The worst real estate scenario may be over
What a difference a year can make.
When Kent County commissioners received the property equalization report last year, they learned that the State Equalized Value of all real and personal property in the county fell to the 2004 level.
When commissioners meet this week to get the latest report, they’ll learn the overall SEV rose by $4 million — the first gain since 2007. They’ll also likely hear Thursday that the worst is over.
“The increase in the SEV is positive for the first time in several years. I think the worst is behind us,” said Matt Woolford, county equalization director, to members of the Finance Committee last week.
The overall SEV went up by two-hundredths of a percent from last year to $20.99 billion, while the taxable value dipped by seven-hundredths of a percent from the previous year to $20 billion.
Woolford said higher values in the residential and agricultural property classes raised the SEV.
Last year, the total value of all homes in the county was $13.2 billion. This year it’s $13.4 billion, an increase of $217 million.
Last year, the county’s farmland had a value of $313.8 million. This year, it’s $316.5 million, an increase of $2.7 million. The value for ag properties has risen steadily for the past several years.
“The agricultural class of property has remained stable during this recession. Favorable agricultural sector economics have actually led to increasing ag land values throughout the Midwest. So even as developmental pressure on values evaporated, the value of raw ag land remained stable,” said Woolford.
But the SEV fell in the commercial and industrial property classes. “I do believe that commercial and industrial will improve in 2013. Local real estate professionals are reporting that interest from around the nation is focusing on West Michigan for growth opportunities,” said Woolford.
“If companies continue to do better, their space needs will drive down vacancy levels and put upward pressure on rents and sales prices. If we see more jobs created, these will only help the housing and retail sectors. We’ll have to wait and see how things develop,” he said.
Last year’s report had the value for all commercial properties in the county at $4.4 billion. This year it’s at $4.2 billion, a dip of nearly $163 million. The SEV for industrial properties a year ago was $1.1 billion. The current number is just over $1 billion or $85 million below last year’s value.
All but seven of the county’s 30 cities and townships recorded gains in SEV and taxable value. Last year, only two had SEV increases and six had gains in taxable value.
The city of East Grand Rapids and Ada and Bowne townships had the largest increases from last year. Most of the gains were slight but East GR was the biggest gainer. The city’s SEV rose by 6.17 percent to $645.4 million and the taxable value went up by 3.69 percent to $565.4 million.
On the other side of the equalization ledger, Cedar Springs, Grand Rapids, Kentwood, Lowell, Walker and Wyoming had losses in SEV and taxable value. Spencer was the county’s only township to have the double loss. Grand Rapids was the biggest loser as its SEV fell by 3.2 percent to $4.53 billion and its taxable value dropped by 2.5 percent to $4.35 billion.
The SEV for total real property countywide is $19.06 billion this year, down from $19.09 billion last year. But the SEV for personal property went up by 8.1 percent from $1.897 billion last year to $1.929 billion this year. The taxable value of personal property climbed by 9.6 percent to $1.928 billion this year.
“The number that drives the municipal budgets is the taxable value,” said Woolford.
State lawmakers have put together a plan that would eventually eliminate the personal property tax in a few years if voters approve a referendum in August 2014. Commercial businesses pay 42 percent of that tax, industrial firms pay 40 percent and utilities pay 19 percent. If the tax is eliminated, only utilities would continue to pay it.
County Commissioner Jim Talen asked Woolford what it would take to return the county to the SEV and taxable value growth years of the 1990s, when annual hikes that ranged from 5 to 11 percent were the norm.
“New construction is the only way we can move the needle past inflation,” he said. “Proposal A definitely put a slowing factor on the growth.”
That legislation limits the taxable value for individual properties to 5 percent or the inflation figure, whichever is lower. The Headlee Amendment limits a taxing jurisdiction’s taxable value in much the same way. The countywide taxable value is now 95.39 percent of its SEV, a bit smaller than last year’s 95.48 percent.
The taxable value fell by 2.28 percent last year, 2.39 percent two years ago and 3.76 percent in 2010. This year’s loss is a mere seven-hundredths of a percent.
“I do anticipate in 2013 we will hear more of the positive changes that are occurring,” said Woolford.