The tax man cometh

Madison Park's 2013 tax rate increases by 3.98%

King County will be mailing out the 2013 property-tax bills this week (expected arrival date: Valentine's Day), and Madison Parkers will on average see an increase in taxes relative to last year. Seattle's tax rate is going up from $10.17 per $1,000 of home value to $10.51. For the City as a whole, this uptick in the tax rate will be almost entirely offset by the fact that the median assessed value of Seattle homes fell year over year, from $359,000 in 2012 to $348,000 this year (a 3.1% decline). This means that although the City's tax rate will rise by 3.3%, the actual taxes paid on the median house will increase by only .2%.

Madison Park and the nearby neighborhoods of Madrona and Leschi, however, will experience a much larger increase in property taxes in 2013. As we previously reported, our section of the City this year saw a 0% increase in its "Standard Area Adjustment." While most Seattle neighborhoods recorded a decline---at least in the Assessor's opinion---Madison Park was one of those few places in the City where values held steady. The downside of that official determination is that we will be paying more of Seattle's total property tax bill than was the case last year.

For Assessment Area 14 (Madison Park, Madrona, and Leschi) the median value of a home increased from $806,000 to $811,000, slightly less than 1%. Even though the "Standard Area Adjustment" was only 0%, some properties in the Area were either improved or were replaced by higher-value structures. This was the reason for the increase in the Area's year-over-year median-property value (the point where 50% of the properties are worth less and 50% are worth more).

Here's the implication of all of this: Although the tax increase for Seattle this year is 3.3%, the tax on the median-value Madison Park home in 2013 will increase by 3.98%. In 2012 the median-value Madison Park home was taxed $8,197.02 and this year the property tax on the median-value home here will be $8,523.61.

Between us, Madison Park, Madrona and Leschi be paying 3.96% of the City's $112 billion property-tax bill in 2013 rather than the 3.95% we paid last year.

Lucky us.

[Thanks to the many responsive staff members of the King County Assessor's Office for providing the data and background necessary to produce this story.]

The Assessor does his thing

A 0% increase for Madison Park properties

Most Madison Park homeowners were probably shocked to receive their “Official Property Value Notice” from the King County Assessor late this summer and discover that their property’s assessed value had not changed by even one cent year over year. The Assessor’s staff concluded that Assessment Area 14 (which in addition to Madison Park, includes Madrona and Leschi) had experienced no appreciation in housing values for the period ending January 2012, the relevant end point for purposes of the 2012 valuation process.

Even though this doesn’t mean that taxes will stay static next year for Madison Park residents, the 0% change in the “Standard Area Adjustment” for our part of town is in some respects good news. It’s an official confirmation that, at least in the opinion of the Assessor, the downward trend in property values here has been staunched.  The last time the Assessor determined that property values were not declining in Madison Park was in 2008.  Zero percent looks pretty good in comparison to what we’ve been experiencing:

Our examination of the Area Reports for the various Seattle neighborhoods shows that our area is almost unique this year among communities “south of the ship canal.”  While many Seattle neighborhoods to the north also rose to the level of zero growth in values, we could detect only one other area to the south that met that very low standard: the Central District. Some areas actually showed significant declines (Georgetown was down 9.79%, while Beacon Hill was down 11.15% and Rainier Valley was down 11.85%).

Meanwhile, only a few assessment areas in North Seattle showed significant declines (Lake City was one exception), while no fewer than seven (Green Lake, Ravenna, Wallingford, Blue Ridge/Shilshole, Maple Leaf, Fremont/Phinney Ridge, and West Ballard) had no decline.

In any given year, only a few assessment areas in the County are subject to an actual physical inspection of all residential properties by the Assessor’s staff.  This more comprehensive and intensive analysis must occur in each area every six years. Madison Park and the other neighborhoods in Area 14 last went through this rigorous process in 2010. In non-inspection years, the Assessor’s staff looks at actual sales of properties within the subject area and determines a median increase or decrease (the “Standard Area Adjustment”) which the Assessor then applies to all residential properties in the area that have not had improvements or other changes since the last assessment period.  

