Reappraisal: Complex but Crucial Event

By Andy Meek

Anyone who owns property in Shelby County – especially new, recent homebuyers – may be interested in a primer on the local reappraisal process, a major event that happens here every four years and the initial phase of which is wrapping up now.

The reappraisal process involves the Shelby County Assessor of Property updating the property values listed in the assessor’s records for all taxable real estate in Shelby County – approximately 351,000 parcels of property.

That excludes a variety of property types that aren’t on the tax rolls, for a variety of reasons. Saint Francis Hospital-Bartlett, for example, is part of a for-profit hospital company, so it’s on the tax rolls, while other nonprofit hospitals aren’t.

The process is a major undertaking, and getting it right is important for several reasons. Both Memphis and Shelby County governments use the property tax to get most of their revenue, so that makes it important that accurate figures are established.

Four years was chosen as the frequency with which the assessor will undertake that process. The reason for the needed frequency is because over time, some owners’ property values rise, and some fall. And since a property’s value determines its tax bill, that means that if the assessor did not keep the official property values updated regularly, some people would be paying too much in property taxes and some people would be paying too little.

This is why Shelby County Assessor Cheyenne Johnson and her staff frequently say the reappraisal process “equalizes” the tax burden for everyone in Shelby County.

“We put all the sales data out there,” so property owners can see what their values are based on, Johnson said.

The reappraisal also is an empirical process. To determine a property’s value, the assessor’s staff looks at the property’s use, its physical characteristics and recent market conditions.

Recent market conditions are studied by looking at actual comparable property sales that occurred during the years since the prior reappraisal.

This year’s reappraisal is unique, because for the first time in memory the assessor estimates that once everything is finished and all the reappraisal notices sent out, the county will be left with an atypical result.

The county’s tax base has shrunk.

Usually, like clockwork, the overall amount of taxable real estate in Shelby County grows from one reappraisal to the next. State law dictates that after a reappraisal, a local government must first “reset” the property tax rate to whatever figure will produce the same amount of revenue as before, when the tax base was smaller.

Once the government has done that, it’s free to return the tax rate back to where it was most recently. That happens often among local governments in Shelby County following the reappraisal, and it makes two things apparent: the tax rate doesn’t look like it’s changed, even though the government would be collecting more revenue.

This year, though, the assessor is estimating the county’s tax base to shrink in the aggregate. So, according to state law, that means local governments where that’s the case would need to raise the tax rate to whatever will produce the same amount of revenue as before the overall tax base dropped.

Those government bodies would then be free to raise the tax rate again, if they choose.

All that said, no matter the outcome of a reappraisal, one thing is always true: some people’s tax bills go up, and some people’s tax bills go down.

As of the week that ended April 5, the assessor’s office had mailed out almost 290,000 reappraisal notices – 83 percent of the total. The next mailing is April 20.

It’s also important to note that the initial figure the assessor arrives at is not necessarily the last word. Owners are allowed to file an appeal.

“We do reappraisal according to the standard principles of appraisal,” Johnson said. “But people know more about their individual properties than we do. And we’ll make the necessary adjustments if we need to.”

This is how the tax burden is equalized: No matter if someone owns a $500,000 home, a $100,000 home or anything above, below or between that range, the assessor will identify what’s called the appraised value of that property. The owner then will pay taxes on only a percentage of that appraised value.

The process is fair, because owners of the same property type will pay taxes on the same percentage of their appraised value. Residential property owners only pay taxes based on 25 percent of their property’s appraised value. For commercial property owners, it’s 40 percent. That keeps the burden, on a percentage basis, equitable for property owners with the same kinds of property.

The window opens May 1 for property owners to file appeals to the local Board of Equalization.