State comptroller backs increased property reappraisals in ‘dynamic’ market
EDITOR’S NOTE: This article has been updated to reflect the estimated amount of money 38 counties lost last year in property tax collections.
Tennessee Comptroller Jason Mumpower is pushing a plan to increase the frequency of county property reappraisals to more closely match market values and stop local governments from losing tax revenue.
Mumpower, who floated the idea in May, told the Tennessee Lookout he plans to introduce a bill in 2024 to speed up the reappraisal schedule statewide after 38 counties lost anywhere from $100 million to $113 million last year in property tax collections, depending on the growth rate of property values.
“It’s just something everybody recognizes needs to happen in such a dynamic and growing state,” Mumpower says.
With 83,000 people moving into the state last year, seventh highest nationally, the state is suffering from a housing shortage, which is driving up real estate prices, according to Mumpower.
Yet real property is appraised by country property assessor offices only once every four, five or six years, depending mainly on the size of the county. Mumpower wants to move that up to every two, three or four years, and he’s considering requesting larger counties such as Shelby, Davidson, Hamilton, Knox, Rutherford, Williamson and Wilson go to a yearly reappraisal.
The Comptroller’s Office estimates Davidson lost about $27 million last year and Shelby about $28 million.
Because of the lag time between appraisals, governments often have to discount property taxes by applying a sales ratio dealing with appraisals versus market values, which led 38 counties to experience “extraordinary revenue loss,” according to Mumpower.
Another 36 counties will suffer the same type of revenue loss next year, he says, thus the need to speed up reappraisal cycles.
“It is a modern practice. It is the global standard,” Mumpower says.
Local property assessor offices would be in a constant state of reappraisal, and equalization boards might have to go through more hearings for contested appraisals.
But Mumpower contends counties and the state have the technology for annual reappraisals.
Officials such as Davidson County Property Assessor Vivian Wilhoite and Rutherford County Property Assessor Rob Mitchell also support the proposal.
Mitchell says Rutherford lost $11 million over the last two appraisal cycles because market values outstripped property appraisals by such a wide margin.
An appraisal or sales ratio has to be applied in cases where a property is appraised at $300,000, for instance, but sells in a growing economy at $400,000 within two or three years before the property is appraised again.
Wilhoite, a Metro Nashville mayor candidate this year and a former appraiser for the Tennessee Regulatory Commission, points out the state already does annual reappraisals on personal property, and she believes frequent appraisals will help property owners.
“Taxpayers won’t get that sticker shock,” Wilhoite says.
The Comptroller has an Office of State Assessed Properties, which reappraises some commercial, utility and transportation properties annually.
Mumpower presented the plan to the Tennessee County Services Association, the Tennessee County Mayors Association, the Tennessee Municipal League and the Tennessee Assessors Association and the Government Finance Officers Association and says it is “heralded” as a good idea from a “fairness” standpoint for taxpayers and local governments.
“There are tax dollars generated off of growth,” Mitchell says, but he notes county commissions still wind up missing out on revenue increases because of the way sales ratios are applied.
If appraisals are done every two years, the law doesn’t require the use of an appraisal or sales ratio, according to Mitchell.
In addition, assessors say disabled, elderly and veteran property owners who receive property appraisal reductions will benefit from the proposal.
The Beacon Center, a libertarian group, issued a statement Monday saying it agrees with Mumpower that property taxes and housing costs “are becoming a larger issue in Tennessee,” though it contends the state has bigger problems with taxation.
“The timing of reassessments doesn’t change the underlying issues with property taxes,” Ron Shultis of the Beacon Center says in a statement. “Policymakers should create property tax caps across the board to give property owners protection from large unexpected tax hikes, as we are one of only four states without one. More frequent reassessments without a cap would make it easier for local governments to collect a windfall due to the truth in taxation law, as evidenced by what occurred recently in Nashville.”
The Beacon Center points to the 34% property tax increase in Metro Nashville four years ago, followed by a reappraisal when property values increased across Davidson County.
In April 2021, now-former Mayor John Cooper claimed the tax increase would be “reversed” because property reappraisals would show values increased countywide. Several Metro Council members disagreed with the mayor, saying his comments were misleading.
Under state law, counties are prohibited from having a tax revenue windfall from increases in property reappraisals. A certified tax rate from the state that equalizes revenues must be sent to counties following reappraisals, then the county’s governing body sets a new rate.