Assessment Area 14, including Madrona and Leschi

Interestingly, our immediate neighbor across the ship canal, Laurelhurst, went through a physical inspection this year that resulted in an upward assessment of 6% on average for those “lucky” homeowners. It’s somewhat of a mixed blessing to have confirmation that property values in your area are on the rise when your tax bill is then ratcheted up as a result.

And speaking of taxes, this is the point where we remind readers that the Assessor simply sets the property values and does not determine tax rates.  Approximately half of what we pay in property taxes is the result of decisions made by government officials.  The other half is the direct result of citizen votes, such as on school levies. The amount we pay in property taxes takes into account what the government needs to raise in order to fund public services and what the total value is of taxable property. The annual tax rate is determined after both of these factors have been determined.

The 2013 property tax bills will be mailed on February 14. Our zero percent change in property values for 2012 will certainly ensure that the average absolute tax levels in Madison Park show a lower rate of increase next year than that of, say, Laurelhurst.  But it probably won’t mean no tax increase. The number crunchers are still figuring what the new rate for Seattle will be.  We should know what that number is in January.

Appealing those assessments

We ended our recent report concerning the 2011 assessments by noting that while you can choose to believe that the Assessor's valuation of your house is invalid, you still must your pay your property taxes based on that analysis. Of course, as has been pointed out by several readers, that is not strictly true.  If you really think your property assessment is off base, you can choose to appeal. It's a course of action open to all; but it's undertaken each year by only a select, aggrieved few.

We decided to look into the appeals process for our area of town to see how things have been trending.  Unfortunately, the Assessor's Office does not maintain records that show the percentage of appeals that are successful for any particular Assessment Area.  What is available, however, is an aggregate total for each year of how many appeals have been filed.  For the Madison Park/Madrona/Leschi Assessment Area (14), there was a big spike in appeals for the 2010 assessments (the valuations which were used to determine our property taxes this year):

The number of appeals almost quadrupled between 2009 and 2010, dropping back this year to a more manageable level (though still about 50% higher than for 2009).  The Assessor was not surprised by the sudden uptick for 2010, apparently.  It's what can be expected in those years when physical inspections occur in a particular Assessment Area, as happened for our part of town in 2010.  These physical inspections, as we have noted, result in varying increases or decreases in assessed valuation between properties (in other words, no standard increase or decrease is applied to most properties in the area).  Physical inspections and the resulting adjustments to value must, by law, occur at least every six years.  And when that happens, many more property owners object to the results than is the case in a non-inspection year.

So many 2010 appeals were made from Area 14, in fact, that it's apparently the case that the King County Board of Equalization, which adjudicates these matters, is still working on finishing them up.  After that's done, the Board can move on to appeals of the 2011 assessments.  The deadline to file appeals of the 2011 assessments has passed; so with just 45 appeals in the docket, the 2011 workload for the Board will be much abbreviated from the previous year's level.

It's worth noting at this point that the 2010 assessments, which were issued in late summer last year, provided property owners with an assessed value as of January 1, 2010.  So in 2011, property owners are paying taxes based on a home valuation which is well over a year old.  In rapidly declining real estate markets, the Assessor will necessarily be behind the curve in assessing values downward.  But that never-quite-up-to-date situation is equally true in rapidly increasing markets.

By the way, if you're interested in knowing how the physical-inspection process works, the Assessor's Office has a video on YouTube showing a property assessor in action:

There were a couple of other issues that came up as a result of the posting we did on the assessment process.  One of these is the fact that when it comes to condos, the standard area assessment adjustment (the factor used for most properties in an Assessment Area in non-inspection years) does not apply.  Condos are considered part of the Commercial Property assessment report, according to King County Chief Appraiser Dennis Pulsipher, and the adjustments are not broken out by Assessment Area.  So anyone trying to reconcile the 2011 Area 14 standard area adjustment (-5.08%) to their condo-value decrease for this year is going to find it does not track.

Finally, those interested in knowing just where all those property-tax revenues are going this year might be interested this little chart, courtesy of the King County Assessor:

In early 2012 we will be reporting both on the tax rate for the year and on whether the Madison Park/Madrona/Leschi Assessment Area is paying a greater or lesser proportion of the County's total tax burden than was true in 2011.

