Proposal A was a dramatic ballot initiative passed by the voters of the state of Michigan on March 15, 1994. Proposal A significantly changed the administration process for assessments while preserving the traditional method of calculating assessed values. In contrast to prior practice, tax billings are now computed by means of multiplying the taxable value by the authorized millage rate. In addition, Proposal A changed the school funding process, which is now funded by the State, primarily from an increase of the general sales tax from 4% to 6%. However, a Hold-Harmless millage can be instituted by a majority of the voters of the community to supplement additional funding to the school district (The residents of the City of Center Line voted in a Hold Harmless millage in the current amount of 16.5354 mills, for the Center Line School District on May 7, 2013, which will expire on June 30, 2024.
Proposal A established a statewide allowance of $5,000 per pupil with formalized annual increases. School districts with a higher operating cost per pupil than what is mandated by the state, are able to hold themselves harmless by continuing to tax homestead property. A hold-harmless millage can only be instituted if it is passed by a majority vote of the residents of the community, as reflected in the prior paragraph.
State Equalized Value (SEV) or Assessed Value (AV)
The State Equalized Value or Assessed Value for a property represents 50% of its estimated fair market value. Twenty-four month sales studies are performed by the County Equalization Department to determine the total assessment increase by class (residential, commercial, industrial, personal). Upon completion of county equalization, the Michigan State Tax Commission uses the same procedures to equalize each class of property in each of the 83 counties in the state. The local assessor's responsibility is to spread appropriately the class increase or decrease among all the various areas of the city, as determined by analysis of sales within each area. In Center Line, for instance, there are four residential sections, which is further broken down by year built. Each of theses sections is separately analyzed and receives an adjustment according to what the sales analysis dictates. Subsequent to the processes of county and state equalization, the Assessed Value becomes the State Equalized Value. In most contexts, Assessed Value and State Equalized Value are used in an interchangeable sense.
Capped Value is a new term that was introduced with the inception of Proposal A. Capped Value is computed as: (the prior years Taxable Value minus losses) multiplied by (the lower of 1.05 or the Consumer Price Index factor) plus additions.
The CPI factor is synonymous with the rate of inflation and is determined by the Michigan State Tax Commission for use by all assessing departments within the state. The result of the formula is to limit the capped value from increasing by more than the lesser of 5% or the rate of inflation, unless an addition to value has been added or there has been a transfer of ownership in the preceding calendar year.
Taxable Value, for a given year, is the lower of that year's State Equalized Value or that years capped value (see above). Taxable Value is the number which is of key interest to residents and property owners. The essential significance of this is that a Taxable Value generally may not increase by more than 5% in a given year, unless there was an addition to value or a transfer of ownership had occurred.
Uncapping the Taxable Value
Another important provision of Proposal A is the concept of "uncapping the taxable value." The spread between the Assessed Value and Taxable Value may increase substantially over time, particularly with economic conditions of a low inflation and strong real estate sales. When a property has sold, within the assessment year following the transfer of ownership, the Taxable Value and the Assessed Value are set to the same number. It is entirely possible for a situation to exist where identical houses on the same street may have dramatically different tax bills, resulting from one house having been recently sold and one which has been owned for several years.
Assessment Appeal Process
Every taxpayer has the right to appeal their assessment. The first level of appeal is directed to the Assessor. Many "appeals" are simply misunderstandings or misinterpretations of fact which can be resolved effectively in the office. The next level of appeal is to the Board of Review. The Board of Review is comprised of three members and one alternate, which who are all knowledgeable residents of the community. When you receive your Notice of Assessment in the mail during the end of February, it will include upon it the dates, and times the Board will be meeting. The Board begins meeting on the Tuesday following the first Monday of March every year. Meetings are informal and are usually held in the conference room at City Hall. Applicants that appear before the Board of Review should be aware that the burden of proof is upon them as the appellant to substantiate their claim of over-assessment. This can be addressed by presenting information such as photographs, appraisals, and listings of comparable sales to the Board. The next level of appeal must be made by June 31st to the Michigan Tax Tribunal for Agriculture Real and Residential Real. The deadline for Commercial Real, Industrial Real and Commercial Industrial Utility Personal is May 31st. The MTT is a quasi-judicial body that provides a structured, semi-formal court setting in front of a hearing referee. In rare cases, appeals may proceed to the Michigan Court of Appeals.
Please be reminded that this information is a tool to help you reach a better understanding of the Assessment process and how it affects you. If you should have any questions or would like to explore the subject further, please contact the Assessing Department directly at 586-757-6800, Monday through Friday 8:30 a.m to 5 p.m, and we will gladly assist you.