Assessor revalues some properties downward
As residents across metropolitan New Orleans fret over steep hikes in flood insurance rates expected under federal legislation set to be implemented next year, St. Charles Parish’s assessor has already started to revalue some properties downward on the basis of the new law.
The reappraisal of about 1,650 properties mainly affects low-lying areas of Bayou Gauche, Paradis and Des Allemands, officials said last week.
The move was prompted by the federal Biggert-Waters Flood Insurance Reform Act, which is aimed at making the federal flood insurance program financially solvent by charging property owners for the true cost of insuring homes in flood-prone communities, a cost the government has traditionally subsidized. The result will be big premium increases.
St. Charles Parish’s assessor, Tab Troxler, is believed to be the lone assessor in the metro area to begin revaluing properties based on the anticipated impact of the legislation, which Louisiana’s entire congressional delegation voted for in 2012, but is now frantically trying to forestall.
Troxler, who became assessor earlier this year, came to the decision after studying market data and consulting with other assessors, real-estate agents and tax experts. “We’ve really come to the determination that there’s been some market damage” by the lingering concerns, he said.
Troxler said he developed a formula for revaluing the properties based on the projected elevation costs in that area. Overall, assessed values of the revalued improvements fell by 18 percent to 30 percent on the property. He did not adjust land values, he said.
Homes situated above the base flood elevation will see no change, he said.
The impacted properties are located in the parish’s Sunset Drainage District, a 16.4-square-mile area with levees and drainage canals that protect about 5,400 residents. The Parish Council voted earlier this month to take charge of the levee district in an effort to improve the structures as St. Charles implements a comprehensive hurricane flood protection system on its west bank.
Earlier this month, members of the state’s congressional delegation took David Miller, head of the Federal Emergency Management Agency’s flood insurance program, on a daylong helicopter and bus tour to see locally built flood protection features, a portion of which focused on the Sunset Drainage District levees. Because the levees are non-federal, the flood insurance program treats them as nonexistent in its calculations of flood risk, though a nascent FEMA pilot program will begin taking them into effect.
Sen. Mary Landrieu, D-La., who organized the event, and members of the delegation used the opportunity to press Miller to take action to prevent flood insurance costs from becoming prohibitive in Louisiana.
The effect of the property tax adjustments on St. Charles’ tax coffers should be minimal because the parish’s most populated areas, along the banks of the river, aren’t getting a wholesale adjustment. Troxler said the parish should lose only about $194,000 in property taxes.
“It’s very minute, but the impact to these individuals is significant,” he said.
Though property values in that area appear stable, the market has stalled as a result of “the hangover” from the coming changes to the flood insurance program, Troxler told the Parish Council last week. Lowering the tax assessments, he said, was “just realizing where the market actually is.”
St. Charles property owners will be able to view their 2013 annual tax assessment starting this week at Troxler’s office.
Troxler said he was making the adjustments because the low elevation of properties in the area makes them “functionally obsolescent,” even when they’re in good shape. Bringing them into compliance can be so expensive that it’s generally not worth it, he said.
“Whatever it’s going to take to get your property in-line, what would be typically normal, would just be exceeding the cost,” he said.
In turn, Troxler revalued the properties by separating the impacted area into zones. “We basically set some of them a little higher, some of them a little lower, and went ahead and calculated what that was going to be against their replacement cost,” he said.
From there, he set a percentage of deprecation based on how high the property would likely need to be elevated.
Not everyone is happy about the changes. St. Charles Parish President V.J. St. Pierre said he disagrees with revaluing property now, describing it as “a difference of opinion” with the assessor.
“I think he should wait another year, because we don’t know what the full implementation of these things are,” St. Pierre said. “I would like to see him wait at least another year to see what’s going to really happen.”
Troxler contends that it’s the “best and fair way that we can move forward.”
“I promised the residents of this parish that no property owner would pay taxes on value that doesn’t exist, and in this case here, values have been affected, and I’m simply keeping to my word,” he said.