Those good news/bad news assessments

Values down 5.9% on average

That old adage about the certainty of death and taxes has a corollary for property owners:  the inevitability of tax assessments, which for those of us in King County is an annual ritual.  Last year, as you may recall, our area of town (known to the King County Assessor as Area 14) was subjected to a physical inspection by the Assessor’s staff, a process that resulted in changes to the valuation of area properties that were definitely not uniform.  Overall, however, the decline in assessed values for properties in Area 14 (Madison Park, Madrona and Leschi) was 1.3%.  Last year was the second year in a row that the assessments had been adjusted downward.  This is the third year.

Everyone should have long ago received their 2011 property assessments for taxes to be billed in 2012 (they were mailed out in August); and assuming that no improvements were made to your property over the past year, the “official property value notice” should show your property declining in value by about 5% (5.08% to be exact).   This “standard area adjustment” applies to 97% of the homes in our area.  The exception this year is for waterfront properties, which were uniformly decreased in value by 12.19%. Such a large adjustment in the assessment of these 100 very expensive waterfront homes had an outsized impact on the average decline for the 3393 total properties in Madison Park, Madrona and Leschi combined.  As a result, the neighborhoods registered a 5.9% average decline in property value year over year:

2010 Average Value:  $1,136,300
2011 Average Value:  $1,069,400

The average land value, according to the Assessor, is now $631,200 and the average value of the improvements is $438,200.   The valuations were based on sales occurring in Area 14 during the period from January 1, 2008 through January 1, 2011, giving progressively higher weighted value to most-recent sales.

Area 14, showing the various subunits

A decline in the tax-assessed value might be considered a good thing if it automatically meant a decrease in taxes.  Unfortunately, as we’ve noted many times, assessing the tax value of properties and setting the annual tax rate are two separate and distinct processes.  The government’s need for revenues in 2012, as determined by the votes of our elected officials and the passage of tax levies by the voters, will not be known for certain until early next year.  Once that aggregate tax-revenue number is established, the tax rate will be determined based on the total assessed value of all the properties to be taxed.

Even though our neighborhoods’ assessed values declined by 1.3% last year, the annual tax rate rose by almost 7%.  So for 2011, the impact of an average decline in property values was more than offset by an increase in the overall tax obligation, meaning higher taxes. That will probably happen to us again in the coming year due to the fact that Seattle voters just passed a $232 million school levy that almost doubles the existing school levy amount.

There’s something of a silver lining, however.  By our count, of 27 Assessment Areas located in Seattle, only nine of them suffered a larger decline than Madison Park/Madrona/Leschi.  The Georgetown/South Park area showed the biggest decrease (down 7.37%), while three areas actually showed increased values:  Green Lake (up .78%), Phinney Ridge/Fremont (up 1.47%) and Wallingford (up 2.52%).  While property owners in those last three neighborhoods have the satisfaction of enjoying escalating property values (at least in the opinion of the government), the positive glow from that accomplishment may be offset by the greater likelihood of their having to pay higher taxes next year.  Those of us living in Madison Park (or, certainly, Georgetown) will be paying a diminishing portion of the total tax obligation relative to most of the other Seattle neighborhoods. That’s the good news portion of what is otherwise a bad news “2011 Residential Revalue” report by the Assessor.

Here’s how the tax revaluations have played out for Area 14 over the past seven years (based on the standard area adjustment, except for 2010, where the average adjustment for all properties is used):

So, as you can see, the Assessor believes that over the last three years the market has just about wiped out all of the increased property value that accrued to our part of town during the previous three.  Of course, if you don’t believe that the Assessor can accurately use property sales data to track changes in values for properties that didn’t change hands (like most of ours), you may ignore all of these statistics as meaningless bureaucratic static.  Just so long as you pay your tax bill, that is.  You’ll know exactly what that is come February.

About those property taxes

We understand from the County Assessor's Office that the 2011 property-tax bills went into the mail starting yesterday, so the homeowners among us are just about to officially receive the bad news.  The local press has done a surprisingly good job this year of preparing the public for what's to come; so if you've been paying attention you already know that in spite of our generally lower property values, you are still likely to be paying much higher property taxes this year.


