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Reeval
So You Got Your Reevaluation. What Does It All Mean?
A reevaluation (or property revaluation) is the process by which a town or municipality reassesses the value of all properties within its jurisdiction. In CT, the state mandates that property be reevaluated every 5 years and to do a full revaluation every 10 years. The impact of a revaluation on the town's mill rate is closely tied to changes in property values, and here's how it works:
1. What is a Mill Rate?
The mill rate (or millage rate) is the amount of property tax paid per $1,000 of assessed property value (assessed value is equal to 70% of the property's full value). For example, if the mill rate is 25 mills, then a property valued at $100,000 would pay $2,500 in taxes ($100,000 ÷ 1,000 × 25 mills).
2. What is a Property Reevaluation?
A reevaluation is the process where a town or city re-assesses the values of all taxable properties within its boundaries, usually due to changes in the local real estate market. Property values may go up, down, or remain stable based on the market, property improvements, or other factors.
3. How Does a Reevaluation Affect the Mill Rate?
If Property Values Increase:When the assessed values of properties increase, the total taxable value of all properties (the Grand List) in the town increases.
Example:Before reevaluation, the town’s total taxable property value might be $500 million, and with a mill rate of 30, the town collects $15 million in taxes. After reevaluation, the town’s total taxable value might increase to $600 million, but to keep tax revenue at $15 million, the mill rate would need to decrease to 25. However, to avoid a windfall gain (where the town collects more tax revenue due to higher property values without needing to raise the mill rate), the town's Board of Finance or Select Board will likely (should) adjust the mill rate downward. This helps keep the total tax revenue roughly the same as before the revaluation, even though property values have gone up. The amount of taxes needed to be raised should equal the amount of money needed to fund (pay for) the new year's budget that passes at referendum.
If Property Values Decrease:If the reevaluation shows that property values have declined, the total taxable value of all properties in the town would decrease. To maintain the same level of tax revenue, the town may raise the mill rate. However, the increase in the mill rate would still be subject to oversight to ensure the town isn't over-collecting taxes.
Example:If the town's total taxable value drops from $500 million to $400 million, and the town still needs $15 million in revenue, the mill rate might increase from 30 to 37.5.
4. How Does This Impact Property Owners?
For Individual Property Owners:Depending on how their property value changes in comparison to the average townwide change, property owners may see a higher or lower tax bill despite the change in the mill rate. If their property value increases more than the average townwide increase, they might pay higher taxes, even with a lower mill rate. Conversely, if their property value increases less than the average, they might see a reduction in their taxes.
If, for example, the value of homes in town increases to a greater degree than commercial property and farmland (as is the case in Coventry this year due to the revaluation) there will be some shift in the tax burden from the commercial properties and farmland to home owners even before the budget is increased and more taxes are needed. This is because as homes increase in value at a faster pace than other properties, their total value will make up a greater amount of our Grand List. In Coventry commercial properties in town make up only about 4% of the current year Grand List. As home values increase at a rate that is 4 times faster than commercial properties, commercial properties will make up a smaller percentage of the new Grand List and homes will make up a larger percentage of it. We will have to wait for the numbers to be finalized to project the impact, but home owners will bear a higher percentage of the tax burden than they did before the revaluation. It is also true that individual homes and properties may rise at a higher or lower rate than the average of all homes or properties in town.
Each year, the Grand List typically (not always) increases due to new construction or impactful renovations that increase the property value of properties in town. This is separate from the impacts of the revaluation. The annual growth in the Grand List, if there has been any (separate from revaluation), will help offset a small amount of any increase in the town budget and need for more tax revenue. Likewise any negative impacts on the current Grand List value would have the opposite effect.
For the Town:The goal of a reevaluation is to ensure that the tax burden is distributed fairly based on current property values, so that no one property owner is unfairly over- or under-taxed. It also allows the town to continue funding its budget without experiencing large fluctuations in tax revenue. The revaluation causes a new balance to be made based on the changes in value of each individual property and property types.
In short:
A reevaluation impacts the mill rate by adjusting it to reflect the changes in total property values. If property values increase, the mill rate generally goes down to keep revenue steady. If property values decrease, the mill rate might go up to compensate. The reevaluation itself doesn’t automatically increase or decrease total tax revenue; it’s the mill rate adjustment that determines the overall tax burden." The Town Council sets the mill rate each year. Taxpayers must be vigilant and make certain that the Town Council adjusts the mill rate to only match the increase in new tax revenue needed to fund the approved budget and nothing more.
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