File No. 412

Senate, April 2, 2009

The Committee on Planning and Development reported through SEN. COLEMAN of the 2nd Dist., Chairperson of the Committee on the part of the Senate, that the bill ought to pass.

AN ACT CONCERNING REVALUATION.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. (NEW) (Effective from passage, and applicable to assessment years commencing on or after October 1, 2008) (a) Notwithstanding any provision of the general statutes, any municipal charter, any special act or any home rule ordinance, any municipality required to effect a revaluation of real property under section 12-62 of the general statutes for the 2008 assessment year shall not be required to effect a revaluation prior to the 2009 assessment year provided any decision not to implement a revaluation pursuant to this subsection shall be approved by the legislative body of such town or, in any town where the legislative body is a town meeting, by the board of selectmen. Any required revaluation subsequent to any delayed revaluation effected pursuant to this subsection shall be effected in accordance with the provisions of said section 12-62. The rate maker, as defined in section 12-131 of the general statutes, in any municipality that elects, pursuant to this subsection, not to implement a revaluation may prepare new rate bills under the provisions of chapter 204 of the general statutes in order to carry out the provisions of this section.

(b) The assessor or board of assessors of any municipality that elects, pursuant to subsection (a) of this section, not to implement a revaluation of real property for the 2008 assessment year shall prepare a revised grand list for said assessment year, which shall reflect the assessments of real estate according to the grand list in effect for the assessment year commencing October 1, 2007, subject only to transfers of ownership, additions for new construction and reductions for demolitions. Such assessor shall send notice of any increase in the valuation of real estate over the valuation of such real estate as of October 1, 2007, or notice of the valuation of any real estate which is on the grand list to be effective for the October 1, 2008, assessment year but was not on such list in the prior assessment year, to the last-known address of the person whose valuation is so affected, and such person shall have the right to appeal such increase or valuation during the next regular session of the board of assessment appeals at which real estate appeals may be heard.

Sec. 2. Section 12-62c of the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage, and applicable to assessment years commencing on or after October 1, 2009):

(a) (1) A town implementing a revaluation of all real property may phase in a real property assessment increase or a portion of such increase resulting from such revaluation, by requiring the assessor to gradually increase the assessment or the rate of assessment applicable to such property in the assessment year preceding that in which the revaluation is implemented, in accordance with one of the methods set forth in subsection (b) of this section. The legislative body of the town shall approve the decision to provide for such phase-in, the method by which it is accomplished and its term, provided the number of assessment years over which such gradual increases are reflected shall not exceed five assessment years, including the assessment year for which the revaluation is effective. If a town chooses to phase in a portion of the increase in the assessment of each parcel of real property resulting from said revaluation, said legislative body shall establish a factor, which shall be not less than twenty-five per cent, and shall apply such factor to such increases for all parcels of real property, regardless of property classification. A town choosing to phase in a portion of assessment increase shall multiply such factor by the total assessment increase for each such parcel to determine the amount of such increase that shall not be subject to the phase-in. The assessment increase for each parcel that shall be subject to the gradual increases in amounts or rates of assessment, as provided in subsection (b) of this section, shall be (A) the difference between the result of said multiplication and the total assessment increase for any such parcel, or (B) the result derived when such factor is subtracted from the actual percentage by which the assessment of each such parcel increased as a result of such revaluation, over the assessment of such parcel in the preceding assessment year and said result is multiplied by such parcel's total assessment increase.

(2) The legislative body may approve the discontinuance of a phase-in of real property assessment increases resulting from the implementation of a revaluation, at any time prior to the completion of the phase-in term originally approved, provided such approval shall be made on or before the assessment date that is the commencement of the assessment year in which such discontinuance is effective. In the assessment year following the completion or discontinuance of the phase-in, assessments shall reflect the valuation of real property established for such revaluation, subject to additions for new construction and reductions for demolitions occurring subsequent to the date of revaluation and on or prior to the date of its completion or discontinuance, and the rate of assessment applicable in such year, as required by section 12-62a.

(b) A town shall use one of the following methods to determine the phase-in of real property assessment increases or the phase-in of a portion of such increases resulting from the implementation of a revaluation:

(1) The assessment of each parcel of real property for the assessment year preceding that in which such revaluation is effective shall be subtracted from the assessment of each such parcel in the effective year of said revaluation, and the annual amount of incremental assessment increase for each such parcel shall be the total of such subtraction divided by the number of years of the phase-in term, provided if a town chooses to phase in a portion of the assessment increase for each real property parcel, the amount of such increase that is not subject to the phase-in shall not be reflected in said calculation; or

(2) The ratio of the total assessed value of all taxable real property for the assessment year preceding that in which a revaluation is effective and the total fair market value of such property as determined from records of actual sales in said year, shall be subtracted from the rate of assessment set forth in section 12-62a, and the annual incremental rate of assessment increase applicable to all parcels of real property shall be the result of such subtraction divided by the number of years of the phase-in term. Prior to determining such annual incremental rate of assessment increase, a town that chooses to phase in a portion of the assessment increase for each real property parcel shall multiply the result of said subtraction by the factor established in accordance with subsection (a) of this section, to determine the rate of assessment that shall not be subject to such phase-in; or

(3) The ratio of the total assessed value of all taxable real property in each of the following property classes for the assessment year preceding that in which a revaluation is effective and the total fair market value of such property in each class as determined from records of actual sales in said year, shall be subtracted from the rate of assessment set forth in section 12-62a, and the annual incremental rate of assessment increase applicable to all parcels of real property in each such class shall be the result of such subtraction divided by the number of years of the phase-in term, where such property classes are: (A) Residential property; (B) commercial property, including apartments containing five or more dwelling units, industrial property and public utility property; and (C) vacant land. In the event the assessor determines that there are no records of actual sales of real property in any such property class in said year or that the number of such actual sales is insufficient for purposes of determining a rate of increase under this subdivision, the annual incremental rate of assessment increase determined under subdivision (2) of this subsection shall be used for said property class.

