FREQUENTLY ASKED QUESTIONS

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 VALUE DESCRIPTIONS AND PURPOSE

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ASSESSED VALUES (AV) =  Represents 50% of the estimated current True Cash Value (Market Value) of the property 

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STATE EQUALIZED VALUE (S.E.V.) = Prior to the voters passing Proposal A in 1994, the S.E.V. is the value that had been used to calculate property taxes.  After voters passed Proposal A, limiting property tax rate growth to the rate of inflation or 5%*, the S.E.V. represents 50% of the estimated True Cash Value and the taxable value can never be higher than the S.E.V.

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TAXABLE VALUES (TV) = The value that your property taxes are calculated from based on levied mills.  

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TRUE CASH VALUE (TCV) = The value that represents the estimated market value.  The True Cash Value is a combination of the estimated land value and cost of improvements new less depreciation.  True Cash Values are estimated using the Mass Appraisal process.  The Mass Appraisal Process involves a sales study of arms-length transactions of properties that have sold within the previous 2 years (Studies are from April 1-March 31 for the previous 2 years).

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*Proposal A, passed by voters in 1994, essentially "capped" taxable values so the annual rate of increase for homeowners is limited to the rate of inflation, or 5%, whichever is the lessor of the two, UNLESS the property had a non-exempt transfer of ownership in the previous tax year, and/or missing/discovered improvements not previously listed on the tax roll, or new construction was added to the property.

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Non-exempt property transfers in the prior year will result in the property's taxable value uncapping to the S.E.V., or 50% of the estimated True Cash/Market value.

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New construction or missing/discovered improvements not previously on the tax roll have the value estimated in accordance with the State of Michigan Assessor Cost Manual and 50% of the estimated true cash value is added as new taxable value.  For example, if a vacant property has a taxable value of $25,000 and a new house is constructed and the estimated value for the new construction is $200,000, then 50% ($100,000) is added to the existing $25,000 for the new taxable value of $125,000.

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The capped value formula for taxable values is as follows:  (Prior Year Taxable Value - losses) x cpi (rate of inflation) + additions = current year taxable value

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QUESTION/ANSWERS

 

WHY DID MY TAXABLE VALUE INCREASE?  

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All properties are subject to the following increase annually:

1.  Taxable Values increase annually by the rate of inflation or 5%, whichever is the lesser of the two.  Taxable Values are 

    calculated using the following formula:  Prior Year Taxable Value - losses x *IRM + additions.  

*IRM (interest rate multiplier is a 24-month average of the national (CPI) Consumer Price Index)

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If a taxable value has increased by more than the rate of inflation one or both of the following may apply:

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1.  The property had a transfer of ownership in the previous tax year.

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2.  The property had new improvements, or improvements previously not described or missing on the tax roll.  50% of the

     estimated true cash value of the improvements added to the property tax record is added as a new taxable value.

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WHY DID MY ASSESSMENT VALUE INCREASE SO MUCH?

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Assessed Values are 50% of your estimated "True Cash Value" (TCV)/"Market Value", or the most probable estimated selling price, if the property were to be sold on the market at the time of Assessment, according to actual recent real estate market sales.  Assessed Values do not directly affect Taxable Values unless the property had a Transfer of Ownership (not qualified for an uncapping exemption), or new value or previously omitted property was added to the Assessment Roll.  Assessed Values are required by law to keep pace with the real estate market, and will fluctuate with the real estate market, and increase with building costs, the rate of inflation, and are required to be adjusted annually to estimated market values.

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WHY DID MY ASSESSMENT VALUE DECREASE BUT MY TAXABLE VALUE INCREASE?

The longer a person owns their property there is the potential for a significant difference between the Taxable Value (used for calculating property tax bills) and the Assessed/SEV Value (a 50% estimation of Market Value) because the Taxable Value is legislatively limited to a maximum annual increase of 5%, whereas, the Assessed/SEV are still legislatively required to be estimated to approximately 49-50% of the estimated real estate market values, and will fluctuate based on the real estate market sales studies.

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When the Assessed Value/SEV is higher than the taxable value, decreases in the Assessed Value/SEV may not have any effect on the Taxable Value.  The Taxable Value may never be higher than the Assessed Value, meaning that the Taxable Value will not decrease unless the Assessed Value drops at or below the Taxable Value.