A property reappriasal could result in a lower tax bill

With Dover’s recent reappraisal and ongoing related process, and so many towns under orders from the state to perform a property value reappraisal, we’re hearing a lot of valley property owners express the opinion that their property tax bills are going to increase along with their property value.
Judging from some of the exchanges we’re seeing on valley-centric social media pages, some property owners are honestly concerned that, if their property values increase by, say, 30%, their taxes will rise by 30%. A few people even appear to believe the reappraisal is nothing more than a cash-grab by public officials who are rubbing their greedy hands together as they plan new ways to spend the tax revenue windfall. Thankfully, that’s not how tax revenue works in Vermont (or anywhere else that we know of). Whether it’s the local municipal tax or education taxes, the amount of tax revenue collected is based on revenue needed to fund budgets and other spending passed by voters, not the other way around.
For the municipal tax, the math is pretty straightforward. Voters approve budgets and other spending at Town Meeting. The town’s finance department divides the total spending approved by voters by the assessed value of all the taxable property in the town to determine the rate. That’s it, essentially.
What does that mean for tax bills? For most property owners, their municipal tax bill will remain about the same. Some property owners, those whose properties increased in value below the average, will likely see a lower municipal tax bill. As Dover’s contracted appraiser, Ryan Silvestri, pointed out recently, those property owners, the ones who get a tax break after a reappraisal, have been paying more than their fair share for the past several years. In essence, they’ve been subsidizing property owners with properties that were drastically undervalued on the grand list. Some owners of properties that increased in value above the average due to, say, major improvements or because the sales of their particular market sector (ski-in/ski-out, for instance) have increased more than others, are likely to see an increase in their tax bill. But their tax increase won’t be on a 1:1 basis with their property value increase, or in other words, their municipal tax won’t go up 50% if their value went up 50%.
Vermont has a multi-layered property tax system, and the statewide education tax is the most complicated part of it. One of the complexities is the so-called common level of appraisal, or CLA. The CLA is the state’s way of equalizing property values across the state. The CLA is set by the state, and it differs for every town. Essentially, the state uses real estate sales information collected from transactions recorded in individual towns to calculate the disparity between assessed values on that town’s grand list and market values. So, for instance, if a town’s CLA is set at 90%, the state’s formula has determined that assessed values in the town are at 90% of market value. And, as a result, that town’s statewide education tax rate must be adjusted to compensate, to ensure everyone in the state is paying a tax bill based on 100% valuation – or as close as it can be with an approximate number like the CLA.
If a town’s CLA falls below 85%, the state will order a new townwide reappraisal. In 2023, following a pandemic-era boom in the real estate market, 165 Vermont towns were given such an order by the state. Most of the current reappraisals are the result of that order, and there are many more to follow. Recent legislation will require towns to reappraise every six years.
When a town reappraises properties, the CLA theoretically becomes 100% in the first year, meaning the assessed values on the grand list reflect the current market, and no increase in the statewide education tax rate is required – so the rate paid on properties in the town is lower, even though the assessed value may have increased. Again, as with the municipal tax, many may see little or no change, those with large increases in value may pay more, and those with increases in value below the average may catch a tax break.
Of course, the CLA isn’t the only thing affecting the education tax rate, or education taxes. Factors from annual inflation to the decisions made by local voters and state legislators can also drive increases.
But if any property owner believes their property has been incorrectly appraised, there are multiple courses of action they can take. Immediately after an appraisal, towns send out notices and offer to schedule meetings with property owners, at which time they can present evidence of errors or other information to support a lower appraisal. Additionally, there is a statutory annual tax grievance process that any property owner can take advantage of. That process starts with a call to the town.