The reason for this, as we've noted many times, is that there is no direct relationship between assessments (which were down an average of 1.3% in our area of town last year) and tax rates (which are up in Seattle by almost seven percent this year).  Assessments are the government's guess of your home's value based on movements in the market.  Tax rates are determined by the amount of money the government thinks it needs for the year, relative to the total value of the assessed properties in its taxing jurisdiction.   So, when property values decline while government's funding needs increase, the tax rate must be jacked up, first to offset the property-value decline and then to provide the additional tax revenues.  A sorry situation--even for renters, who will ultimately pay higher rates as their landlords' tax bills rise.


Since last year, according to the King County Assessor, the total value of Seattle property fell from $118.1 billion to $114.7 billion, a 2.9% decline.  At the same time, however, Seattle's total tax obligation rose by almost $6 million dollars, a 1.7% increase.

More funds needed from a lower property based translates into higher tax rates.  This year the City of Seattle tax rate has been increased from $9.04 to $9.66 per $1,000 of assessed value, a 6.8% increase.  This means that the tax bill for a home assessed at $700,000 will be $6,762 this year, versus $6,328 last year.  There are no official numbers available, but $700,000 is probably a good approximation of the median* assessed value of homes in Madison Park.  The average assessed value of homes in our Assessment Area is $1,148,000, which means an average annual tax bill of $11,090.


By the way, we did this to ourselves.  Of that $9.66 we're paying, over a quarter, $2.56, is the result of voter-approved initiatives, such as school levies.  The rest is primarily the consequence of spending decisions made by our elected representatives.


Last year, for fun, we took a look at how much our part of town (Madrona and Leschi included) paid as a percentage of the City's total tax obligation.  Our share had declined from 4.12% to 4.11%.  This year there was a much bigger decline, to 4.07%.  What this probably means is that there has been little construction in our area and therefore little additional property value created relative to other parts of Seattle, where new multi-family residential and commercial buildings are always being added.  The total value of property in our part of town declined from $4.86 billion in 2010 to $4.67 billion this year, down 3.9%.  

There's probably not much comfort, however, in knowing that as our property values fall and our neighborhood's share of total taxes declines, the absolute amount of taxes we each will be paying is still going to rise.


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This year, as always, the staff of the Assessor's Office was extremely helpful in researching and providing assessment and tax data for us. One of the senior managers there chuckled as she told us how the process plays out every year at this time.  As the tax bills start arriving, she says, it's inevitable that her office will begin receiving calls from people complaining about the unfairness of it all.  Last year, she said, a woman called to say that since she had not voted for any of the tax levies, she shouldn't have to pay for them.  "Guess what?" the manager told the caller:  "Majority rules."


[*Here's a little refresher for those who are not math wonks: the median is the point midway between the top half and the bottom half of the range of values. It is generally regarded as a better measure of home values, since the average value of homes can be skewed by high or low outliers.  For Madison Park and the surrounding neighborhoods in our Assessment Area, high-end outliers, such as the $6.7 million waterfront home which recently sold in Washington Park, distort the average home value but have much less impact on the median home value.  If this is still too complicated for you, send us an email.  An additional note:  The 2011 tax bills are based on property values established at January 2010.   See the map above for the Assessment Area covered by this report (click to enlarge).]

What’s the story on the new tax assessments?

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Values down 1.3% on average for our area

Late last week, the King County Assessor began sending out 2011 property-tax assessment notices to property owners in the Madison Park/Madrona/Leschi neighborhoods, collectively known (to those who follow these things) as Area 14. So by now most of us have received the news that our houses are not worth what they once were, at least in the opinion of the government.

Unlike last year, however, when 94% of local property owners saw their properties decline in value by a uniform 12.3% year over year, the 2011 valuation notices show changes for individual properties that are all over the map. Though the average property in Madison Park and contiguous waterfront neighborhoods declined by 1.3% this year, many property owners have been shocked to find that the government thinks their property is worth more than it was worth at the last assessment, even though no property improvements may have occurred.

