East Lansing’s Assessor Explains Increases in SEVs
ELi runs a regular service called “Ask ELi to Investigate.” This week, a reader wrote to ask why it seemed that property assessments are rising dramatically in some areas of East Lansing.
She wrote, “Several of my neighbors got [property assessments] yesterday and SEV’s went up large amounts, $7,000-$10,000, when no work had been done on the house. We’re trying to figure out what’s creating these increases.”
We also heard from another reader who wondered if the passing of the income tax or the passage of the property tax millage reduction allowed a broad resetting of State Equalized Values (SEVs) in East Lansing.
We asked the City’s tax assessor, David Lee, to explain for our readers what is happening. Lee began by explaining that house prices have been rising in East Lansing: “The market for residential property in the City has been strong over the past several years.”
That matters because “Assessed value changes are required [by law] to match market changes each year.”
Lee explained that, “For 2019, sales activity showed that we needed to increase residential assessments by 4.1% in Ingham County and 4.8% in Clinton County for those assessments to be set at 50% of market value as is required by law.” (Most of East Lansing is in Ingham County, but a small portion on the northern side is in Clinton County.)
It is not the case that all residential properties have their State Equalized Value (SEV) raised at the same rate. So not all East Lansing homeowners will see their SEVs rise at the same rate.
According to Lee, “We break the City up into groups of similar properties and study land values and building values within those areas. We then apply the results of those studies uniformly within the various groups. Our studies use market activity (i.e., sales information); market activity differs from one area of the City to another.”
The result is that “Some areas might typically see changes in assessed value less than the average increase for the City, other areas will see increases above the average. Again, this is based on market activity within those areas.”
Keep in mind that property taxes are actually based on taxable value, not SEV. Michigan’s “Proposal A” limits increases in the taxable value to the rate of inflation or 5%, whichever is lower.
In 2019, taxable value went up by 2.4% , unless a property transferred ownership. Says Lee, “That is true regardless of the amount of increase in assessed value. (New construction would cause an increase in taxable value above the rate of inflation.)”
In other words, even if you do not improve your home at all, your home’s SEV might go up 6% this year because the assessor believes the value of the home has gone up that much, but your taxable value won’t go up more than 2.4%. The amount of tax you pay is based on taxable value, not SEV.
If you do renovations on your home that increase your home’s value, your SEV and taxable value will both go up.
If you sell your home, the next owner will see the taxable value on your property reset to the SEV. That means that person will pay more than you’ve been paying, if the SEV is higher than the taxable value at time of sale.
What about the income tax – did that cause a city-wide reassessment of some sort?
No, says Lee: “The assessing process and methods used to determine assessed values are no different for 2019 than what has been used in prior years. The passage of the income tax had no effect on the assessing process.”
The millage rate drop of 5 mills takes effect January 1, 2019, but in practice that means you’ll see that millage rate drop for the first time in your 2019 summer tax bill.
Keep in mind that the City’s millage rate isn’t the only millage rate that determines your tax bill. See our article “Why Is My Winter Property Tax Bill So High?” to learn more about why tax bills can go up because of taxes other than ones charged by East Lansing.
Our thanks to David Lee for help answering our readers’ questions. Have a question you’d like to ask ELi to investigate? Contact us!
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