June 5, 2017

Several of you have written to us about what role, if any, was played by City Council in the recent (2017) spike in property tax assessments.  The answer is that City Council is partly responsible for the property tax increases.  Please read on for an explanation . . .

It is true that the City of Milton does not perform the actual calculations of appraised value.  That function is performed by Fulton County.  The results are then provided to the City of Milton, which calculates taxes based on the millage rate, appraised value, etc.  From what we understand (and we are verifying this), appraised value is a function of 1) the value of the lot and the 2) value of the actual house on the lot.

The value of a developed lot is tied to raw land prices—i.e., the value of an undeveloped lot.  This is important as raw land prices in Milton have skyrocketed.  The Milton Coalition looked at 4 undeveloped parcels and found a 178% increase in the appraisals for these parcels.  And as we know, increasingly the land that is available for development in Milton is becoming more marginal.  This is typical as developers tend to cherry-pick the best parcels of land for development, leaving more marginal land to later development.  This marginal land tends to be bought by land speculators that have found (or are looking for) loopholes to allow more profitable development of land.  These same land speculators often concoct schemes to bend, break, and change the rules to their benefit.  Their dubious schemes often end up before Milton City Council, where they get a sympathetic ear.  Three council members (Lusk, Thurman, and Kunz) are reliable votes for virtually any ridiculous request from developers/land speculators.  Accordingly, developers need only find one additional vote to get their requests approved.

So the takeaway is that developers and land speculators are willing to pay sky-high prices for increasingly marginal land in Milton because they know Council will endorse their schemes to profitably develop these properties.  And even if a developer miscalculates, he knows he can likely convince Council to approve variances to correct for his mistakes.  In short, Council is interfering in the market for undeveloped land in Milton.  Its approval of schemes to increase density helps drive up the price of marginal land.  Speculators are thus able to largely shift their risk to you, the citizens of Milton.  Government interference in markets predictably causes distortions in those markets to the detriment of citizens.  There is only upside for developers; Milton’s City Council absorbs the downside and passes it through to citizens.  Concerned citizens, this is Economics 101.  If marginal land can be developed more profitably, then developers will pay more for it.  So how does this affect you as a citizen?  Well, it affects you in a number of ways:

• Reduction in Milton’s quality of life. All of these developer schemes involve Council granting higher density than would be allowed under existing zoning.  More homes mean more cars on the road, more kids in our jam-packed schools, slower internet connections, more/faster degradation of infrastructure, etc.
• Inflated property taxes. Property tax appraisals shoot up and not just on raw land.  Undeveloped land influences the value of developed lots, causing increases in valuations of your homes.
• Imminent real estate bust. Milton is in danger of a real estate collapse.  Currently, we are experiencing a real estate bubble.  If raw land prices have truly increased more than 100% and home prices in areas of Milton have truly increased more than 50%, we are in for a hard landing.  Because of Council’s aiding and abetting of developers, there is clearly a building boom occurring in Milton.  Increasingly, builders are gambling on spec homes.  It is easy to predict a glut of unsold homes in the near future in Milton.  Such a glut will lead to a bust and all that entails:  abandoned, half-finished subdivisions; foreclosures; seizing up of the real estate market; etc.  Remember 2008-2012?
• Acceleration in the loss of farms, greenspace, and equestrian properties.
• Less bang for the greenspace buck. Skyrocketing raw land prices means that Milton’s greenspace bond money will buy much less land than we might have purchased just a few years ago.

Clearly, Fulton County has erred in its calculations of Milton property values.  Many estimates are inflated and bear no resemblance to reality.  However, it is also true that the actions of Milton City Council have created an unsustainable real estate bubble (i.e., overly inflated housing/land prices) in Milton that has attracted many pigs to the trough.  So yes, Milton City Council does bear some blame for the current property tax debacle.  And Council needs to start owning the problem and taking corrective actions . . . before it is too late.  A good start would be to stop interfering (e.g., approving rezonings) with Milton’s real estate market on behalf of developers and land speculators.

 

June 4, 2017

Friday’s blog post addressed Fulton County’s huge hike in property taxes for many Milton residents.  Fulton County’s government is receiving a tremendous blowback from Milton and other North Fulton residents.  Town hall meetings have been scheduled by North Fulton’s two county commissioners, Liz Hausmann and Bob Ellis.  Both commissioners seem to be playing catch-up on this issue.  Did they not realize that voters would be upset by tax appraisals that increased by over 50% for many neighborhoods in Milton (and elsewhere in North Fulton)?  Or were they unaware of the assessments, (but should have been)?  These are key questions for the town hall meetings.  And residents will also need to understand what specific actions our commissioners will take to address the spike in taxes.

Hopefully, the commissioners are going to 1) acknowledge that there are obviously problems in Fulton’s tax assessment office and 2) seek an independent investigation into the situation.  And it would seem that the county should revert to 2016 assessments pending the outcome of such an investigation.  Rather than citizens filing hundreds (and perhaps thousands) of appeals that will clog up the Fulton County Assessor’s office, Fulton County needs to address this issue from the top down.  If the commissioners do not have good answers and specific solutions, these town hall meetings are going to be quite unpleasant for all concerned.  Defending the indefensible would be a bad strategy for Ms. Hausmann and Mr. Ellis.  Rather, they need to step up, advocate for their constituents, and get to the bottom of this debacle.