Below-market property valuations and constitutional caps on tax increases are depriving Oklahoma schools, counties and cities of tens of millions of dollars in annual revenue, according to a recent data study.
The data analysis shows that 52 of the state’s 77 counties would have generated an additional $192 million in property tax revenue in 2014 if their valuations had been accurate and if they could have immediately begun collecting the proper amounts.
The study was prepared by the Oklahoma Tax Commission at the request of State Auditor and Inspector Gary Jones and Oklahoma Watch. It was limited to 52 counties that participate in a state computer-assisted property appraisal system. Tulsa and Oklahoma counties, which operate their own systems, were not among those studied.
Jones said the findings show that funding for public schools, vo-tech education, county and city governments, libraries and local health departments could be boosted significantly if property taxes were being assessed and collected fairly.
“Over a period of time, it’s in the hundreds of millions of dollars,” Jones said.
“Some counties are barely getting 50 cents on the dollar because they have kept their values so low for so long,” Jones said. “Even for the ones that are starting to do it right now, it’s going to take a long, long time before the values get up to where they need to be. In fact, if we have increasing real estate values, it won’t happen in our lifetimes.”
Jones, whose view was shared by other state and county officials interviewed by Oklahoma Watch, said the property tax problem had several causes:
–For many years, elected assessors in some counties lacked the expertise, technology and political will to make sure they were assessing property correctly. Although some are trying to do a better job now, 16 counties have been put on notice they might face future penalties if they do not improve their assessment practices.
–Many smaller counties are still using antiquated computer hardware and software to help determine property values accurately. For three years in a row, the Legislature and governor have been unable or unwilling to come up with about $5 million sought by the state auditor to help assessors with their technology and training needs.
–Even in counties where property valuations have been increased, assessors are unable to raise assessments by more than 3 percent for homestead residences and farmland, and 5 percent for other property, because of constitutional caps approved by Oklahoma voters in 1996 and 2012. Even if property values remained flat, it would take years and possibly decades to ratchet up assessments in counties with gross under-valuations.
For example, the Tax Commission study said residential property valuations in Pottawatomie County, where Gov. Mary Fallin grew up, are 16 percent too low, and commercial property valuations 24 percent too low.
Because of the constitutional caps, Pottawatomie County tax collections were nearly $17 million less in 2014 than they might have been otherwise. It could take five years or so to raise them to their proper levels even if market prices did not change. If they did increase, it would take even longer.
In Pittsburg County, where residential properties were considered 19 percent undervalued and commercial property 54 percent undervalued, tax collections were $8 million lower than they might have been in 2014, the study indicated.
Pittsburg County Assessor Cathy Haynes, who took office in 2011, said she had been working hard to come into compliance with state standards. The county failed to meet the minimum threshold on the last state test and is one of the 16 counties facing possible sanctions.
“I’m hoping, although I think I am compliant now, we will be able to improve that next year,” Haynes said.
Haynes said her office still used a computerized valuation system more than 20 years old.
“It’s hard to get it to produce what we need it to produce,” Haynes said. “A lot of our reports … are still in the DOS format, and that’s nearly obsolete.”
In Tulsa County, where property valuations were judged to be in full compliance with state standards, First Deputy County Assessor Patrick Milton said he sympathized with counties that lacked his office’s resources.
“Our job is to value property according to its value and not to give any special preferences to anybody, nothing too high, nothing too low, Milton said. “We have lots of tests that we run to try to make sure that we are being accurate and equitable. We think that’s the way it ought to be across the state. Some county assessors don’t have the resources they need to ensure that.”
State Senate Finance Committee Chairman Mike Mazzei, R-Tulsa, said he shared the state auditor’s concern about the unfairness of the current situation, particularly with respect to education funding.
In counties where property tax collections are too low, the state helps make up the difference every year by appropriating more money to public schools through its state aid formula.
That means taxpayers throughout Oklahoma are subsidizing the cost of education in counties where property owners aren’t paying their proper share, Mazzei said. In counties where property is fully taxed, it’s a double whammy because local property taxes are higher and state education aid is reduced.
“You’ve got a true imbalance,” Mazzei said. “It’s not fair to counties that are doing it right.”
Mazzei said he did not favor reconsidering the 3-percent and 5-percent assessment increase limits embedded in the state constitution. Those caps have been a balm to fixed-income senior citizens who would be hit hard by sudden increases in property tax assessments.
“The best way to address this is through better technical administration, not by changing the constitution,” he said.
Auditor Jones said he was appointed to lead a task force on property valuation problem during his first year in office in 2011, and was frustrated that he might leave office in 2017 without having resolved it. He said he would push again next year for state funding to improve county assessment technology and training.
“After five years, we’re still talking about the same problems,” Jones said. “We’re not fixing things.”