AN ACT CONCERNING MUNICIPAL ASSESSMENTS AND ASSESSMENT APPEALS.

This bill changes how tax assessors must determine the fair market value of large apartments, leased commercial and industrial facilities, and other income-producing property. Under current law, they must do so based on the sales of comparable property in the municipality or an appraisal consisting of various applicable methods. Under the bill, they must determine value based on the various methods whenever they value property. In doing so, assessors may examine the sales of comparable property in other municipalities.

The bill explicitly allows assessors to request net income and expense data any time they value income-producing property, not just during a town-wide revaluation. It sets a deadline by which assessors must provide property owners with the forms for providing income and expense data and allows them to extend that deadline by up to 30 days. It also sets conditions under which they and boards of assessment appeal may waive the statutory penalty for failing to submit income and expense data.

The bill raises the ceiling above which boards of assessment appeals may refuse to hear appeals regarding specific types of property. It also allows property owners aggrieved by an assessment and denied a hearing to appeal directly to Superior Court. Current law allows them to do so if they were aggrieved by the board of assessment appeals.

Lastly, the bill requires board of assessment appeals members to complete training prescribed by the assessors' association at the association's expense.

EFFECTIVE DATE: October 1, 2009, and the provisions regarding income producing properties apply to assessment years beginning on or after that date.

Assessors generally determine a property's fair market value based on the recent sales of comparable property. But current law requires them to use other methods to value large apartments (i. e. , seven or more units), leased facilities, and other income-producing property if there is not enough comparable sales data in the municipality to make a valid comparison. In these cases, assessors must determine value based on as many of the following methods as applicable:

1. replacement cost less depreciation, plus the market value of the land;

2. gross income multiplier method used for similar property; and

3. capitalization of income based on market rent for similar property.

The bill requires assessors to determine value based on an appraisal that includes comparable sales and two of the above applicable methods, regardless of whether enough comparable property was sold in the municipality to make a valid comparison. The other methods assessors must use are:

1. replacement cost less depreciation, plus the land's market value and

2. capitalization of income based on market rent for similar property,

The bill eliminates the gross income multiplier method as a valuation option, but it is already part of the capitalization of income method (see BACKGROUND). It requires the assessor to use each of these methods any time they revalue property, not just during a town-wide revaluation.

By law, assessors may require property owners to submit annual rental income and operating expense data when valuing property. The bill specifically allows them to do so regardless of whether the municipality is conducting a town-wide revaluation. Property owners must submit the data by June 1 annually on a form the assessors provide. The bill requires assessors to provide that form no later than 45 days before the June 1 deadline. It also allows them or their designees to audit the data on the form.

The bill allows assessors to extend the June 1 submission deadline for up to 30 days. They may do so for good cause if a property owner requests an extension no later than May 1.

The bill sets conditions under which assessors or boards of assessment appeals can waive the penalty for failing to submit income and operating expense data. By law, the penalty is a 10% increase in the property's assessment for that assessment year. The bill allows assessors to waive this penalty if the taxpayer who was required to submit the data no longer owns the property on the subsequent October 1. Assessors or appeals boards may do this if the municipality adopted an implementing ordinance.

The bill raises the ceiling above which the board of assessment appeals may refuse to hear appeals regarding specific types of property. Under current law, the board may do so for commercial industrial, utility, or apartment property assessed at over $ 500,000. The bill raises the ceiling to $ 1 million. By law, all property owners may appeal their annual October 1 assessment. Those that wish to do so must file their appeals in February, and the board must hold hearings in March.

The bill requires board of assessment appeal members to complete training the Connecticut Association of Assessing Officers (CAAO) prescribes. Members must complete the training by October 1, 2010 or one year after they are appointed or elected, whichever date is later. CAAO must pay for the training and notify the municipality where a member serves when he or she successfully completes it by sending a certificate of completion to the municipality's chief administrative official.

This method determines value based on the subject property's monthly rental income and the sale price of a comparable property. It requires an assessor to divide the sale price of a comparable property by its monthly net income. He or she must then determine the value of the subject property by multiplying the result by its monthly income.

For example, assume the subject property generates $ 2,500 per month in net income. An assessor can determine its value based on the sale price and monthly net income of a comparable property. Let us assume that that property sold for $ 200,000 and generated $ 2,000 in monthly net income. The assessor divides the sales price by the monthly income to calculate the gross income multiplier (i. e. , $ 200,000/$ 2,000=100. ) He or she then determines the subject property's value by multiplying the gross multiplier (100) by the subject property's monthly income ($ 2,500) to determine the property's value (i. e. , $ 100 X $ 2,500=$ 250,000).

The income capitalization method looks at similar factors to determine value. It focuses on the ratio between the net income a property expects to produce and its original sale price or current market value. Using the above example, the assessor calculates the value of the subject property by determining the capitalization rate of the comparable property (i. e. , $ 2,000/$ 200,000= . 01). The assessor then determines the subject property's value by dividing the comparable property's capitalization rate by the property's monthly net income (i. e. , $ 2,500/ . 01= $ 250,000).

The House referred the bill (File 319) to the Appropriations Committee, which reported a substitute requiring the assessors' association to cover the cost of training assessment board of appeals members.

Yea

Nay

(03/11/2009)

Yea

Nay

(04/23/2009)