New CPI numbers released; no inflationary increase

The numbers are in and the calculations have been made, it is now official: inflation for the last year was in the red. The State Tax Commission has announced that the official inflation factor to be used for calculating taxable values for the coming year is -0.3 percent. A negative inflation factor has never been used before in calculating the value of property for purposes of taxation.  This comes one year after the state experienced the highest inflation factor ever used to calculate taxable values under Proposal A, 4.4 percent. The large swing can primarily be accounted for with the huge increase in fuel prices a year ago compared to the more moderate prices that have occurred in the past 12 months.

The negative number means that the taxable value on every individual piece of property in the state must be reduced by a minimum of 0.3 percent.  The only exception to this scenario would be pieces of property that transferred ownership in the past year and that still had a difference between the taxable value and state equalized value or property where construction has occurred. In many instances, the taxable values will likely decrease much more than the 0.3 percent because of overall declines in the market.

In the current year, many communities saw some stability in their property tax revenues based on some properties seeing an increase in taxable values of 4.4 percent, offsetting other parcels that were seeing real declines.  The controversy from last March of citizens complaining about taxes going up while values of property were going down should not reoccur this spring. Instead, all local governments will need to plan for real drops in property tax revenue for next year. Regular conversations with your assessor should be taking place to keep well informed on how the new assessments will impact your township's operations in the coming year.