NEW HANOVER COUNTY — Since New Hanover County sent out tax revaluations at the end of February, residents filed more than 2,800 appeals to date.
“It’s normal,” according to New Hanover’s tax administrator Allison Snell. “If we weren’t getting appeals, something would be very wrong.”
The last revaluation in 2017 brought in 2,906 appeals, while five years before in 2012, the county had 5,021. The county could lose millions of dollars on its tax base depending on how many appeals are overturned.
In 2012 appeals accounted for a 13.5% loss ($595,560,136) from original revaluations, which equaled a 2% loss of the tax base. In 2017 there was a 13% appealed value loss ($303,258,054), which decreased the tax base by 1%, according to Snell.
“The further we get out from a reappraisal, the appeals drop off,” she said.
That means, compared to revaluation time, the county gets fewer appeals during off years. North Carolina law requires counties to proceed with revaluations every eight years, though New Hanover does it every four to keep abreast of changing market conditions.
“Only the people who have made a change to their property are going to get a new notice of value during years that are not a reappraisal year,” Snell explained.
Usually, they have to be substantial, too, like additions to a house or structure.
“Every attribute, every difference, everything that you have in your house will add something different to your property,” Snell said. “Whether you have a finished upstairs or an unfinished upstairs or three-quarter finished upstairs or whether it’s brick front, whether it’s wood, whether it’s siding. It all adds up.”
$13.5 billion revaluation increase from 2020
New Hanover uses a mass appraisal system for revaluations, which divides the county into 1,350 neighborhoods according to groupings of structures with shared similarities and characteristics, including age, market value, type of construction, replacement costs, depreciation, etc. Some appraise high, others low, but all in all, it helps determine the equitable value of the tax burden.
From 2017, revaluations increased in total around 33%. Since 2020, there has been a 30% increase — around $13.5 billion.
Snell broke down the revaluations from 2017-2020:
- 2017 — $28,948,394,127
- 2018 — $29,447,566,093 or 2%
- 2019 — $29,854,785,453 or 1%
- 2020 — $30,597,000,000 or 2%
- 2021 — $42,947,000,000 or 29%
One assessor and 10 appraisers reviewed more than 110,000 parcels between 2018 to 2020, using a modified cost approach, but also considered traditional appraisal tools, including income, cost, and sales/market approaches. They visited areas across 191 square miles of the county, took pictures and measurements, as well as examined new construction, demolition, zoning changes, and built a mathematical analysis to determine the market value.
Snell said the property value base came from 2017’s revaluation. “Your value stays the same for the next four years until we adjust values again,” she said.
The only exception comes when a major property change happens. Essentially, though, she said every reappraisal year starts with a clean slate: “It’s fresh, it’s all brand new.”
Local commercial real-estate broker and certified real-estate appraiser John Hinnant said the county’s mass appraisal process — especially when considering cost approach and new construction in 2020 — seems problematic. 2020’s prices of lumber rose 180% since last spring, according to the National Association of Home Builders, which in turn has affected the market by increasing sales prices of homes.
From 2017 to 2020, the county shows the average price of a single-family home has increased from $272,786 to over $358,685.
“Almost all the lumber mills across the country shut down for a time in reaction to Covid,” Hinnant said. “The home-building market continued because they were deemed essential for the economy. Nobody put two and two together, until it was apparent there was a significant shortage of materials.”
“When we talk about cost approach, we’re not talking about going into the builder supply warehouse and pulling lumber prices, and saying, ‘This is how much it’s going to cost to build a home.’ That’s not how we build that,” Snell said.
However, the end price on that home, which likely will increase because of rising costs of supplies, will inform the market value.
According to Hinnant, the mass appraisal process can be confounding at times.
“I believe many folks have had a tax value below what they think it’s worth for so long because of the county’s process,” Hinnant said. “Some have been as much as 100% overvalued — in our opinion.”
He recalls a 2007 revaluation in various areas of downtown, when he served as president of Wilmington Downtown Inc. from 2007 to 2013, that came in undervalued.
“I remember the building at Front and Market that used to be the Tom’s Drug building lost $80,000 in value, and at the time values were going up like crazy. It was just baffling,” Hinnant said.
“Again, we’re looking at properties as a whole,” Snell said.
Snell clarified she wasn’t working for New Hanover during 2007 and cannot speak to the exact nature of Tom’s Drugs: “But there are a variety of issues that could have been happening with that particular building: How old is it? Did it have damage?”
Because of the nature of mass appraisals, not every property during revaluations faces an increase.
“We have some that might see a 12%, some 2%,” Snell said. “It really depends on what’s going on with that property and the area around it. Is it new construction? Was it just built? Then, yeah, that’s going to have a fairly large increase from the value of one year to the next.”
Hinnant said he and his colleagues have come across a few disparities in 2021 revaluations, specifically pointing to an industrial metal building in Castle Hayne that’s across the way from GE. Its value is around $157 per square foot.
“That area is well and septic, limiting the site’s development potential and characteristics,” Hinnant said.
He found a similar building, in both style and size, and with water and sewer within city limits at $55 per square foot.
“While the building inside city limits seems accurate, we provided our client with some closed sales so they could file an appeal,” Hinnant said.
And Snell welcomes the feedback.
“We need to hear from people if something seems off,” she said. “If there is something going on with their properties that we don’t know about, please, appeal. It helps us reach market value.”
Revaluations vs. property taxes
The public response when county revaluations come up inevitably revolve around tax increases. Revaluations are only one part of a larger piece. They inform budgetary discussions in municipalities but on their own are not indicative of property-tax increases.
In an email obtained by Port City Daily, Commissioner Rob Zapple informed a concerned citizen who inquired about revaluations, that New Hanover County property owners currently pay 0.55 cents per $100 valuation. Residents who live in city limits or its surrounding beach towns also pay additional property taxes for government-provided services.
“As property values go up . . . the property tax rate should go down, proportionally,” Zapple wrote, “so that the County is not collecting excessive taxes. In the perfect scenario, the County would drop the tax rate to the point that, even with an increase in property values, the amount of taxes that are being collected would not rise — ‘revenue neutral.'”
But he noted the county’s significant growth — population has increased by 30,000 in almost a decade — as a key factor. As such services in the county have expanded.
“[I]nvestments we have made in infrastructure over the past four years, since the last reevaluation [sic], all cost money and going forward will most likely require a small increase in the amount of property tax paid by individual property owners,” Zapple wrote.
The New Hanover County Board of Commissioners will meet in June on the 2021-22 budget, review the revaluations and discuss whether to increase property taxes.
Property owners in New Hanover County who wish to file an appeal for 2021 can do so now. “The earlier they can file their appeal with our office, the better,” Snell said. “This allows staff to work the appeals informally and make any adjustments necessary.”
If the county tax department can’t resolve the appeal, it then goes before the Board of Equalization and Review, which will convene on April 27, 9 a.m. The board will accept appeals through May 11, 5 p.m., but will hear them through the end of the year.
New Hanover County’s full 2021 Schedule of Values can be read here.
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