Shrinking commercial ratables may cause school, town tax hikes.
By: Joseph Harvie
The township is facing a 1.94 percent decrease in the size of its ratable base because several businesses have won tax appeals this year, which could mean higher taxes for residents.
The township ratable base was set at $3.798 billion on Jan. 10, a $75.268 million decrease from the 2004 figure of $3.873 billion, said Township Tax Assessor Keith Fasanella.
That means the total tax levy the amount to be raised by taxes for school, municipal and county government has to be spread across a smaller base.
The school board already has announced that the drop in ratables could mean a 5-cent increase on top of an 8-cent increase caused by the way school tax rates are calculated, according to Jeff Scott, assistant superintendent for business. The board introduced its budget Tuesday, but is still awaiting state aid figures.
Township Manager Matt Watkins did not return calls about the municipal budget on Wednesday. The municipal budget will be presented to the Township Council on March 8.
Commercial tax appeals were responsible for the decrease, according to Mr. Fasanella. Total assessments for commercial and industrial tax classes decreased from about $1.557 billion in 2004 to $1.45 billion in 2005, Mr. Fasanella said. Residential assessments increased from $2.164 billion in 2004 to $2.195 billion.
Because of the appeals, the percentage of the total township tax base that is made up by commercial and industrial properties decreased from 40.43 percent in 2004 to 38.16 percent in 2005. Residential assessments make up 57.78 percent of the tax base, compared to 55.48 percent in 2004. Vacant land accounts for 4.06 percent of the total tax base, compared with 4.09 percent in 2004.
Mr. Fasanella said several large businesses, including several hotels and motels, won appeals lowering their assessment because the market value of commercial properties was not increasing as it was for residential property. He would not identify specific businesses because the township is still involved in litigation.
He said ratio of assessed value to market value, expressed as a percentage of market value, has been decreasing because residential market values have been increasing. The ratio compares the assessed value to sales prices of properties sold in the past two years, Mr. Fasanella said. The overall ratio this year is 65.09 percent, down from 72.91 percent last year and 80.39 percent two years ago.
"The problem is the ratio is driven by the residential market and it doesn’t seem to represent the commercial-industrial community," Mr. Fasanella said. "They are appealing to be at that level, which is being driven by the residential market."
Mr. Fasanella said residential sales prices have increased at about 12 to 14 percent for each of the last few years. He said commercial property values have not increased at the same rate.
"Four years ago we reassessed a lot of commercial industrial properties to what the market was," Mr. Fasanella said. "Now with residential markets going up 12 to 14 percent a year the commercial-industrials are not keeping up."
Residential properties’ assessed values are based on the cost of building the house and the value of the land, Mr. Fasanella said.
Commercial industrial properties’ assessed values are based on cost to build, the comparison of sales of liked properties and what he calls the "income approach."
"The income approach is most important factor," Mr. Fasanella said. "It is an equation using their income, their expenses and what a person can expect to get out of property as income when they buy it."
Mr. Fasanella said most of the weight of a commercial industrial’s assessment is placed on income approach. When the economy is weak, commercial assessments are affected, he said. Hotels, in particular, were affected after Sept. 11, 2001.
"After 9/11 people are using hotels and motels much less," Mr. Fasanella said. "So their income was down and henceforth their value."
In addition, Mr. Fasanella said a change in state law in 2000 has hampered the township’s ability to make annual adjustments to its assessments. Under the new law, the township must get state and county approval to make reassessments. He said in the past the township could reassess annually without approval.
"We used to be able to just make the adjustments and (the law) has made it much more difficult for towns to make those adjustments, because both the county and state have to approve what you are doing," he said. "That is what caused our ratio to drop."
Mr. Fasanella said the township may reassess properties within the next couple of years.

