Starting Friday, thousands of Fayette County homeowners will get some unwelcome mail: a notice that their property has been reassessed at a higher value, which means they’ll owe more taxes this fall.
That’s good news for schools and local government, which relied heavily on the $260 million in property taxes collected in Lexington last year. And while no one likes to see a bigger tax bill, Fayette PVA David O’Neill said the reassessments reflect a booming real estate market, creating the largest annual increase in property value since the Great Recession of 2008.
“I think it is good news for the economy,” he said. “This is the first big jump (since 2008).”
O’Neill said about 26,000 notices are being mailed to property owners this year, compared to 15,000 last year. The vast majority of those are reassessments.
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He estimates that Fayette County’s total land value could increase from $23.8 billion in 2015 to $25 billion this year.
The reassessment notices are in a new format aimed at helping people understand why their property value has changed. The notice shows a map of the homeowner’s neighborhood, with recent sales of nearby properties marked. As housing prices go up, so does its assessed value.
“Once we let people know about sales around them, that satisfies most of their questions,” O’Neill said.
$25 billion The estimated total value of Fayette County property in 2016
Property tax assessments are mostly based on comparable sales of nearby properties, which is known as a property’s fair cash value. If someone sells their house for more than it is currently assessed, the value of nearby properties often will increase as well.
Under state law, properties must be checked every four years to determine if their value has changed. O’Neill said his office has divided Fayette County into 300 different neighborhoods. Tax assessors check a fourth of those neighborhoods each year.
About 60 percent of property tax proceeds go to public schools, followed by state and county governments to pay for such services as garbage and street maintenance. Smaller percentages go to libraries, the health department, and agriculture extension services. Most taxpayers in Fayette County pay a 1.2075 percent tax on every $100 of assessed value. That means a home valued at $100,000 would owe property taxes of $1,207.50 this fall.
About two-thirds of Fayette property taxes come from residential properties; one-third comes from commercial property.
Elaine Hangis, the CEO of Lexington-Bluegrass Association of Realtors, said the region’s real estate market is “hot.”
“It’s really active right now,” she said. “It’s a popping market right now because there’s not enough inventory. When a house goes up for sale, there are multiple offers.”
According to data collected by LBAR, new listings in March were up 13 percent over last year, and the average time a property was on the market declined 24 percent. The average price increased from $199,307 to $212,906.
O’Neill also has changed rules for which properties get an agricultural tax break in Fayette County. Anyone who buys property of 10 acres or more after Jan. 1, 2016 will no longer receive an automatic farmland preservation tax break. Instead, owners must apply to O’Neill’s office and show proof of agricultural production.
The change was made in response to a Herald-Leader series published in February that showed thousands of properties statewide receive an agricultural tax break without providing any evidence of agricultural production.