(c) The assessment of any new construction that first becomes subject to taxation during an assessment year encompassed within the term of a phase-in shall be determined in the same manner as the assessment of all other comparable real property in said assessment year, such that the total of incremental increases applicable to such other comparable real property are reflected in the assessment of such new construction prior to the proration of such assessment pursuant to section 12-53a.

(d) Not later than thirty business days after the date a town's legislative body votes to phase in real property assessment increases resulting from such revaluation, or votes to discontinue such a phase-in, the chief executive officer of the town shall notify the Secretary of the Office of Policy and Management, in writing, of the action taken. Any chief executive officer failing to submit a notification to said secretary as required by this subsection, shall forfeit one hundred dollars to the state for each such failure.

(e) Any town that votes to phase-in real property assessment increases resulting from a revaluation may, by vote of its legislative body, extend the number of years over which the gradual assessment increase is reflected by one additional assessment year, notwithstanding the provisions of subsection (a) of this section. The amount of the assessment increase in the assessment year in which such extension is approved shall be the amount of the assessment increase in the preceding assessment year. Not later than thirty business days after the date a town's legislative body votes to extend such phase-in, the chief executive officer of the town shall notify the Secretary of the Office of Policy and Management, in writing, of the action taken. Any chief executive officer failing to submit a notification to said secretary, as required by this subsection, shall forfeit one hundred dollars to the state for each such failure.

The following fiscal impact statement and bill analysis are prepared for the benefit of members of the General Assembly, solely for the purpose of information, summarization, and explanation, and do not represent the intent of the General Assembly or either House thereof for any purpose:

OFA Fiscal Note

State Impact:

Note: GF=General Fund

Municipal Impact:

Explanation

The bill allows towns to: (1) delay for one year a revaluation they completed on October 1, 2008, and (2) delay the next annual increase in property values if a municipality is phasing in a revaluation completed before 2008. Towns electing to postpone revaluation or their scheduled phase-in will defer changes to the town's grand list that occur as a result of revaluation.

The bill will also delay the costs associated with conducting property revaluations. The average cost to a town to conduct a revaluation is approximately $35 to $40 per parcel but can range from $25 to $60 per parcel depending on the scope of the project and the number of parcels.

This bill could result in a minimal revenue gain to the state associated with collecting $100 from municipalities that fail to notify the Office of Policy and Management (OPM) of an approved extended phase-in.

The Out Years

The annualized ongoing fiscal impact identified above would continue into the future subject to inflation.

OLR Bill Analysis

SB 388

AN ACT CONCERNING REVALUATION.

SUMMARY:

This bill allows municipalities to delay for one year a revaluation they completed on October 1, 2008 and, consequently, must implement in FY 09. It also allows municipalities that are phasing in a revaluation completed before 2008 to delay the next annual increase in property values. The bill specifies the process and requirements for delaying 2008 revaluations or phasing in earlier ones.

EFFECTIVE DATE: Upon passage, but the authority to delay a revaluation applies to assessments years beginning on or after October 1, 2008, and the authority to delay a phase-in applies to assessment years beginning on or after October 1, 2009.

REVALUATION

The law requires municipalities to tax property based on its fair market value as of October 1 annually. Municipalities begin taxing property based on those values during the next July 1 fiscal year. Because market values change over time, the law requires municipalities to redetermine the value of all property at least once every five years (i.e., revaluation). Consequently, municipalities that revalued property as of October 1, 2008 must tax it based on those values in 2009.

The bill allows these municipalities to delay implementing that revaluation until October 1, 2009 and taxing based on it until 2010 if their legislative bodies (the board of selectmen in town meeting towns) approve doing so. Those municipalities that choose to delay the revaluation until 2009 must revalue property no later than 2014.

The assessor in these municipalities must revise the property values on the October 1, 2008 grand list to reflect the values on the October 1, 2007 grand list, subject only to changes in ownership, new construction, and demolitions. The assessor must send notice of any increase in valuation to the affected owner's last-known address. The owner can appeal the increase when the board of assessment appeals meets in February 2010.

The bill allows the person or entity authorized by law to prepare rate bills in these municipalities to prepare new rate bills.

PHASE-INS

Because the property tax is based on market value, a property owner's tax liability could increase after a revaluation. In these cases, the law allows municipalities to phase-in and tax a portion of the increase over five years. The bill allows municipalities currently phasing in a revaluation to delay the next increase in value for one year. Consequently, the bill allows these municipalities to stretch out the phase-in over six years instead of five.

A municipality may delay a phase-in only if its legislative body approves doing so. No later than 30 business days after doing so, the municipality's chief executive officer must notify the Office of Policy and Management secretary in writing about the municipality's decision. If the officer fails to do so, he or she must forfeit $100 to the state.

BACKGROUND

Related Bill

SB 997 authorizes municipalities to delay revaluations that must be implemented in 2008, 2009, or 2010 until 2011. Its process and requirements for doing so are similar to the bill's. The Finance, Revenue, and Bonding Committee reported the bill favorably on March 24.

COMMITTEE ACTION

Planning and Development Committee

Joint Favorable