[B]URLINGTON — Key city officials are defending a piecemeal approach to reassessing property that critics say will increase rents in conflict with a stated goal of keeping the city affordable.
City administrators say a current program of incremental revaluations is meant to address emerging inequities in the listed versus market values of properties throughout the city.
Since the last citywide reassessment of property in 2005, real estate in the Queen City has steadily gained value, except for a lull during the Great Recession, said City Assessor John Vickery.
Those gains were not distributed evenly, and some properties accrued value more quickly than others over the last decade, he said. Specifically, the value of apartment properties has outpaced the overall growth, according to Vickery.
As a result, the gap between their assessed value on the city’s grand list of properties and their value on the real estate market has widened more quickly.
Assessors call the ratio between assessed value and the sale price for properties in a certain class, such as single-family homes, the level of assessment. The LAO for rental apartments was roughly 71 percent, versus the 86 percent average for all properties in the city, according to Vickery.
To correct that imbalance, Vickery’s office began reassessing apartment properties last year, starting with properties with four or more units in the Hill and downtown sections of the city, where the disparity was most glaring, he said.
That didn’t sit well with a group of prominent landlords who are suing the city over the new assessments, which caused their property tax bills to spike. They say the reassessments will mean higher rents for their tenants, a concern shared by City Council President Jane Knodell, P-Central District.
Burlington has a low rental vacancy rate, and typical renters spend 44 percent of their income on rent, according to a 2014 city report.
Increasing the tax burden on apartment properties is bound to exacerbate the situation for renters, Knodell said. That runs counter to the city’s goal of making Burlington more affordable for low- and middle-income people, who are more likely to rent.
Property taxes are based on the assessed value, but the property tax rate is set each year to meet the revenue needed to pay for the city budget. The assessor’s role is to ensure that the property tax burden is spread equitably across all property owners.
Vickery says that’s what he’s doing, and if landlords respond by jacking up rents, that’s beyond his control.
The assessor’s office is moving forward with reassessing rental property values this year. Vickery says they are doing the rest of the four-unit and larger properties in the city and those with three units.
Affected property owners received a letter from the city notifying them of the reassessment, and Vickery expects the city to send letters to the owners with the new listed values in late April or early May.
Combined, between this year and last year, the city is reassessing the values of 909 apartment properties, or 8 percent of all parcels in the city.
The city charter requires reassessments to be revenue-neutral, Knodell said, meaning the city is not supposed to make money by reassessing properties. She’s concerned that the selective reassessments the city is doing now are skirting that requirement, because the property tax rate can’t be adjusted to account for those changes.
“Many of us (on the City Council) are hearing from property owners that they don’t feel it’s fair to be doing this in a piecemeal way,” she said.
That’s why, when the Board of Finance was discussing recently whether to approve $1.2 million for capital improvements from a $4.2 million surplus, Knodell asked if some of that money could be used for another citywide assessment. The board makes spending decisions before they reach the full council.
A citywide reassessment would cost between $700,000 and $1 million, according to Vickery.
Mayor Miro Weinberger, who chairs the Board of Finance, [has other priorities for the remaining surplus], but he reached an agreement with Knodell that if board members approved the capital spending, then the board and the council will discuss whether to do a citywide reassessment.
Though he’s agreed to have the conversation, Weinberger doesn’t appear eager to do a citywide reassessment soon.
Weinberger said he shares Knodell’s concerns about rents and affordability in Burlington, but he doesn’t believe that grand list maintenance — another term for selective reassessments — is what’s driving high rents. Neither does Vickery, who points out that Burlington rents have increased 30 percent since 2005 without a property reassessment. That’s part of the reason apartment properties have increased in value, he said.
Erik Hoekstra, one of the landlords suing the city over his reassessed property values, said a larger factor in Burlington’s high rents is the lack of new rental housing. Hoekstra, who works as a developer for the firm Redstone, said higher assessed values on apartment properties will discourage people from building them.
Weinberger said the city does have “a property tax challenge” that hurts affordability for renters and property owners, but he argued it’s driven largely by education spending and municipal pension costs, factors his administration is working to address.
Vickery and Weinberger said they’re not convinced the revenue neutrality provision in the city charter applies to grand list maintenance. Its purpose in a citywide reassessment is to ensure the city doesn’t create a windfall of tax revenue for itself, which is why a citywide reassessment is accompanied by an adjustment to the tax rate.
Historically, citywide reassessments have taken place roughly every 10 years, Knodell said, but Vickery said the state requires municipalities to do them only when things get too far out of whack.
For the Tax Department, that means the level of assessment on all classes of properties drops below 80 percent, or when the coefficient of dispersion — a measure of the spread of market values versus assessed values — climbs above 20 percent.
Doug Farnham, director of property valuation and review at the Tax Department, explains the coefficient of dispersion this way: “Coefficient of dispersion is like using buckshot. The farther the pellets spread from the center of what you’re aiming at, the higher the coefficient is.”
In that analogy the pellets are assessed property values and the target is market value. Currently, Burlington’s level of assessment across the board is 86 percent and its coefficient of dispersion is 11 percent, according to Vickery.
Those figures indicate that Burlington has a relatively even distribution of property taxes, he said. By Vickery’s calculations, Burlington won’t cross the state thresholds for property tax equity until 2020 or 2021.
In the meantime, Farnham said grand list maintenance is a common practice for assessors in Vermont and nationwide to address changes in the market that are having an outsized impact on certain properties.
