Nobody enjoys paying taxes, but we accept it with the understanding that the taxes are fair and just. Property tax is a mainstay that most people don’t worry about much, especially since it can be deducted from federal income tax debt (for now). Even with deductions, a tax is a tax: it is something the government is taking away from YOU, something you go along with because everybody else is paying equally for services local government claims to be essential.
When taxes are unjustly imposed, some people revolt and perhaps more people should. As a protest exercise, dumping a shipload of tea into the harbor led to the Boston Tea Party being written into the annals of history, not to mention being a powerful meme that fueled the American Revolution.
For the past year, Klamath has rested with what is arguably the most benevolent and sane three county commissioners to ever hold office in this county at the same time. However, behind these benign appearances, the corruption of “business as usual” runs rampant. In a nutshell: Klamath County has been and continues to deeply exploit property owners with false property valuations and policies circumventing cures which are tantamount to a tax scam. (Side note: Dennis Linthicum, your vehement anti-tax zealot supported these practices when he was county commissioner).
Case In Point: a recent property sale illustrates how unjust and corrupt Klamath County’s methods are.
A few months ago, a 1,900 square foot home in Pacific Terrace was sold on the open market for $77,000. The seller had owned this property since 1999 when it was purchased for $85,000. Back then the assessed value was less than $70k. When it was sold in 2017, the assessed value was $155,000! How can a property that suffered an $8k loss in the “real” market over 18 years be taxed at a value 2x reality?
Taxes must be paid in order to transfer ownership in property. Alarmed at the discrepancy and reluctant to pay excessive taxes that were clearly fabricated, the owner visited the county assessor to beg for an adjustment based on the actual sale amount. The county refused, citing a lengthy process that does not use the actual price a property is sold for as proof of the market value. A county gatekeeper also stated that the option for adjustment isn’t even an option to consider after a property has been sold. Did you catch that? Once you sell a property to acquire the most concrete evidence of market value, you are prohibited from claiming any relief from prior false valuations, including the one that occurred the year you sold the property!
Scam 1: fabricate higher than actual property value assessment.
Scam 2: deny actual sale data to prove real value.
Scam 3: prohibit taxpayer victimized by Scam 1 and Scam 2 from filing a claim or recovering any of the tax overcharges from previous years.
Something is very wrong here and the failure of the new leadership to notice or deal with it constitutes a conspiracy. This is very much a system of collusion among all the counties in Oregon and the Oregon Department of Revenue (what is your corrupt Senator Linthicum doing about this on the state level? Nothing). While it is true that many other counties in Oregon operate the same way, collusion with perpetrators of unethical and corrupt practices should never be a viable defense. It certainly doesn’t keep drug users out of jail, nor should it be a shield for Klamath County to hide behind.
Understanding Real Estate Valuation
In the USA system, value is determined by supply and demand. Since we rely on a socio-economic indicator to provide evidence of value, there is a system in place to realistically evaluate property value using comparable sales. Banks use appraisals by appraisers trained and licensed in a specific and common methodology to determine if the purchase price of a property they are financing. The appraised value is supposed to reflect what it is really worth in case they need to liquidate the property later. Even with this conservative methodology in place–they get it wrong–as evidenced by the financial crisis of 2008 when too many loans were written on too many properties with inflated values.
Bank loans and tax assessments are supposed to be based on the actual value of a property using a method called comparative market analysis. Property value is the highest price a buyer on the open market will pay for a property at any given time. There is no truer measure of value than actually selling a property, but to guess, or “assess” the value for other purposes, similar properties sold recently are used as examples. Since no property is exactly the same, adjustments are made to various factors such as square footage, number of bathrooms, defects, etc.
When property values were ramping up to their inflated 2008 peak, cities and counties seized the opportunity to increase tax revenue by increasing property value assessments en masse. The way the county determines value is rarely the same as how real estate appraisers do it. Counties do increase assessed value once a property has been sold. No argument there. Ironically, they don’t automatically adjust the assessed value downward when a property is sold for less than assessed value. This is hugely unjust: to automatically increase property assessment when a property is sold, but fail to decrease the assessed value when a sale is recorded for less! Rather than being content to wait for properties to change hands before adjusting the assessment upward, counties often apply a multiplier to all unsold properties. These multipliers fail to account for massive discrepancies in the marketability of a property or the physical nature of the property, such as structural malfunctions or major disrepair that could significantly impact property value.
Professional real estate appraisers physically walk through a property being evaluated to more accurately assess value, noting structural abnormalities that could impact value long-term. Counties assessors don’t do this, they look at the sales data in an area and apply assumed increases in value across the board. If the private sector used the same reckless valuation methods counties used, the 2008 recession would have been a far worse depression. In the case of the property that is the subject of this article, the county fabricated a value twice as high as the actual market value.
County officials justify their procedures based on the notion that someone could sell a property at a discount to a relative, or be forced to sell a property for less than market value because of a crisis. They say either case would result in an assessment that does not reflect the actual market value, so the county is fully justified and pious in their methods that can be proven to be 100% faulty in many cases. And just how many people are selling homes to relatives at huge discounts? Likely very few…far fewer than are being overcharged for property taxes by faulty assessments driven by government people intent on extorting more money from property owners. This is a scam because it takes advantage of the resistance property owners inherently have about going on record abo0ut the condition and value of their property. The main reason people buy real estate is for it to appreciate. Real or fake, the perception of value can be altered if the assessed value changes, so even though many could pay less tax if they challenged the assessment, most will not out of fear of placing something in the record that will harm them in the future.
The county assessor, an elected position that nobody pays much attention to or cares much about is part of this scheme, but it is not the assessor that is responsible for the bulk of the unfair policies in place: the county commissioners determine county policies, so it would be up to them to issue corrections.
Challenge: if our commissioners are truly interested in fair and just governance, restructure the system of property assessment. At a bare minimum, make it a law to immediately adjust the assessed value when a sale is recorded for less. And to be just, anyone who has owned a property for five years or more, should be compensated for tax overpayments resulting from inaccurate and overzealous assessments implemented in haste, as so many seem to be in Klamath County.