Main Street Journal: How Memphis Values Your Home

The following article is taken from the November 2008 issue of the Main Street Journal. Click “Subscribe Online” above to start your subscription.

How Memphis Values Your Home
by Joe Saino

As if the financial news is not bad enough including the stock market, the housing market and the promise of higher federal taxes, I hate to remind you that next year, 2009, is reappraisal year here in Shelby County. That means that the Shelby County Assessor of Property, Cheyenne Johnson, will be reappraising all the property in Shelby County, including your home.

For most of us, our home is our biggest investment and the equity in our home is one of our biggest assets. However, the City of Memphis and Shelby County also covet our homes as it is their single biggest source of tax income. Property taxes account for about 45% of revenue for the City and the County. Most of it comes from taxes paid on our homes because of our extensive use of PILOTS which gives a pass to a huge chuck of local businesses.

Now in this economy, you would think that the appraisal of your home, if done honestly, will go down next year, maybe 10% or 15% or maybe more. Certainly there are a lot of For Sale signs visible around town and local business journals report home sales down by a substantial amount. Your thinking is that with the reappraisal of your home, your property tax bill will decrease. Think again.

Article 67-5-1701 of the Tennessee Code states that “Exclusive of such new construction, improvements and deletions, each governing body, in the event of a general reappraisal as determined by the state board, shall determine and certify a tax rate which will provide the same ad valorem revenue for that jurisdiction as was levied during the previous year.”

What this means is that if the total appraisal of the same property that existed the year before is down 15%, then the new property tax rate must automatically be raised 15%. This is politicians at work to insure that you, the taxpayer, the source of all tax money, never gets a break. This is very similar to the state law that governs budgets for schools which mandates that school budgets cannot be cut unless the school population goes down. This provision rules out any incentive for management efficiency.

A business friend of mine called me the other day with a story that illustrates what is likely to happen next year on reappraisals. He told me about an investor who had bought a number of houses in an arms length deal for a figure that was 33% below the appraised value of the houses. He wanted assurance from Cheyenne Johnson that the new appraisal would be what he paid for the houses, not the previous appraisal. His request was denied which will inevitably lead to a lawsuit.

So here is what is likely to happen. Appraisals will stay the same or be slightly lower than the year before, but because state law requires that the pot of money be the same, the tax rate will automatically be raised to insure that the pot stays full. Then it will be up the City Council and the County Commission to lower the rate if they will. After all, Memphis and Shelby County has the highest property tax rate in Tennessee which is killing any incentive to live and build here. This must be changed.

Close Bookmark and Share This Page

Save to Browser Favorites / Bookmarks