Legislator questions process for appraisals

GRAVETTE — The taxable value of real estate in Benton County increased 16.7 percent after a countywide update by appraisers earlier this year. The increase raised both the tax bill and the ire of state Rep. Kim Hendren, R-Gravette.

Hendren will propose a review of how real estate is appraised for taxes to the House Revenue and Tax Committee on Oct. 5 in Little Rock. His witnesses will include Jonathan Barnett of Siloam Springs, a former state representative and former Arkansas Highway and Transportation Department commissioner.

Both men believe they received inflated appraisals for property they own and the inaccuracies are widespread. They have the means and the time to appeal these appraisals, but not all property owners do, they said.

“I know the system and how to appeal my appraisals, but how many of my constituents do?” Hendren said Wednesday. “Even if they know, how many of them can afford to do all the work you have to do to prove your case in an appeal? How many can take a day off work and go make that appeal? For many of them, it’s cheaper and easier to pay the increased tax.”

Appraisers and administrators for the Benton County Assessor’s Office noted the Board of Equalization, which hears appeals of property tax assessments, had the fewest cases brought before it this year after an appraisal as it has had in years.

Also, the appraisal was made in accordance with both standard practices and state law, they said. Those who participated in the interview were: Roderick Grieve, chief deputy assessor; John Williams, reappraisal manager; and senior appraisers Aaron Coffee and Marty Brewer.

This year’s real estate appraisal update was the county’s first in five years, the county’s appraisers and administrators said Friday. Much of the 16.7 increase comes from added construction and improvements to buildings and homes onto the tax rolls that weren’t on the books five years ago, they said.

The 16.7 percent increase averages about 3 percent a year for five years, figures show. How much of the increase is new construction isn’t a figure readily available, the assessor’s spokesmen said.

The value placed on the land itself increased 1.3 percent on average in those five years, according to county figures. That amounts to little more than one-quarter of 1 percent a year for each of the five years.

“This is in a county that includes downtown Bentonville, one of the hottest real estate markets anywhere,” Williams said.

The state Legislature in 1999 and a constitutional amendment passed by Arkansas voters in 2000 addressed sudden increases in the value of property on the tax books.

The reforms set a schedule where each county was appraised every three years. One-third of the state’s 75 counties were appraised each year.

Two things happened in later years undermining that plan and allowing Benton County to wait five years, said state and local tax administrators.

First, the Legislature created an exception in 2003 so some counties wouldn’t have to pay for an appraisal every three years. If an appraisal didn’t add at least 15 percent of value to the tax rolls, the county didn’t have to have a new appraisal for five years. This spared poor, rural counties from having to pay appraisers for results that made little difference from year to year.

Then the bursting of the national real estate bubble in 2008 and the recession that resulted turned every county in the state into a slow-growth county eligible for the five-year interval.

Despite the long wait, Benton County property value grew slowly enough to prevent a major shock to property owners, Williams said.

“This has been the lightest year for appeals to the county’s Board of Equalization that I’ve seen in 21 years,” he said.

Grieve agreed.

“There would have been more appeals if this had been a surprise, so the increases appear reasonable,” Grieve said. “And property appreciating again is a good thing.”

“Even with this latest reappraisal, we didn’t add enough to get back on the three-year cycle,” Grieve said. Counties can stay on a five-year cycle until an appraisal adds 25 percent in the value of property on the tax books. Part of the reason Benton County didn’t reach the threshold is appraisals of agricultural land follow a formula set by the state, Grieve said. Appraisals for Benton County’s agricultural land aren’t growing much under the state’s formula, he said.

Neither the reforms of 1999 nor any since addressed one serious problem, Barnett said. The appraisal and appeal process is a closed system, he said. The appraisers set the value. Anyone who wants to dispute the value appeals to the Equalization Board. That board in every county is made up of members appointed by cities, school districts, the county judge and quorum court. Cities, school districts and county government all benefit from increases in property taxes.

If a property owner’s appeal of his appraisal fails before the board, he can only appeal to the county court — one of the few remaining judicial functions of the county judge, who’s county government’s chief administrator.

“We have representative government. We elect people to make these kind of decisions,” Barnett said Thursday. “When taxes go up like this, that needs to be debated in public. There needs to be a public debate on whether these increases — whatever the cause — are right and fair.

“One issue involved here is that schools, cities and counties need the money,” Barnett said. Updated appraisals bring in more revenue for those entities, which are the primary beneficiaries of property taxes.

“But with other types of tax increase, such as a millage increase, you have to go to the people and ask for more money. You have to tell them what you need it for and they have the right to vote on an issue on that,” he said.

Even when taxes don’t go up by a large amount overall, there should be more accountability to make sure the increases are distributed fairly, Barnett said.

“But if a small businessman was hit with some of the increases I had on some of my properties, it would kill his business,” Barnett said. Since the last appraisal, “I had lots that I paid as little as $7,000 for be reappraised for $28,000. I had one building I bought for $40,000 be reappraised for $204,000.”

The state has an Assessment Coordination Department with headquarters in Little Rock. The department sets standards and checks to make sure counties apply those standards equitably, but the appraisals themselves are a county responsibility. The department’s director is Bear Chaney of Bella Vista, who was Benton County assessor until Gov. Asa Hutchinson appointed him to the state post last year.

Chaney hasn’t reviewed this year appraisal by Benton County, but addressed one concern Barnett raised. Barnett found different lots in Siloam Springs were given the same value. For example, a relatively low-income subdivision near the downtown area had every lot appraised at a value of $28,000 despite differences in size and location. The building appraisals varied, but the land value for each lot was $28,000. In another neighborhood, the value was $15,000 for each lot.

Using a standard “median value” for lots is an accepted practice for mass appraisals, said both Grieve and Chaney. Chaney added the practice is often used for downtown areas where very little property changes hands, giving appraisers few comparable sales to work with.

Intentionally or not, Barnett said, the practice of using a single median value has put higher land value on some of Siloam Springs poorest downtown neighborhoods with the oldest streets and infrastructure. More affluent, recently developed neighborhoods in other areas have land that’s assessed for less, he said.

“There are lots appraised at $28,000 in one neighborhood that wouldn’t sell for $8,000 if you tore down the house on it,” he said. That is one of the issues that a more open process would question, Barnett said.

Doug Thompson can be reached by email at [email protected] or on Twitter@NWADoug.