Director Explains Assessment Notice Increases To Businesses

OCEAN CITY – Resort business leaders recently expressed
some angst about increased assessments on residential and commercial property
in the area when the real estate market has decidedly gone soft, but their
concerns were allayed somewhat this week after a presentation by the state’s
assessment office chief for Worcester County.

At the January meeting of the resort’s Economic
Development Committee (EDC) meeting, some resort business leaders questioned
why the most recent tax assessments on their properties continued to increase
while their apparent values have declined in what has become a soft real estate
market. To that end, the EDC invited Worcester County Department of Assessment
and Taxation Director Robert Smith to their April meeting on Wednesday to
clarify some of the issues.

Smith addressed the issue of increasing assessments
compared to stabilizing, if not declining, property values in what has become a
sluggish market. He said the assessments are determined by a specific set of
criteria and are independent of the perceived values based on what is going on
with the real estate market.

“The assessment office does not set values on property,”
he said. “Most people think we do.”

Resort business leaders questioned whether their property
assessments can or should be revisited in the middle of the process if
fluctuations in the market suggest their values have gone down. Smith said he
understood the property owners’ concerns about increased assessments and
explained a three-step appeal process if a property owner believes the
assessment office erred when preparing the new values upon which taxes are
based. However, he said his office does not typically consider changes to an
assessment based on dips in the real estate market.

“The big question today is if prices are coming down,
should the assessment be adjusted to reflect that,” he said. “The answer to
that is no. If I adjusted them when the price went down in the middle of a
cycle, I would have to adjust them when the prices went up in the middle of a
cycle, following the same logic.”

Essentially, Smith warned property owners to do their
homework and be careful what they wish for prior to appealing their assessment
based on market fluctuations.

“Make sure the market is down,” he said. “During a
petition for review is the only time I can raise an assessment. Make sure it is
what you hope it is.”

However, Smith reassured property owners he is not
interested in raising assessments in the middle of a cycle and would do so only
in certain circumstances where the data presented called for an increase.

“In all my history doing this, I have never raised an
assessment during a petition for review,” he said. “I work for all of you. I
follow the market, I don’t set it.”

Smith presented statistical data from the last two
assessments of real estate in Ocean City in 2002 and 2005 to illustrate his
point. For example, in 2002, 703 owner-occupied properties sold in Worcester
County at a median sale price of $145,000, while in 2005, the number of
properties sold in the county dropped to 268, while the median sale price
jumped to $290,000, representing an increase of 200 percent.

He explained there is a distinction between the sale price
of a property and its value based on a determination by the assessment office.
Assessed values are made independent of what is going on in the market and are
based on a series of specific criteria such as age, condition and location, for

In Worcester County, and more specifically in Ocean City,
there is often a major difference between the sale price of a property and its
assessed value largely because of the resort nature of the area and an
increased desire to relocate to the coastal communities.

“Worcester County has never been number one in the state
in terms of the value of parcels in 48 years since the creation of the
assessment office,” he said. “However, Worcester County has been number one in
terms of sale price three times during the same period.”

Smith cited the three examples when Worcester County
ranked number one in the state in terms of property values. The first came in
1991 when property values in the county increased by 43 percent. More recently,
property values in Worcester increased by 78 percent in 2002-2003, and again by
76 percent in 2005-2006.

Smith said there were 67,000 parcels of property assessed
in Worcester County, of which only about 15,000 are listed as primary
residences, making the ratio of secondary or vacation residences to
owner-occupied properties about 73 percent to 27 percent.

“We’re the only county in the state where our ratio is so
heavily in favor of non-owner-occupied residences,” he said. “Just about every
other jurisdiction is the complete opposite. Worcester County is the only one
in Maryland in that category.”

For that reason, Smith said his office handles about 30
change of address requests per day, a little less than half of which are
seeking to change their vacation home or secondary home to their primary
residence in order to take advantage of the tax benefits here.

“It’s a major, major item,” he said. “Some are simply
changes from one part of the county to another, or people leaving Worcester to
move to another county or another state, but the majority are seeking to make
their properties here their primary residences.”