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Rising Property Taxes

Re-assessment hits
historic home owners

General Assembly to re-visit issue in January

By Ruth Wright
Staff Writer

MADISON, Ind. (January 2004) – A reasonable property tax rate was one of the selling points that drew Ann and Larry Johnson from Chicago to Madison, Ind., three years ago. The Johnsons had planned for some time to open a bed and breakfast when they retired, and after scouting out locations in Indiana and surrounding states, the couple selected Madison as their new home. In 2001 they purchased the Schussler House Bed and Breakfast in the downtown historic district.
“If the taxes had been what they are now, we probably wouldn’t have bought here,” said Larry Johnson, one of many property owners upset about the sudden and dramatic rise in property taxes last year. The Johnsons’ property tax bill increased by 126 percent, more than twice what they had paid two years ago. In 2002, their property tax bill was $1,260; it ballooned in 2003 to $2,848.

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January 2004
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“I was stunned – completely stunned,” Johnson said about his reaction to the tax statement he received last October.
Robin Henderson was also shocked when he discovered the 110 percent increase in property taxes on his downtown 1890-era home. “We would never had bought it,” said Henderson, who moved with his wife, Margot, to Madison a year ago. The couple own two downtown businesses, Baskin-Robbins and Montpelier Inn restaurant. “We moved here because of high property taxes in Virginia. There, they were raising at the rate of 20 percent a year over six years,” said Henderson. He is considering moving across the river to Kentucky if his property taxes go up again in the next two years.
It’s no secret by now that the reason so many saw a spike in their property taxes last year is due to a change in the way property was valued for taxes. In 1998, the Indiana Supreme Court ruled that the former method used to assess property value in Indiana was unconstitutional. Judges said that under the previous system, the tax burden was shouldered by an unfair percentage of property owners, and that many were paying less than they should because assessed property values were not based upon objective standards. The court ruled that a new system be instituted. To oversee the transition, it created the Department of Local Government Finance.
Left with a choice of options, this new agency chose a system based on fair market value – or the amount a property could bring if sold, regardless of age or maintenance costs. The primary factor in determining the assessed value became the home’s condition, thus increasing the assessed value of many well-kept and renovated older homes. All counties in the state were required to re-assess all properties according to these guidelines.
“Every property had to be re-assessed,” said Madison Township Assessor Don Thompson. Thompson said his office used sales information from July 1998 through July 2000 to perform a sales comparison ratio study, as outlined by the new agency. Training was provided to local assessors regarding the new system and a computer program certified in advance by the state.

Ann, Larry Johnson

Photo by Ruth Wright

Schussler House B&B owners Ann and Larry Johnson worry about rising property taxes.

Although some property owners saw a decrease in their taxes, many noticed a substantial increase, particularly homeowners. “The residential side of the equation picked up a greater amount of the tax burden,” Thompson said. In Madison, that included most historic homes.
“It’s very serious for all of Madison and particularly the historic district,” said Madison Mayor Al Huntington. Huntington voiced these concerns to representatives of the House Ways and Means Committee, who met Nov. 12 in Madison. “As local elected officials, we are closest to our citizens. I have been listening to their tax concerns and find that there are several issues. Paramount would be the significant property tax increases many homeowners and business property owners in the historic district have experienced as a result of the court ordered reassessment,” Huntington told those present at the meeting.
“It tends to be concentrated in communities that have historic and older established neighborhoods,” said John Molitor, a lobbyist for the Historic Landmarks Foundation of Indiana. In some cases, according to Molitor, taxes have tripled or quadrupled.
“It’s very hard for someone to absorb that type of tax increase from one year to the next,” Molitor said. “And it really interferes with the city’s efforts to keep these holder neighborhoods viable.”

Robin Henderson home

Photo by Don Ward

Robin Henderson's home on Main Street.

Historic Landmarks immediately drafted several suggestions that they presented to legislators prior to a November meeting. The suggestions included:
(1.) that properties in historic districts or listed on the National Register receive 10 or 15 percent exemption to reflect the fact that they hold together the fabric of our communities and preserve our history for generations to come;
(2.) that exemptions for improvements to homes 50 years and older be increased from half of the cost to all of the cost for five years;
(3) that the cap on the income tax credit for rehabilitation be increased to $2 million for commercial and residential properties;
(4.) that some tax exempt organizations, excluding schools and churches, make payments in lieu of taxes for their police and fire protection;
(5.) and that stronger enforcement measures be initiated against delinquent or non-paying tax payers who own commercial and rental properties.
While a substantial portion of the General Assembly’s meeting, a one-day “organizational” gathering that stretched to three weeks, was dedicated to addressing the property tax issue, few immediate measures were enacted. Temporary relief, including a filing deadline extension for the Homestead Credit, while helping a few did not put the issue to rest for the majority.
“Nothing (was accomplished) that will save you any money right now,” said Larry Johnson.
Legislators will have the opportunity to revisit the issue when the General Assembly reconvenes in January. And the question most are asking is, what can or will be done to provide significant tax relief this year?
Johnson said he would like to see some of the local organizations, such as the Madison Area Chamber of Commerce, the Madison Main Street Program and Madison Area Convention and Visitors Bureau, form a coalition to demand swift action by legislators. “I think we’re beyond the asking phase. We have to demand that they do something,” he said.
Local officials, responding to the call of Johnson and others, in November requested that the Visitors Bureau board draft a letter to area state legislators requesting relief from rising property tax re-assessments that they said threaten future preservation efforts in Madison. The letter, drafted by the board and dated Dec. 1, was sent to Rep. Markt Lytle, and Sens. Jim Lewis and Johnny Nugent.
“We understand that exempting historic districts from the market value assessments merely shifts the tax burden to others; however, we hope that you can initiate discussion among Indiana’s leaders to come up with a create solution to this problem… such as a phase-in of increases,” the letter read.
Local legislators will have the opportunity to revisit such requests when the General Assembly convenes. And what do individuals like the Johnson’s hope to see accomplished this year? The first thing they’d like to see legislators do is re-visit the way taxes are calculated, and change what they believe is a faulty system.
“We’re not saying keep it the same (as it was before), but be fair,” said Johnson. “And we don’t think they’ve been fair to the people living in historic Madison.”

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