by the Oct. 1, 2018 real estate revaluation that’s currently in process? The answer to this question will vary by homeowner, but it’s worth thinking about its effect on taxpayers in general. For simplicity, let’s set aside the budget’s other moving parts and examine the impact of the revaluation alone.
After every real estate revaluation, the Board of Finance determines whether the tax rate (the “mill rate”) needs to be adjusted to keep tax revenues constant. In the current revaluation, property values are expected to decline on average, so the tax rate is likely to increase to prevent a deficit. (The BOF also will calculate the tax rate needed to cover the cost of services and other expenses, but let’s hold that aside for now).
We don’t yet know how much property values will change in this revaluation, but let’s assume they decline 5 percent on average, and that the tax rate is increased 5 percent accordingly. Under these assumptions,
- If a property’s value declines 5 percent (the town-wide average), there would be no change in property taxes due to the revaluation.
- If a property’s value declines more than 5 percent, property taxes would go down.
- If a property’s value increases—or if it declines less than 5 percent—property taxes would go up.
Clearly there may be plenty about this revaluation to make everyone unhappy: some because their home value has declined, some because their taxes will go up, and some for both reasons.
The purpose of the town’s property tax system isn’t happiness, however. It’s fairness. The system allocates the cost of town services among property owners in proportion to the value of their properties. To maintain this proportionality, we need periodic revaluations.
Now let’s look at the likely change in property taxes for all reasons, including the revaluation. One resident is quoted in the media as saying, “We are currently facing an 8 percent to 10 percent increase in property taxes in the upcoming fiscal year.” This is quite misleading in that it confuses property taxes with the property tax rate.
Because of the revaluation, it is conceivable that the property tax rate could increase 8 percent, but that rate would be applied to diminished average property values. The average growth in actual property taxes is more likely to be in the general proximity of 2 percent, and certainly nowhere near the 8 percent to 10 percent range the author cites.
As indicated above, the Oct. 1, 2018 revaluation is likely to cause an increase in property taxes for individuals whose property values have outperformed the Town-wide average. But, until the revaluation data is available, it’s impossible to know the extent of these increases or how common they will be.
(The author submits this as a private citizen, and not on behalf of the New Canaan Town Council.)