When Stephen Hamilton watches HGTV with his wife, he’s not looking to hear a business perspective. The home buying and renovation shows “are not about how much you’re investing and want to get back,” he told the Derry Town Council and television audience. “HGTV is about people’s hopes and desires.” The investment market is different, he said.
Hamilton, director of the Municipal and Property Division of the state Department of Revenue Administration, was a guest speaker in the June 21 Town Council meeting. Hamilton gave an overview of how taxes are assessed on municipalities and tried to answer a question that’s been cropping up as Derry deals with its own high taxes: Are apartment buildings assessed differently?
Hamilton explained the function of his department, which is to make sure assessments are taken correctly and to organize municipal finances. Derry undergoes a municipal assessment once every five years, and the 2015 assessment “came out well,” according to Hamilton.
“Derry is meeting all the standards for assessment review,” he said.
There is a significant change in market value for homes in the southern tier of the state and a corresponding increase in sale prices, resulting in “good equity,” Hamilton said. But it also leads to higher taxes, and “when you have significant numbers leading in one direction, it can be a cause for concern.”
Hamilton said homeowners need to maintain equity in order to get their fair share of market value. But market value changes, with, at various times, single-family homes going up in value faster than condos or manufactured housing going down.
If the adjustment happens all at once, after a long static period, it can be hard to pick up the tax burden all at once, Hamilton added.
To avoid the unplanned tax hike, Hamilton recommends making regular updates to assessed valuations. The southern tier, especially homes along I-93 and I-95, are responsible for recent increases in market value, he said.
Waiting for updates can result in an unwelcome large change at the end of a five-year period, according to Hamilton.
Council Chair Brian Chirichiello, also a Realtor, observed, “When values go up, people think the town is going to bring in more taxes. It’s not necessarily true.”
Hamilton reviewed the “simple formula” for setting the tax rate. The amount of money that has to be raised to run a town and school district is divided by the assessed valuation of the community, he said. “If the value goes up, the tax rate will go down,” he said.
The value of single-family homes has increased dramatically, Chirichiello observed. He recently saw a home assessed at $280,000 sell for $405,000.
“We learn what we can from sale property and apply it to parcels not for sale,” Hamilton said.
Chirichiello brought up the issue of apartment buildings. Recently, residents concerned about Derry’s high property tax rate have posited that owners of apartment complexes are not paying their fair share. Chirichiello asked if the perception was true.
“The single standard for all property is market value,” Hamilton said. “But it’s different for investment property.”
For apartments and other investment properties, it’s more about suits and ties and calculators and profit, Hamilton said.
Will Corcoran, principal of Corcoran Consulting, the town’s contracted assessing firm, was also in the meeting (see related story). He said that with “investment-grade” property, the increase in value is usually less dramatic. Assessing apartments involves several strategies, including the “income approach,” measuring rents and expenses through a questionnaire, and “sales comparison,” keeping a data base of comparable properties or “comps.”
“We dig deep to find the details,” Corcoran said. “But it’s the same for residential property. We don’t just check the boxes.”