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Taxation Process
The Assessor has three major duties: to discover, list, and estimate the value of all taxable property within the jurisdiction of the town.
Process
- Step 1 - Assessed Value & the Tax Rate
- Step 2 - Discovering Property
- Step 3 - How the Assessor Goes About Valuing Property
- Step 4 - Listing Property
- Step 5 - The Market Approach
- Step 6 - The Cost Approach
- Step 7 - The Income Approach
- Step 8 - Valuing Property
- Step 9 - Why Assessed Value Can Change From Year to Year
The Assessor's primary responsibility is to find the fair market value of your property, so that you and other taxpayers may contribute a fair share of support for the community services you receive.
For these services to continue, other agencies, as well as the town, must levy taxes. Here again, state laws define the powers of these taxing agencies and the kinds of properties that are exempt from taxes, such as schools and churches, or have a special process of valuation such as utilities, residences in commercial districts, farmland, etc.
Each year the governing bodies of the various taxing agencies propose budgets for the tax year. To finance the expenditures in the budget, they total all expected sources of revenue such as state aids and shared taxes, license fees and tuition. This is subtracted from the estimated expenditures. The remainder, which is the total amount to be collected through property taxes, is the called the tax levy. The amount of the tax levy for the Town of Salem depends on the size of the Town budget. The levy is raised by multiplying the value of all the property in the Town by a percentage, called the tax rate. The rate is the same for all property owners. When this tax rate is applied to the value of all the taxable property in the town, it will total to the amount of money needed for the levy to help finance Town expenses.
The tax rate is calculated by simply dividing the amount of taxes needed by the total assessed value of all taxable property in the Town.
Tax Rate equals Levy divided by Total Assessed Value of the Town
Once the rate is set, the assessed value of your property is used to determine your portion of the levy. The tax rate when multiplied by the assessed value of your property, equals what you owe in taxes -- your tax bill. The tax rate is often expressed in terms of dollars, per thousand dollars of the assessed valuation (ex: a property gets taxed $17.60 per every $1,000.00 dollars assessed).
The entire taxation process requires the cooperation of several parts of Town government. The Assessor sets the value of your property. The Town Council and other taxing agencies, overseen by the New Hampshire Department of Revenue Administration, determine the cost of services thereby establishing the tax rate necessary to generate funds for these services.
The Assessor must maintain accurate maps identifying each parcel of land in the city. So there are no omissions, and great care is taken to insure that these maps are kept up to date.
The Assessor maintains close coordination with town, county, and state offices to keep informed of name and parcel changes, Planning Board and Zoning Board of Appeals decisions, and building activity.
Finally, constant attention must be given to businesses that sell, move, or come into the town to insure that all property receives an equitable assessment.
To find the value of any piece of property the Assessor must first know what properties similar to it are selling for, what it would cost today to replace it, how much it takes to operate and keep it in repair, what rent it may earn, and many other dollar factors affecting its value, such as the current rate of interest charged for borrowing the money to buy or build properties like yours.
Using these facts the Assessor can then go about estimating the property's value in three different ways; see steps 5, 6, and 7.
So that your property is not confused with another property, the Assessor must establish a record showing you as the owner. The office records your mailing address, describes the property in detail, prepares a legal description, and identifies your property on an assessor's map by parcel number. Properties are assessed according to their value as of April 1st of each year and to the owner of record at billing time.
When values are finally estimated and listed, they must be classified as either residential, commercial, industrial, or agricultural. This information is listed on the Vision database and is open to public inspection.
The first way to determine property value is to find properties like yours which have been sold recently. Their selling prices, however, must be analyzed very carefully to get at the true picture. One property may have sold for more than it was really worth because the buyer was in a hurry to occupy the property and would pay any price to get in.
Another may have sold for less money than it was actually worth because the owner needed cash right away and was willing to sell to the first buyer who made an offer.
Using this approach (comparing the selling prices of properties similar to yours) the Assessor must always consider such over- or underpricing to arrive at a fair evaluation of your property's value. Various statistical procedures are employed in this process.
The second way to determine property value is based on how much money it would take, at current material and labor costs, to replace your property with one just like it. If your property is not new, the Assessor must also determine how much depreciation the property has suffered.
The third method to determine property value is used in addition to the other two if you happen to own property that provides you with a rental income, like an apartment house, a store, or an office building. In addition to your rental income, the Assessor must consider such dollar factors as your operating expenses, taxes, insurance, maintenance costs, the degree of financial risk you have taken in earning income from your property, and finally, the return most people would expect to realize on this kind of property.
Of course, if your property is the home you live in, the third approach cannot be used since you derive no income from it. But in any case, you can be sure the Assessor carefully considers all the available, reliable money factors pertaining to your property.
Estimating the market value of your property is simply a matter of determining the price most people would pay for it in its present condition.
However, the Assessor has the monumental job of valuing all of the houses, shopping centers, office buildings, and apartment units in Salem. The assessed value is typically something other than (usually less than) market value. Revaluations generally bring assessed values to or near market value (required to be between 90% and 110%). Because determining how close to market value is something that cannot be measured until several months after April 1st, the ratio often falls between 95% and 100%. As time goes on market value changes, but not necessarily the assessed value. Unless towns conduct revaluations annually or something happens at or to the property or group of properties, the assessed values do not change. What happens is the relationship between market and assessed values changes. the ratio of assessed value to market value decreases in a rising market and increases in a falling market.
This is done so that the costs of schools, fire and police protection, health and recreational facilities, and other public services can be prorated over all taxable property in the town. Your share of the cost of these services is based upon the value of your property relative to the total value of all property in the town. The value of your property, as determined by the Assessor, is called the "assessed value."
When market value changes, naturally so does assessed value. For instance, if you were to increase the total market value of your property by building a garage, or adding a family room, the assessed value would increase.
Similarly, should your property's value be decreased by a fire, the assessed value would decrease to show the downward effect of this damage on the market value of your property.
For any number of reasons a neighborhood, or a particular house style, may become very popular, thus causing market values to rise at higher-than-average rates. The Assessor must constantly stay alert to spot these trends.
Inflation and the economy of the entire community also affects your assessed value. We all know that as building materials, labor, and the cost of money increase, the value of the existing housing stock also increases.
The Assessor does not create this value - buyers and sellers create the value through their transactions in the marketplace. We must reflect these market value changes at least as often as every five years in what is called a revaluation. A revaluation is the process of assessing all properties in town at the current market rate for that particular style of home or building.