As part of The Register’s Ask It Madison County series, one Madison County resident had a question on how a property listed for millions of dollars had a property tax assessment for much less.
The Register sat down with Billy Ackerman, the Madison County property value administrator, to get a breakdown of how assessments work.
According to the county’s website, the purpose of the Madison County Property Valuation office is to assess all property at the fair market value (FMV) for the purpose of taxation.
They are required by law to revalue property every year (KRS 132.690) and physically inspect property at least once every four years. Ackerman states Madison County has approximately 35,000 unique properties with a 2019 certified assessment base of nearly $4.9 billion.
In a nutshell, Ackerman said, the FMV is the price a willing buyer and a willing seller would agree to given reasonable market exposure time and access to financing.
There are four primary classes of property including residential, farm, commercial and exempt (e.g., churches, schools, government); exempt property is not taxed on real property.
“Properties are classified as farms when there are more than 10 contiguous acres in addition to acreage used for residential structures,” he said. “The additional farm acreage is assessed at an agriculture value, which is based on the income producing potential of the USDA soil class for a region.”
There are seven types of soil classifications, essentially rating the soil from better to worse, and helping determine if the land is good for farming, and what crops or livestock could be raised there, therefore affecting the land's value.
In Madison County, the soil class assessment ranges between $100 and $700 per acre, he said.
An example Ackerman gave was a 20-acre farm that has an FMV assessment of $60,000 ($3,000/acre) and a taxable assessment of $8,000 based on the soil class. The residential structures and acreage of a farm are not subject to the agriculture values.
“For example, a farm with a house would be classified as a farm so that the farm acreage, anything over let’s say one acre that is not attached to the house, would get a discounted farm value and then the house would be assessed at the fair market value,” he said. “Depending on when it was last assessed it could be behind, or it could be right where it needs to be, or it could be high.”
He explained there are three main methods of determining the FMV: sales comparison, cost and income. The Madison County PVA primarily uses the sales comparison approach; however, the cost and income methods may be used for commercial properties.
The PVA office must inspect every property in the county every four years, and reassess as needed.
For the area in question, Ackerman explained the property was not finished being developed at the time of the regular assessment, and unless the owner were to request one, the property value would remain the same until the next assessment cycle in 2020.
“Let’s say you built a house and finished it today, you are not going to pay property taxes on your house until next year because it is based on the condition of the Jan. 1 date,” he said.
The inspection may be made at the site (boots on the ground) or digitally. Ackerman claims that he prefers the boots on the ground inspection, as it can be more accurate. However, with so much ground to cover and a limited staff of six employees, it is sometimes a necessity.
With each new term, a Quadrennial Plan is submitted to the Department of Revenue (DOR). The Quad Plan outlines the properties that an office anticipates inspecting each year, and may be done by geographical area, property class, etc.
In Madison County, the PVA office typically follows a geographical Quad Plan. Their Quad Plan is colored coated by areas to be assessed and what year: blue is 2019, green is 2020 and yellow is 2021.
For the next assessment year, the PVA office will focus primarily on the western portion of the county and some areas in both cities.
“The year 2022 will be used to catch up on any area that we were not able to inspect in 2019 through 2021 or where there are significant market changes,” he told The Register. “For the 2020 tax year, we anticipate amending the Quad Plan to encompass a larger area, because we should have new aerial imagery that will allow us to inspect more properties using current information.”
Ackerman said if anyone ever has questions about a property, their assessment or how it is assessed to call the PVA’s office at (859) 623-5410.
Reach Taylor Six at 624-6623 or follow her on Twitter at @TaylorSixRR.