The reason for this is that the Department of Assessments this year made a physical inspection of the area neighborhoods rather than relying solely on property-sales information and other statistics in order to make the assessments. The County is required to do physical inspections of individual neighborhoods at least once every six years, according to Stan Roe, Assessment Units Supervisor. And this year it was our turn. As result, assessors fanned out through the area and did drive-by inspections of the various residential properties. “Usually we do see a lot of changes when a physical inspection is done,” says Roe. It is considered a more accurate way of analyzing properties than relying on statistics alone, he noted. The stated goal is to create uniformity and equity in the assessment process.

Some homeowners, however, are certainly questioning whether their individual assessments are fair. For the County as a whole, the Assessor’s office is currently receiving between 200 and 300 calls per day from people objecting to or raising issues about their new assessments. Undoubtedly, based on some emails I’ve received, some Madison Parkers are among that group.

Several residents have reported large increases in their land values, from 20% to 37.5%. I was dumbfounded when reviewing my own assessment notice. The Assessor had decided that our land value had declined by 98.5% while the building value had increased by 67%, for an overall property-value increase of 2%. What was that all about? “A mistake,” says Roe. One of the physical inspectors apparently hit the wrong button when inputting the information about my property into his laptop. Mistakes happen.

But what about the changes that are not the result of an error? The valuation adjustments are simply an attempt to get at a “true and fair value of the property as of January 1, 2010, based on comparable sales” says the Residential Revalue Report recently issued by the Assessor for our part of town. Noting that the area is “extremely diverse,” the report cites the fact that recent sales prices for non-waterfront homes here ranged from $350,000 to $5,925,000. What the property assessors try to do, says Roe, is make sure that for valuation purposes properties that are similar are compared to each other rather than to dissimilar properties.

One way to create uniformity is to evaluate land values by neighborhood rather than for the area as a whole. The Assessor recognizes eight such units in our area, including Broadmoor, Madison Park (primarily north of E. Madison Street) and Washington Park/Denny Blaine. See map above for details of these neighborhoods (click on map to enlarge). Fair comparisons supposedly result from treating all of the non-waterfront land within these neighborhoods as of equal value based on equal size. For example, if you live in Madison Park (neighborhood 80 on the map), your land value will be $463,000 if you have a 4,000 sq. ft. lot, and it will be $303,000 if you have a 2,000 sq. ft. lot. For comparison purposes a 4,000 sq. ft. lot in Washington Park/Denny Blaine (neighborhood 70) would be valued at $551,000 and a 2,000 sq. ft. lot would be valued at $361,000. Broadmoor (neighborhood 90) actually has lower land values than Washington Park.

These land values will hold for everyone in that neighborhood with an equal-size lot who does not have a territorial, water or mountain view. Upward adjustments are made for lots with these characteristics, and a different valuation method is used for waterfront lots. An “excellent” view of Lake Washington, for example, could add up 80% to the value of a particular lot. A waterfront lot in Washington Park, on the other hand, would have an increase in value of $30,000 per waterfront foot. More than 37% of the lots in our area have some degree of view, usually of Lake Washington and Mt. Rainier.

Downward adjustments, meanwhile, are made for lots impacted by arterials. A lot on a street with “extreme traffic noise” would decrease the value by 30% under the Assessor’s valuation model.

Once the land value has been decided, the total property value is determined. As part of the assessment process, each residence is effectively compared to the properties that sold during the three-year period from January 2007 through December 2009 (these sales are then “time adjusted” to create an apples-to-apples comparison of the data effective for January 1, 2010). Incidentally, the average sales prices of non-waterfront properties in our three neighborhoods were $1,318,857 for Madison Park (exclusive of Washington Park and Broadmoor), $2,025,929 for Broadmoor, and $2,438,794 for Washington Park/Denny Blaine.

The basis for comparison of sold properties to the rest of the properties in the area includes such elements as a home’s grade, condition and age. Grade refers to the quality of the construction, and there are thirteen categories. Our area primarily has residences in Grades 8 (just above average construction and design, using better materials) and 9 (better architectural design of high quality). The highest-quality homes, Grades 10 and up, are scattered throughout the area but predominate in Washington Park/Denny Blaine.

