AN ACT CONCERNING MUNICIPAL ASSESSMENTS AND ASSESSMENT APPEALS.

This bill requires tax assessors to determine the fair market value of large income-producing property based on the sale of comparable property, regardless of location, and the other statutorily authorized methods. Current law requires them to use the comparable sales method unless the number of sales within the municipality precludes valid comparisons. 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.

Assessors often hire a state-certified revaluation company to value all property when conducting a town-wide revaluation. But this practice does not preclude them from changing the company-determined values. If an assessor changes a property's value, the bill requires him or her to record their reasons for the changes.

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 a decision of the board of assessment appeals.

Boards of assessment appeals may increase or decrease a property's gross assessment (i. e. , the assessment without reductions for tax exemptions) when acting on an appeal. The bill freezes these changes until the next revaluation unless the assessor changes them to correct an assessment error, comply with a court order, or reflect a change in the property's physical characteristics. If the assessor changes the assessment for other reasons, he or she must explain them in writing to the board.

The bill changes the effective date of PA 09-60, which allows municipalities to delay their next revaluation or the next step in the phase-in of an existing revaluation. The act takes effect July 1, 2009 and applies to assessment years beginning October 1, 2008. The bill resets the effective date to upon passage and applicable to assessment years beginning on or after October 1, 2008.

Lastly, the bill eliminates the 13-member working group established in 2006 to study how the revaluation process could be improved.

*House Amendment “A” eliminates the requirement that board of assessment appeal members complete assessment training.

*House Amendment “B” requires assessors to record their reasons for changing a revaluation company's determination of a property's value.

*House Amendment “C” adds provisions regarding changes boards of assessment appeals make to a property's assessment.

*House Amendment “D” changes the effective date of PA 09-60 and eliminates the working group on the revaluation process.

EFFECTIVE DATE: Upon passage, except that the changes concerning assessment appeals take effect October 1, 2009 and those concerning the valuation of income-producing property take effect on that date and apply to assessment years beginning on or after it.

Assessors generally determine a property's fair market value based on 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 are 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 instead requires assessors to determine value based on an appraisal that includes comparable sales, regardless of whether enough comparable property was sold in the municipality to make a valid comparison. The bill also requires assessors to use the following two methods:

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 assessors to use each of these methods any time they revalue property, not just during a town-wide revaluation.

The bill allows assessors to request net income and expense data any time they value income-producing property and sets a deadline by which they must provide property owners with the forms for providing this data.

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 or not 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 requires assessors to record the reasons for changing a property's valuation or assessment. By law, an assessor must allow the public to inspect the criteria, guidelines, and similar material the assessor or the revaluation company used to determine value during a revaluation. He or she must also allow the public to inspect the list of property sales by neighborhood that was also used to determine value.

The assessor may change the revaluation company's values, but, under the bill, he or she must state the reasons for doing so and append them to the property's card (i. e. , the document on which the assessor records the property's address, physical characteristics, value, and other relevant data).

Boards of assessment appeals may also change values, but only when a property owner appeals his or her tax assessment (i. e. , the portion of a property's value subject to taxation; under Connecticut law, the assessment equals 70% of the property's fair market value). When the board increases or decreases a property's assessment, the bill freezes that value until the assessment year when the municipality implements its next revaluation. (Municipalities revalue at least once every five years. They do so as of October 1 of the revaluation year and begin taxing property based on the new values on the next July 1. )

The bill allows the assessor to change the board's assessment to comply with a court order, correct an error, or reflect a change in the property's physical characteristics (e. g. , addition of a new room, demolition of an existing room, or damage caused by a storm). The assessor may change the assessment for other reasons before the next revaluation, but the bill requires him or her to explain to the board in writing the reasons for doing so. The bill also requires the assessor to append that explanation to the property's card.

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.

If the board refuses to hear a property owner's appeal, the bill allows the owner to appeal directly to Superior Court.

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 the comparable 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).

This 13-member group consists of assessors, business representatives, and public officials responsible for recommending improvements to the revaluation process. It had to submit its findings and recommendations to the Finance, Revenue and Bonding Committee by January 1, 2007, and by law, terminated on that date or the date it submitted the report. The group submitted that report in January 2009.

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.

PA 09-60 (sSB 997, File 603) (1) sets conditions under which municipalities can delay their next scheduled revaluation or the next step of a phase-in of a revaluation and (2) allows groups of municipalities to revalue property according to the same schedule, even if it requires some to revalue later than their schedules require.

Yea

Nay

(03/11/2009)

Yea

Nay

(04/23/2009)