Homeowners Balk as Tax Bills Stay High

143,000 Miami-Dade property owners appealed their property tax bills last year. And Harvey Ruvin, the county’s clerk of courts, expects a similar deluge in 2010. Property tax appeals in the county hit 104,000 in 2008 compared with an average 40,000 in normal years.  From Florida beachfronts to Nevada deserts, fed-up homeowners are challenging property tax bills that have stayed high despite the housing crisis.  Angry homeowners say their tax assessments and tax bills haven’t come down as fast as real estate prices in the worst housing collapse since the 1930s.

They’re right: Despite a real estate implosion, property tax revenue collected by states and localities actually rose 2.7 percent last year to $421.8 billion, according to the U.S. Bureau of Economic Analysis.  Property taxes have been a lifeline for flailing local governments, which collect more than 96 percent of property taxes. Toss them out, and the remaining sources of state and local tax revenue – including sales and income tax receipts – sank more than 9 percent last year from 2008.

It takes three years for changes in housing prices to have an impact on property tax revenue. “The 2009 numbers reflect what was happening in city housing markets in 2007, maybe even 2006,” says Christopher Hoene, director of the National League of Cities’ Center for Research & Innovation. “They were still picking up some of the growth at the end of the boom.”

Most states limit how much property taxes can rise in a booming market. That keeps a house’s taxable value below its market value. In some cases, the gap remains even after housing prices have fallen. Which means some homeowners are seeing bigger tax bills for homes that are worth less than they were the last time their property taxes came due.

In 1995, for instance, Florida instituted a constitutional amendment limiting increases in the tax assessments on owner-occupied homes to no more than the consumer price inflation rate or 3 percent (whichever was lower).  After an exhilarating run-up and a gut-wrenching decline in housing prices, some homes’ taxable values are still below their market values, leaving room for higher tax bills. In Palm Beach County, for instance, 25 percent of properties will see an increase this year in their assessed values.  This at a time when existing homes in the county’s West Palm Beach and Boca Raton were selling for 4 percent less in February than they were a year earlier and 44 percent less than they were in February 2006.

The tax appeals are putting strains on local governments already coping with a weak economy, dwindling overall tax revenue and budget cuts. Clark County,  Nev., which includes Las Vegas, expects property tax appeals to reduce revenue by about $150 million in the next fiscal year, which starts July 1.