Condition as a valuation factor is relative to both age and grade, and it falls into five categories from Poor to Very Good (“excellent maintenance and updating on home”). Finally, the house’s age is taken into consideration. Interestingly, while over half the houses in our area were built before 1940, almost 20% were built within the last 20 years. Of the 3214 houses included in our assessment area, 328 (more than 10%) were built within the last decade.

These, then, are the elements which make up the assessor’s opinion of the value of your property. Obviously an individual property assessment can be incorrect with regard to any of these elements. That’s why there’s an appeals process, one which is spelled out on the back of each assessment notice.

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Note that the valuation process works this way: the Assessor makes a determination of the land value and then the overall property value. According to Roe, this is a requirement of State law. Once the overall property value is decided based on comparable recent sales activity, the difference between the total property value and the previously determined land value then becomes the value of the "improvements" (i.e. the house). Or, as Roe explains, "this residual value is what the house is contributing to the total value of the property." Because this is essentially a plug number, it can change dramatically from one physcial assessment to another. Keep in mind that the only number that makes any difference to your ultimate tax obligation is the total value of the property. This is because land and improvements are taxed at the same rate.

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To put your property in perspective, note these statistics for Area 14 as a whole:

Average Land Value in 2009: $606,900
Average Land Value in 2010: $623,900 (up 2.8%)

Average Value of Improvements in 2009: $556,100
Average Value of Improvements in 2010: $524,400 (down 5.7%)

Average Total Value in 2009: $1,163,000
Average Total Value in 2010: $1,148,300 (down 1.3%)

If the change in your valuation assessment is radically different from last year’s and you think there has been a mistake, there are three Assessor office staffers waiting to receive your call: (206) 296-7300. As noted, Area 14 is an “extremely diverse area” in the opinion of the Assessor, so determining values for Madison Park/Madrona/Leschi is a bigger problem than it would be in a relatively uniform neighborhood.

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That’s the story anyway.

Reassessing the reassessments

Since I reported last month that Seattle’s tax rate is going up by 13.4% this year, I’ve been asked by readers to explain why such a huge increase is necessary. With inflation running at only 2.7% last year, how does local government justify a tax hike that’s almost five times higher? Also, how exactly does the 12.3% downward assessment of residential property in our area of Seattle impact what we end up paying in taxes to the City? And since Madison Park’s property values declined less than the property values in the rest of Seattle, does this mean that we will now have to pay a greater share of the City’s total property taxes this year?

Thanks to the assistance of the King County Assessor’s Office, I have the answers to all of these questions.

But first of all, a word about the relation between property taxes and property assessments. You probably received a King County property tax assessment last year stating that the value of your residence had declined by 12.3%. I warned everyone at the time (or at least everyone who was reading this blog) that they should not expect their tax bill for 2010 to decline by the same 12.3%. The reason for this is that the total property tax obligation of the citizens of Seattle is determined by the multiple taxing districts (e.g. city, library, sewer, school, state, county, EMS, ferry, flood) that have the legal right to tax Seattle property. In other words, the annual need for property tax revenue is determined totally independently of the process by which our property values are determined. Or as the Assessor effectively puts it: don’t hold me responsible for the taxes you have to pay; I’m only responsible for figuring out how the property-tax obligation is distributed.

The following chart shows how much Seattle’s property owners are expected to pay in total taxes this year as compared to last:

That actually amounts to only a 1.6% increase in the property tax obligation for all Seattle properties, both residential and commercial in 2010. Not too bad.

And here’s how our area of the City (Madison Park/Madrona/Leschi) fared in terms of overall property value decline, year over year:

That represents a 10.6% decline in the total value of properties (residential and commercial) in our three contiguous communities. Seattle’s total property value, meanwhile, was $131.7 billion in 2009, declining by 10.3% to $118.1 billion for 2010. So what this means is that Madison Park/Madrona/Leschi actually had a greater decline in overall value than the City did (10.6% versus 10.3%).

