County seeks clarification on property tax 'roll up'

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County seeks clarification on property tax 'roll up'

Published Monday, April 4, 2011   |  598 Words  |  

Beaufort County wants South Carolina's attorney general to clarify whether tax rates can be adjusted to compensate for a potential property-tax base decline after next year's reassessment.

Such a rate increase could mean higher tax bills for some homeowners, despite declining property values.

The county is required by law to reassess property values every five years. The next reassessment is scheduled to take effect Dec. 31, 2012.

Usually, values increase during reassessment, and the county reduces tax rates to bring in the same amount of revenue.

But in response to declining values, Beaufort County Council is discussing the feasibility of the opposite -- increasing rates to raise the same amount of revenue. County officials call it a "roll up."

South Carolina law provides a formula for cutting taxes when property values rise, but doesn't say what to do when property values fall. County attorney Lad Howell wrote to Attorney General Alan Wilson on March 23, asking his office to issue an opinion.

"I cannot find any section in the code which addresses the potential decrease in valuation that our county and probably a number of counties will face during these difficult economic times," Howell wrote. "If this process is allowed, we would need to be provided a formula for that event."

Mark Plowden, Wilson's communications director, confirmed the Attorney General's Office will weigh in, but he couldn't say when.

"If we have already opined on a similar topic, we sometimes are able to answer a question by providing an existing opinion," he wrote in an email. "If not, the matter must undergo thorough legal research, and that could take an extended period of time. We have a small staff to do the work, and under state law, we are required to help the General Assembly first."

How a tax roll up would affect individual tax bills depends on how much a property's value drops, said Beaufort County assessor Ed Hughes.

For example, suppose the tax base shrinks by 20 percent and tax rates are increased by 25 percent to raise the same amount of revenue.

The owner of a home that drops precipitously in value -- by 50 percent, for instance -- likely would see a net tax cut. The higher tax rate wouldn't make up for the lower home value.

On the other hand, a home that fell in value by only 5 percent or 10 percent probably would see a net tax increase. The lower value wouldn't be enough to offset the higher tax rate.

"Those properties that had less decrease in market value, based on my analysis, would pick up a larger share of the tax liability," Hughes said.

It's not clear yet whether County Council would support a tax roll up, or if it would even be allowed.

"The reason why we can't find a clear answer is that we have not been in this type of position before," said county administrator Gary
Kubic. "That being said, it's critical that we try to determine what we can and cannot do."

Even if the attorney general gives the green light to a roll up, his opinion could still be challenged. Only the legislature or a court can settle the matter with the force of law, Plowden said.

But opinions from the attorney general, he said, "are added into the state's legal record, and have been given considerable deference at every level of court through the years."