Property Tax Bills Finally Catching Up With Housing Crisis
Arizona property-tax bills are in the mail and they finally are reflecting the decline in housing prices across the state. Many wonder why it took so long for assessments to catch up with the market. According to an article in the Arizona Republic, there is a two year lag. The current property-tax bills are just now using 2008 assessed prices. Just think about the assessed values in two years when 2010 values enter the mix.
The lower assessed values do not, however, translate to lower taxes for all people. According to the article, taxing jurisdictions work backwards from their budget when setting yearly tax rates. Therefore, if a particular budget is not met by the current tax rate in light of the lower assessed values, many jurisdictions will simply raise the tax rate. The article does not give specifics so it is difficult to know which homeowners in particular will face tax increases.
In my bankruptcy practice, I often have clients who pay their taxes and insurance via an escrow account with their lender. In Chapter 13 cases this can lead to changes in their plan payment during a Chapter 13 plan. When a person is paying their mortgage outside of their Chapter 13 plan and the payments include an escrow payment for taxes and insurance, changes to the tax rate will lead to changes in the payment during the course of a Chapter 13. The reason is that changes in the escrow payment will directly affect a person’s disposable monthly income. If the change occurs prior to confirmation of their plan, it is an easy fix. Such a change during the plan, however, is a little more complicated to address. For the homeowner, the net out-of-pocket payments will be the same. It may just mean that less is paid on their mortgage and an equal amount is added to their Chapter 13 payment. If you are in a Chapter 13 you should always consult with your attorney when your property-tax bill arrives or if you receive an adjustment to your escrow account (yes, I am talking to my clients too).