So how is it possible for both things to be true: our total property value declined more than the City’s, while at the same time individual residential property owners here, on average, had less of a decline in value of their homes than those in all other areas of the City? The answer is that the rest of the Seattle had a lot of new construction and redevelopment, and a significant level of new property value was created in the process. Without this added property available to tax, the City would have had to tax previously-existing property at an even higher rate to make up the difference. Even so, just to stay about even with last year's tax revenues, the tax rate this year had to go up by 13.4%.

For Madison Park, then, this is the outcome of the whole process of tax setting and property reassessment for this year: we lucked out. With our below-average decline in individual property values, we could have faced paying a bigger portion of the City’s total tax obligation in 2010. Instead, because a lot of new property was created in other areas of town that can be taxed this year, we are actually paying a smaller portion of the City’s total property taxes in 2010 than we did in 2009:

And that’s the rest of the story.

["Our share" in the above chart refers to the proportion of total City taxes paid by Area 14, which consists of Madison Park, Denny-Blaine, Madrona, and Leschi (as detailed on the map above).]

The 2010 Seattle tax rate is up a whopping 13.4% (but our tax bills will be down!)

The King County Assessor’s Office this morning certified the 2010 property tax rate for Seattle, and property owners will be seeing the implications when they get their tax bills in early February. The 2010 rate is $9.04 per $1,000 of assessed value, which compares to the 2009 rate of $7.97. While this is a huge rate increase--13.4% to be precise--it doesn’t mean that Seattle property owners will be getting tax bills that show a big hike in their tax obligation this year. And depending on where they happen to live in Seattle, many homeowners will actually end up with a significantly lower tax bill.

But not those of us who live in Madison Park. Our property taxes will be down just slightly-- essentially unchanged.

This is one of those good news/bad news situations for most homeowners in Madison Park, Madrona and Leschi. Our three neighborhoods share the same tax-assessment area (see map); and as I reported in June, our section of the City had the lowest decline in property values of any area: 12.8%. This is the good news part of the story, since in the opinion of the tax assessor at least, our property values held up better than the values elsewhere in Seattle.

Now here’s the bad news: since we had the lowest decline in property values, the typical property owner here will not see the kind of decrease in absolute tax obligation that the typical property owner living anywhere else in Seattle may experience. This is the bottom line: for the vast majority of us in our area of the City, our 2010 tax bill will be about the same as last year (assuming we made no improvements to our homes). The reason is essentially this: the decline in the value of our properties was pretty much offset by the amount of the rate increase.

Homeowners in the rest of the City “lucky” enough to see bigger declines in their property values will have a lower tax burden in 2010 than they had in 2009. In this respect, some neighborhoods are really benefiting in tax terms from big declines in property values.

Seattle Neighborhoods with the Biggest Declines in Property Values

Beacon Hill (down 22.4%)
Queen Anne (down 21.3%)
Rainier Beach (down 19.1%)
E. West Seattle/Georgetown/South Park (down 19.0%)
Central Area (down 18.5%)

These neighborhoods all come out ahead for tax purposes since their property declined in value to a much greater extent than the amount of the 13.4% tax-rate increase.

Seattle Neighborhoods with the Smallest Declines in Property Values

Madison Park/Madrona/Leschi (down 12.8%)
Rainier Valley (down 12.9%)
Ravenna/University District (down 13.1%)
Mapleleaf/Wedgewood/Bryant (down 13.5%)
Capitol Hill (down 14.0%)

These neighborhoods came out the worst for tax purposes, since their property-value decreases were effectively offset by the 13.4% tax-rate increase.

Although Madison Park and our two neighboring communities had an overall decline of 12.8% in property values, that’s not the decrease in value that any of us saw reflected on the 2010 property assessments we received last year. For reasons too involved to go into, most Madison Park, Madrona, and Leschi property owners (94% of us, to be precise) received an actual downward property-value adjustment from the Assessor of 12.3% for the 2010 tax year. (If you want to know why it’s not 12.8% you can email me for an explanation).

To understand why Madison Park has not come out ahead in terms of taxes this year we can compare our situation to that of property owners on Beacon Hill, where property values (again, in the opinion of the King County Assessor) declined the most of any Seattle neighborhood. The Assessor adjusted property-tax values downward by 22.4% for about 89% of homeowners on the Hill. That’s not quite twice the level of decline experienced in Madison Park.

