Op-Ed: Understanding the Coming Property Revaluation

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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. 

Tom Butterworth

(The author submits this as a private citizen, and not on behalf of the New Canaan Town Council.)

8 thoughts on “Op-Ed: Understanding the Coming Property Revaluation

  1. Tom Butterworth goes right to the point, as usual. He is willing to share his thoughts clearly. What an excellent statement that the revaluation is not about happiness but about fairness. We are fortunate to have his continuing input both as a private citizen and new member of the New Canaan Town Council.
    Peggy Jay

  2. My name is James Basch. I am the resident you are referring to. Tom is correct that there is a distinction between property taxes and property tax rates. I made this distinction quite clear in my op-ed (https://newcanaanite.com/op-ed-large-property-tax-increases-or-fiscal-prudence-148219) calling for a budget referendum if our town representatives keep on raising both our property taxes and our property tax rates at a pace far above what any fiscal conservative would allow, especially in the context of sharply lower home values and school enrollment declines. Those enrollment declines are happening now and projected to continue for the next 10 years leading to a cumulative decline in enrollment of 14.4% according to NESDEC (https://www.ncps-k12.org/site/handlers/filedownload.ashx?moduleinstanceid=3432&dataid=20059&FileName=2018-19%20Enrollment%20Projections%20Memo%20to%20the%20BOE.pdf).

    My message is simple: find expenses to reduce to get to a flat spending budget to avoid a property tax rate 8-10% given current projections. Start acting fiscally conservative not just before you got elected, but afterwards as well if that’s part the platform residents voted for!

    Here are some facts that Tom chose to not mention in his op-ed:
    1. According to a study by the Yankee Institute, New Canaan had the highest % spending increase per resident of any town/city in CT from 1996-2012. I doubt much has changed in our relative ranking since 2013. We also currently have the highest debt per resident in the state. I am happy to send along the study to anyone that wants it, or wants to join me in advocating against significantly higher taxes and tax rates in our town. My email is jdb435@nyu.edu.
    2. Our Town Council Chair, John Engel, has written recently that many property owners will face 10-20% higher PROPERTY TAXES (not just rates) this coming year.
    3. According to the town’s 2017 Comprehensive Financial Annual Report, higher valued homes have gone down a greater percentage than lesser valued homes since the last revaluation. We also know this anecdotally. That means, all else being equal, the distribution of the property tax increase will be regressive — owners of lesser valued homes will likely pay a disproportionate amount of the tax burden increase. I agree with Tom that this is what the fair market value dictates so it is what it is, but there are negative societal outcomes from regressive tax distributions. Mitigate the impact to everyone through expense reductions…it’s not rocket science.
    4. Tom wrote an op-ed earlier this year advocating for a 3.5%+ in the BOE budget despite our extraordinary spending per resident and debt per resident. Tom believes this degree of BOE spending increases are ultimately needed to maintain our property values. Huh? Last I checked, our property values were down around 30% over the last 10 years in nominal terms and closer to 50% in real (inflation adjusted) terms. The state of the real estate market is awful in New Canaan. What fiscally conservatives steps are our town reps taking to address it?
    5. Property tax (mill rates) rates matter. With an 8-10% currently projected property tax rate increase, our mill rates will be meaningfully higher than our closest “competitors,” including Westport, Darien, and Greenwich. We are becoming increasingly less competitive with these towns and Westchester County when our mill rate increase and transportation options are taken into account, hurting our home values even more. We have an excellent town that should not be compromised by fiscal irresponsibility.

    Tom, please stop focusing on justifying continually higher spending when most residents are fed up with much higher taxes at the state and LOCAL level. Is it misleading to call yourself a Republican and then continually advocate policies that lead to much higher taxes for our residents?

  3. James, your post doesn’t dispute anything in my Op-Ed, so thank you. I’ve read your material and acknowledge that you know the difference between taxes and tax rates, which is why I’m confused why you’ve repeated the misleading statement at least twice in the past several weeks. Why not simply withdraw or revise it and we can call it a day?

    I applaud your mission of advocating for fiscal discipline. We won’t agree on all the specifics, but New Canaan certainly can benefit from a healthy debate.