Troxler says sales activity is down in the area 57 percent compared to the previous three years. “At the same time, we’re seeing double-digit increases in activity in all the remaining areas of the parish,” he added.
“Properties are being bought and sold at or above the normal pace that we’ve seen in the last few years, but when you go to Sunset, it is dead,” Troxler said. “The market has stalled, and it’s very lethargic, and we’re not seeing a lot of activity.”
Leaving the status quo in place would be unfair, he contends.
“If we took that stance, that we’ll wait until next year to see, these people would be getting the same tax bill that they got last year,” he said. “How can anyone of us look into their eyes and say, ‘Oh, with all this going on, your property value is the exact same thing it was last year.’ How can anybody look in their face and honestly tell them that?”
Though it hasn’t been implemented yet, the Biggert-Waters legislation, he said, is “the law of the land.”
“While they may change it one day, they haven’t changed it today, and I can’t look into these people’s faces and tell them that their property value is the same as it was last year,” he said.
Tax rolls will be open for public inspection from Aug. 29 through Sept. 12. Even with the changes, Troxler projects that the parish will collect about $135 million in taxes this year, up from about $132 million in 2012.
Parish Councilman Paul Hogan, who represents the area, said revaluing the properties was “absolutely the right approach” and echoed the assessor’s sentiment that there’s no assurances that the large premium increases stemming from the legislation, which passed both chambers in June 2012, will be reversed.
“There’s no reason not to address the situation now,” Hogan said. “I don’t think we should wait to see if something should happen to change that down the road. We want it to change, but there’s no guarantee.”
“Nobody is moving to buy land or existing homes not knowing if they’re going to have to pay these exorbitant amounts of money for flood insurance,” he said. “Until that gets resolved, this market will continue to be affected.”
Des Allemands resident Robert Taylor said he is a “staunch advocate” for it.
Taylor called the expected hike in insurance premiums “quite drastic and unfortunate.”
“There’s nobody who would consider purchasing a home back here” now, he said.
“It’s pretty obvious that changing this law is going to be quite an uphill battle, if it’s successful at all, but in the meantime, my home has no value,” he said. “I can’t sell it. Nobody would purchase it, because of the law, and now you are assessing a tax value to it? There’s no tax value if nobody is willing to buy what you have to offer, it is of no value, so why should I pay a tax for something that has no value?”
Troxler is believed to be the only assessor taking such action.
“This is the first time I’ve heard of an assessor doing this,” said Wade Ragas, a former finance professor at the University of New Orleans who tracks sales data.
But Ragas said “the assessor has prerogative under the law here that says, based on the data that he’s collected, he thinks this externality is present.”
Such a move can be appropriate “when there’s an oversupply of property for sale and a low level of demand, and it is caused by something other than the individual property itself,” he said.
Jefferson Parish Assessor Thomas Capella said he was “monitoring” the legislation’s impact on the local housing market. He noted that he doesn’t have many properties outside the levee protection, but there are a few in areas like Grand Isle and Lafitte.
“The bill is obviously something we’re monitoring very close with the parish presidents,” Capella said. “If the bill goes into effect fully, we’ll take a look at it at that point.”
Devin Johnson, a spokesperson for Orleans Parish Assessor Erroll Williams, said early revaluations are unlikely in New Orleans.
“They’re not going to make changes in advance of anything, but they are aware of areas that are specifically — like Venetian Isles — outside of the protection areas. They’re going to be monitoring sales very closely there on an annual basis and revalue as appropriate, but they’re not going to change any values in anticipation of market conditions,” Johnson said.
Taylor, the Des Allemands resident, pays about $400 annually in flood insurance premiums. He expects his assessed property value to drop from about $210,000 to around $160,000 with the changes Troxler is making.
Even that seems like a stretch, he said.
“Honestly, it’s a ridiculous thought, even at $160,000. If I told you, ‘Hey, look, you can steal this house at a great deal for only $160,000, but you’ve got a $28,000 flood insurance bill,’ you’re going to run in the other way,” Taylor said. “You wouldn’t even come close and look. It’s just not worth it.”