A state-mandated countywide property reappraisal that was nearly complete and slated to take effect on Jan. 1, 2025, has been shelved by Haywood County commissioners until Jan. 1, 2027, due in large part to property damage incurred during Hurricane Helene.
"Pushing this reappraisal back is going to allow our primary focus to be on reassessing the residential and business properties that were affected by the flood," Judy Hickman, Haywood County's tax assessor, told commissioners on Nov. 4. Hickman talked to state officials to secure permission for the postponement.
Throughout 2024, Hickman and her office had been conducting the revaluation, which uses a variety of factors including recent sales to determine how much a property has increased or decreased in value since the last reappraisal. That value is then multiplied by the tax rate, set by commissioners, to determine the final property tax bill for a parcel or property.
State law dictates that counties reappraise all real property at least once every eight years. Haywood County, like many others, operates on a four-year cycle, with the last reappraisal taking effect on Jan. 1, 2021.
In the red-hot Western North Carolina real estate market, where property values have soared over the past decade amid a lack of supply, there are pros and cons to the four-year and eight-year cycle. The four-year cycle is obviously more frequent and allows property owners to prepare for smaller adjustments in value, but the eight-year cycle means much larger increases when they eventually do come.
The eight-year cycle also leaves lots of value on the table -- something called sales ratio. For example, if a home is valued at $100,000 but increases 20% each year, during the first seven years the county's tax rate is being applied to that $100,000 value, even though the house is legitimately worth much more.
But there's also a stipulation in statute that any time a county's sales ratio drops below 85%, a revaluation must take place.
During a June update on the county's reappraisal process, Hickman told commissioners that the county's sales ratio was 63%. Post-Helene, as of Oct. 10, that ratio had slipped further, to 60%. What that really means is that on average, across all real property in the county, the tax rate is only being applied to 60% of the true value of all that property.
Of course, that means that the county would be in line to see a 40% increase in property tax revenue, but that's not exactly what happens. Commissioners, in constructing their annual budget, would slash the tax rate to somewhere near what's called revenue-neutral. Revenue-neutral means exactly what it sounds like -- multiplying the higher values with a (much) lower tax rate to collect approximately the same amount of revenue as the previous year, keeping property tax burdens on owners roughly the same.
During the last revaluation, local government units fought to achieve true revenue neutrality, but some opted to keep a small amount of the surplus revenue because operating costs like labor and materials are always rising. Effectively, and counterintuitively, that's a small increase in a property owner's tax burden despite a cut to the tax rate, because of the higher property value.
Property owners will see no change to their 2024 property values, as those values are determined to be correct of Jan. 1 of every year -- the only day that any given county's sales ratio is at 100%. Bills are usually mailed out in the summertime, and come due in September.
For 2025, homeowners will see no change to property values unless they've completed additions or renovations to their properties, thereby increasing their value. Conversely, property owners affected substantially by Helene may see a decrease in value, and therefore a decrease in tax burden.
Hickman and her office are rushing to complete storm damage reappraisals ahead of Jan. 1, 2025, to ensure those already hit hard by Helene aren't hit again by the tax office for property that, in some cases, has been completely washed away.
As for the work that's already been done on the 2025 reappraisal, it's now all moot. Hickman will have to start from scratch, probably early in 2026, and the county will have to commission another market study at a cost of around $45,000. Comparable property sales data utilized to value properties accurately will come from real estate market activity in 2025 and 2026, but if the longstanding trend of double-digit annual increases continues, values reported on Jan. 1, 2027, will be much higher than they would have been on Jan. 1, 2025.
A sampling of post-Helene property sales lines up with that projected 40% increase in average values, for now. That figure isn't likely to be lower in 2027, barring massive increases in development or catastrophic economic events on a national or global scale.
"There's going to be even more sticker shock in two years -- because unless it levels off, probably it's not going to level off, but it might slow down a little from what it was -- just a warning," Chairman Kevin Ensley said.
Commissioner Tommy Long asked Hickman to pre-empt the misinformation that accompanied her previous reappraisal update when concerned citizens, rightfully terrified that their property tax bills might double, were mistaken about how property taxation works.
"That doesn't mean that every property will go up 40%," Hickman said.
Indeed, some property values won't change at all. Some property values will increase, perhaps by more than the 40% blanket figure cited by Hickman. Some will property values will increase by less, or much less, than 40%. Some property values will decrease of their own accord, even those not affected by Helene.
And in the end, it will be commissioners that set the tax rate that is applied to those 2027 values to come up with the final property tax bill. Historically, the Republican majority on the Haywood County commission has pushed for a very low-tax environment, as low as possible, and as a result has left the county in excellent financial shape, with low debt and 70 of 100 North Carolina counties charging higher property tax rates.