This is how that difference between the two Seattle neighborhoods results in a far different tax outcome in 2010 for a house valued at $500,000 in 2009 in each of the two neighborhoods. I picked the house value based on what the King County Assessor’s Office tells me was the “average” assessed value for houses in Seattle last year (give or take a couple thousand).

In 2009 the tax obligation for a $500,000 house on Beacon Hill was $3,985 ($500,000 x .00797). For 2010, the house was reduced in value by 22.4% to $388,888. The 2010 tax obligation for the Beacon Hill house is $3,507 ($388,000 x .00904). That’s a decrease of $478, or 12%.

In 2009 the tax obligation for a $500,000 house in Madison Park was also $3,985. But for 2010, the house was decreased in value by 12.3% to $438,500. The 2010 tax obligation for the Madison Park house is $3,964 ($438,500 x .00904). That’s a decrease of $21, or less than 1%.

Like I say, it’s a good news/bad news situation. At least we’re not paying a big increase in taxes as a result of our property values holding up better than those in the other parts of town. I'll have more on Madison Park's tax situation next week.

Assessed values of Madison Park houses down 12.3%

If you’ve checked your mailbox today you may have found your new property assessment in the mail. And if your property is typical, your assessment should have gone down approximately 12.3% from last year’s level.

King County Assessor Scott Noble, in what is probably one of his last acts before heading off to jail, signed off last month on the 2009 Area Property Assessment Reports, including that for Madison Park/Leschi . These area reports are used to define the percentage by which property values in each area of the County will be adjusted for 2010 property-tax purposes. The map at left (click to enlarge) shows the area covered by the Madison Park/Leschi report. There are three geographic groupings represented: green is Madison Park proper (including Washington Park and Denny-Blaine), blue is Broadmoor, and red is Leschi and Madrona. The housing markets in all three sub units were analyzed together to produce one adjustment percentage for the entire area.

Here for comparative purposes is how our assessment adjustment of -12.3% compares to other Seattle neighborhoods:

Capitol Hill - down 13.9%
Fremont - down 17.1%
Magnolia - down 17.4%
Central Area - down 18.1%
Georgetown - down 19.3%

And here’s what some neighborhoods on the Eastside experienced:

Novelty Hill - down 14.1%
Woodinville - down 14.3%
Bellevue - down 15.3%
Sammamish - down 15.9%
Duvall - down 18.4%

So, if it’s any consolation to property owners in Madison Park, it appears that in the opinion of the Assessor, our community has held up better than any other area of the County (several area reports have still to be issued publicly, however).

After noting that they have historically taken a conservative approach to computing changes in market values, the County’s Department of Assessments this year says that “in the recent declining market, this approach was not an option. Instead, sales occurring prior to January 2009 were adjusted downward for use in the analysis process. An additional downward adjustment was warranted to account for lack of sales and the influence of distressed sales on the housing market. Most homeowners will see a significant reduction in the assessed value of their home.” For Madison Park/Leschi, 94.3% of homeowners will have their property value adjusted by the “standard area adjustment” of 12.31%. Some properties, including new houses and those that have been remodeled, will be adjusted on a different basis.

A caution is in order, however, lest anyone think that a 12.3% decline in property values means a 12.3% decrease in their 2010 property tax assessments. Far from it. The amount of tax each of us will owe next year will be determined in January 2010, and we will be notified of our 2010 tax bill in mid-February next year. The new tax rate (aka millage) that will be imposed next year will be determined by the funding needs of governments within the County, some of which were imposed by the voters through tax levies. As the Assessor’s Office puts it, “Property valuations do not determine the amount of overall property tax obligations. Property tax obligations are determined by 160 taxing districts in King County as they create their respective budgets for 2010 and are not determined nor set by the Assessor. Simply put, the amount of tax obligation is determined by the taxing districts and the distribution of the obligation is determined by property values.”

So the bottom line is that since Madison Park/Leschi held up better in the market downturn, the effect of this is to shift a greater burden to our community in meeting the overall tax obligations of the County. Hurray for us!

If you have not yet received your new property assessment and want to know what it is, you may access this information at the Department of Assessments website.