The economic climate in Michigan has caused a downturn in property values in the past few years that have affected the City of Royal Oak. Annual figures set by City Assessor James M. Geiermann and approved by the State Tax Commission show that all values for commercial, industrial and residential properties are very active. Royal Oak’s total tax base or taxable value improved to $3,379,570,000 for an increase of $216,401,850 or 6.84%.
|Royal Oak Taxable Values|
Assessed ValueValue determined by the City Assessor, based on real estate sales studies and should represent 50% of market value.
The final value figured by multiplying the assessed value by an applicable equalization factor. The City of Royal Oak’s tentative equalization factor is 1.00. This means that assessed valuation and equalized valuation are the same.
State Equalized Value
Capped ValueThe prior year’s taxable value minus any losses (a garage demolition) times the Inflation Rate Multiplier or 5%, whichever is less, plus any new construction (a new garage).
The value on which property taxes will be computed. This will be the assessed value or the capped value, whichever value is less.
The percentage increase in overall value this year (6.84%) in contrast to 4.91% in 2021 reflects a continued vibrant market in Royal Oak equal in comparison to Oakland County as a whole.
Since the enactment of Proposal A in 1994, taxable value has been the base for figuring property taxes in Michigan. (See the adjoining box for a history of taxable values).
The 2021 City tax rate is 17.8496 mills (per $1,000 of taxable value). The rate includes 6.9058 mills for operation, .2056 for fire bonds, 3.7120 for Police, Fire, EMS, 2.3344 for roads, .8220 for drain, .8959 for library bonds, 2.5768 for refuse and recycling, and .0154 for publicity tax.
The State Constitution requires that properties be assessed at 50% of their true cash value. In 1994, Proposal A provided for a limitation on increases relative to property taxes. The intention of this provision was to curb runaway inflation. The limitation was accomplished through a process that restricts increases to the previous year’s taxable value by the rate of inflation or 5%, whichever is less. The 2022 Inflation Rate Multiplier (IRM) is higher than 2021 at 1.033%.
When a property sells (transfers), the Taxable Value will be uncapped to its State Equalized Value in the next tax year and the capping process begins anew.
A question most frequently asked is, “If a property has an assessed value of $100,000 (meaning a true cash value of $200,000) and I purchase said property for $300,000, is my new assessed and taxable value going to be half the sale price?”
Frequently Asked Question
This example describes the practice of “following sales”. As described, the example is both unconstitutional and illegal. In explanation, for the purpose of taxation, properties are appraised on a mass basis. Mass appraisal analysis combines a cost approach for every property that is modified by actual sales that occur over a specific period of time.
Buildings are appraised according to their attributes (story height, square footage, etc.) and grouped as neighborhoods. A neighborhood is a group of properties that enjoy and/or suffer from the same influences. Each neighborhood is reviewed annually and adjusted from sales that have occurred over a one-year period. Each neighborhood sale is reviewed to determine if it is an arms-length transaction that is representative of normal market activity. Each representative sale within the neighborhood is compared to the previous assessed value to see if the neighborhood warrants any adjustment. The Assessed Value of a sale is not, and cannot be, automatically adjusted to 50% of the sale price.