Tuesday, June 24, 2008


The Daniels administration has backed off a controversial purposed rule that critics say would have shifted the property tax burden from businesses to homeowners.

Just days before a public hearing on the issue, Cheryl Musgrave, Department of Local Government Finance commissioner, said "it is the right move, but this might not be the right time."

The change - which no longer would have focused on the current use of a property -- was contained in a proposed manual of rules for the next statewide reassessment, which is scheduled for 2011 and would affect property tax bills paid in 2012.

The manual must be adopted by July 1, and a public hearing on the issue is scheduled for 9 a.m. Monday in the Indiana Government Center Auditorium.

Indiana currently uses "market value in use" to assess property, which means an appraiser or assessor ignores what the market may dictate as the most profitable use of that property and values it according to it's current specific use.

But Musgrave and her staff wanted to move the state to "market value in exchange," which is the standard relied on predominantly in 48 other states.

Manufacturing plant "A" sells at a lower price to a buyer who plans to turn the facility into a warehouse.

Manufacturing plant "B" can then point to that sale as a similar property that sold for less in an effort to get it's own assessed value reduced. The use of the facility would no longer matter under market value in exchange.

This means assessing the property based on it's potential use.

This change may seem subtle, but it will create a new set of "winners and losers" in the property tax system.

In a perfect world, designing an assessment system from a blank slate, [we] would advocate for a market value in exchange standard.

However, the lack of knowledge regarding potentially negative impacts of this new rule leads us to recommend that the new rule NOT be adopted.

Although not directly affecting residential values, if the assessed value in one category goes down dramatically, the tax rate for everyone goes up to make up the difference.