    I’ll end with a word of advice as you try to enlist followers: to be considered credible, you need to do your homework. You claim that I supported funding the full Board of Education budget earlier this year, but I never did. In fact, I voted to reduce it by $900,000, and to approve a town-wide budget that resulted in a mere 1.74% increase in the mill rate. It doesn’t bother me that this flunks your definition of fiscal conservatism, but it should bother you.

    As for my passionate support of New Canaan Schools, I make no apology.

    I expect you’re planning a long rebuttal to defend your cause, which is fine. I admire your passion. But please don’t expect another response from me. There will be other issues to debate later on, but for me, round one is over.

    Thanks again.

  4. I want to thank James Basch for the research he has done on this important topic. I share his concerns. There will be definite winners and losers and we won’t know who’s who until the revaluations are published and a new mill rate established. I know that tough decisions lie ahead in this changing environment and that town government is working hard to get this right. New Canaan, Connecticut needs that now. Fiscal prudence is easy to espouse but difficult to achieve. It appears that the Board of Finance is showing seriousness of purpose with a recent report of their reluctance to fund continued expenditures on two non-essential properties, so I hope that’s a sign of things to come and an inspiration to others.

  5. Tom, I believe you are a well-intended person. I will not question your credibility despite your misleading statement. Maybe you simply don’t remember what you wrote earlier this year. Here’s what you wrote supporting a 3.5% BOE budget increase (something you wrote a few hours ago “you never did”….oops) in an Op-Ed titled “Limiting Schools Budget to 2[%] Too Risky:

    “Cutting the proposed Board of Education 2018-’19 budget request by $1.3 million (keeping the increase to the 2% maximum recommended by the Board of Finance) may adversely affect teacher morale, education quality, the reputation of our schools, and our property values.”Link: https://ncadvertiser.com/117034/letter-councilman-limiting-schools-budget-increase-to-2-too-risky/

    To answer your question, I should have added the word “rate” to “property tax” in one of the letters I wrote. It was one line among many I have written, in the context of much research and data dissemination to your colleagues, and many hours trying to fight for lower taxation on behalf of residents. Mea culpa. Hopefully you can answer a few of my questions below.

    You are losing the forest for the trees and it is hurting residents.

    Exercise fiscal conservatism in our town budget for once! That means if our revenues are going to be down roughly 6% a year for the next five years given the reval absent an increase in property tax RATES, lower expenses in our ~$150 mm budget ($90 mm is the BOE) so that you don’t need to raise residents property tax RATES by 8-10% to offset the home valuation decline. Isn’t that how any fiscally responsible person would manage their business? Try managing our tax dollars that way. You want some ways to do that with little impact to virtually every resident and still maintaining excellent schools? I’m happy to have the conversation if you are having trouble figuring it out.

    I admire your volunteerism. Good night, James

  6. what you don’t know is that the TC was going to reduce the BOE budget by another $200,000 — they wanted it to be unanimous — but 3 TC members said NO — now we all know that this could have been done
    with no effect to our school system — Tom was one of the 3 who would not go along —

  7. I agree with James Basch completely. We need fiscal conservatism in New Canaan. It seems there is an endless list of potential town expenditures, a new police station, BOE offices, buying a house on Valley Road, a new library? We also just spent $18mn on a Saxe expansion with questionable enrollment forecasts and $18mn on renovating town hall. Yes, home values continue to decline. Its not sustainable.

  8. Thanks for your comment Tom Hynes. Current enrollment and forecasts from NESDEC are headed lower (their report is on the BOE website here: https://www.ncps-k12.org/site/handlers/filedownload.ashx?moduleinstanceid=3432&dataid=20059&FileName=2018-19%20Enrollment%20Projections%20Memo%20to%20the%20BOE.pdf). We have 71 less students enrolled this year than expected. NESDEC forecasts a 14.4% cumulative decline in enrollment (around 600 students) over the next 10 years. We spend $22,000 per student ($90.6 mm BOE budget/4,113 students). How can there not be significant savings to taxpayers from this?

    Richard Vachula has what I think is an excellent idea to fill up some of our empty/underutilized classrooms with out-of-town kids that we can charge to enroll. This could be a way to increase revenues without taxing people more. Here’s a link to his article: https://ncadvertiser.com/133260/letter-how-the-board-of-education-can-reduce-our-taxes-10-to-30/

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