The City Assessor has three major duties:
- to discover
- to list
- to value all taxable property within the jurisdiction of the city.
To ensure that all property is treated uniformly, the Assessor's procedures must conform to State laws dealing with property taxation. Furthermore, commonly accepted appraisal and accounting practices must be used.
The Assessor must maintain accurate maps identifying each parcel of land in the city. Great care is taken to ensure that these maps are kept up to date. The Assessor maintains close coordination with other city offices to keep informed of building activity. Finally, constant attention must be given to businesses which sell, move, or come into the city to ensure that all property receives an equitable assessment.
The Assessor must establish and maintain an accurate record of property ownership. The office records mailing address, describes the property in detail, prepares a legal description, and identifies property on a map by parcel number.
When values are finally determined and listed on the annual assessment roll, they must be placed under the appropriate classification. Real estate classifications include: Residential, Commercial, Manufacturing, Agricultural, Agricultural Forest, Undeveloped, Forest, and Other. This information is listed on the assessment roll and is open to public inspection.
The Assessor has the challenging task of valuing all property within the City on an annual basis. Determining the market value of property is primarily a matter of identifying the price most people would pay for it in its present condition. This includes determining the value of all of the office equipment and fixtures.
This is done so that the costs of schools, fire and police protection, health and recreational facilities, street services, and other public services can be prorated over all taxable property in the city. The share of the cost of these services is based upon the value of property relative to the total value of all property in the city. The value of property, as determined by the Assessor, is called the "assessed value."
The basis for assessed values is defined by law and varies by property type. Properties classified as Residential, Commercial, Manufacturing, Forest, Other and Personal Property are valued at 100% of full market value. The categories of Agricultural Forest and Undeveloped are valued at 50% of full market value. Agricultural land is assessed at 100% of its "use-value" (what the property is worth based on its use for agricultural production). Manufacturing values and use-values for agricultural land are determined by the State.
How the Assessor Values Property
To find the value of any piece of property the Assessor must first know what properties similar to it are selling for, what it would cost today to replace it, how much it takes to operate and keep it in repair, what rent it may earn, and many other financial factors impacting its value, such as the current rate of interest charged for borrowing the money to buy or build like properties.
Using these facts, the Assessor can then determine the property's value using three methodologies.
The Sales Comparison Approach
The first method is to find like properties which have been sold recently. It is based on the principle that a typical buyer will pay no more for a property than it would cost to buy a reasonably comparable property. Selling prices must be analyzed carefully. One property may have sold for more than it was really worth because the buyer was in a hurry to occupy the property and would pay any price to get in. Another may have sold for less money than it was actually worth because the owner needed cash right away and was willing to sell to the first buyer who made an offer.
Using this approach (comparing the selling prices of similar properties) the Assessor must always consider such factors to arrive at a fair evaluation of a property's value. Various statistical procedures are employed in this process.
The Cost Approach
The second method is premised on the principle that a well-informed buyer will pay no more for a property than the cost of constructing an equally desirable substitute property. This method is based on how much money it would take, at current material and labor costs, to replace the property with a similar property. If the property is not new, the Assessor must also determine how much depreciation it has sustained.
The Income Approach
The third method is typically used for commercial properties. It involves the calculation of present value based on anticipated future benefits. Important considerations for this method includes such factors as operating expenses, taxes, insurance, maintenance costs, the degree of financial risk, and finally, the return most people would expect to realize on this kind of property.
Business Value vs. Real Property Value
Valuations of a business (enterprise) and real property share methodologies, terms and standards, which can result in confusion. The Assessor must navigate the real property valuation carefully as that is the statutory obligation of the Assessor’s Office not valuation of the enterprise. This distinction is particularly impactful during times of economic fluctuation such as that caused by the Covid-19 pandemic.
Real property is defined as land, any improvements that have been attached to the land, and all fixtures, rights, and privileges pertaining thereto. Business value is defined as the entire value of a business: the summation of all its parts. Both tangible (real property) and intangible (enterprise value). The Assessor is tasked with valuing the tangible aspect of the business, which is real property. The value of the business (enterprise) is not under the purview of the Assessor.
This is a loss in value due to factors external to the property. An example of obsolescence is the draining of Lake Delton and the impact on value to waterfront property for a period of time. This is similar to the impact of the Covid-19 pandemic on some real property in the City. To be considered for assessments, the impact must be to the real property and not solely to the business (enterprise) value of the property as referenced above.
Why Assessed Value Changes From Year to Year
Properties are assessed on an annual basis as of January 1. When market value changes, naturally so does assessed value. For instance, if you were to increase the total market value of your property by building a garage, or adding a family room, the assessed value would increase. Similarly, should a property's value be decreased by a fire, the assessed value would decrease to show the downward effect of this damage on the market value of the property.
For any number of reasons a neighborhood, or a particular house style, may become very popular. Thus, causing market values to rise at higher than average rates. The Assessor must constantly stay alert to recognize these trends. Further, inflation and the economy of the entire community also impacts assessed value.
The Assessor has not created this value -- people establish value by their transactions in the market place. The Assessor merely acknowledges the market. It is the Assessor's responsibility each year to adjust existing assessments to keep pace with the market.
Assessed Value & Tax Rate
The Assessor's primary responsibility is to determine the fair market value of property. This ensures taxpayers contribute a fair share of support for the community services received.
For these services to continue, other agencies, as well as the City, must levy taxes. The other taxing jurisdictions include the Madison Public Schools, Dane County, and the Madison Area Technical College. State laws define the powers of these taxing jurisdictions and the kinds of properties that are exempt from taxes. Taxes levied by these other jurisdictions are included in the annual tax bill for properties in the City.
Each year the governing bodies of the various taxing agencies propose budgets for the next year. To finance the expenditures in the budget, they total all expected sources of revenue such as state aids and shared taxes, license fees, and tuition. This is subtracted from the estimated expenditures. The remainder, which is the total amount to be collected through property taxes, is called the "tax levy." The amount of the tax levy for the City of Madison depends on the size of the City budget, which is determined by the Common Council. The levy is raised by multiplying the value of all the property in the City by a percentage, called the tax rate. The rate is the same for all property owners. When this tax rate is applied to the value of all the taxable property in the City, it will total the exact amount of money needed for the levy to help finance expenses.
The tax rate is calculated by simply dividing the amount of taxes needed by the total assessed value of all taxable property in the City.
Tax Rate = Levy ÷ Total Assessed Value
Once the rate is set, the assessed value of your property is used to determine the portion of the levy. The tax rate when multiplied by the assessed value of the property, equals what is owed in taxes -- the tax bill. The tax rate is often expressed in terms of dollars per thousand, or as a "mill rate."