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 example.

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.'