The Mandated Process of Equalization
A process of equalization of assessments has been established in Michigan to meet the constitutional mandate that all property be uniformly assessed. Michigan Compiled Law 211.34 (Section 34 of Michigan’s General Property Tax Act) covers the process of County equalization. This section of the law requires the County Board of Commissioners to examine the assessment rolls of the Cities and Townships within the county each year and determine whether each class of real and personal property in each City and Township has been equally and uniformly assessed at a level of 50 percent of true cash value. If necessary, the County Board of Commissioners must add to or deduct from the value of a class of property within a City or Township so that the total value of that class of property is set at 50 percent of the class’s true cash value.
The County Board of Commissioners adds to or deducts from the value of a class of property by applying a County equalization factor to the value of the class as determined by the City or Township assessor. If the County Board of Commissioners determines that the value of a class of property within a City or Township has been set at 50 percent of true cash value, a County equalization factor of 1.00000 will be applied to the class. The class will then be equalized as assessed at the County level. If the County Board of Commissioners concludes that the value of a class of property has been set too high (i.e., above 50 percent of the class’s true cash value), a County equalization factor of less than 1.00000 will be applied to the value of the class, thereby deducting value from the class so that the County equalized value of the class will be established at 50 percent of true cash value. If the County Board of Commissioners reaches the conclusion that the value of a class of property has been set too low (i.e., below 50 percent of the class’s true cash value), a County equalization factor of greater than 1.00000 will be applied to the value of the class, thereby adding value to the value of the class as determined by the assessor so that the County equalized value of the class will be established at 50 percent of true cash value.
The County Board of Commissioners does not determine the value of individual properties. Rather, the County Board of Commissioners is responsible for determining the total value of each class of property in each City and Township each year. Since 1981, real property has been divided into six classes (agricultural, commercial, industrial, residential, timber-cutover, and developmental). There is just one class for personal property. Nineteen Townships and four Cities are located within Calhoun county. The five Villages located in Calhoun county are not separately equalized. For equalization purposes, these Villages are part of the Townships within which they are located. For each of the 23 local assessment jurisdictions in the county, the County Board of Commissioners must annually set the value of property within each class at 50 percent of true cash value on average.
After County equalization has been completed, the State Tax Commission (acting as the State Board of Equalization) is required by law to examine the tabular statements summarizing County equalization that are filed by each County. After examining appropriate data and evidence, the State Tax Commission must determine whether the value of each class within each county is greater than, less than, or equal to 50 percent of the class’s true cash value. If necessary, the State Tax Commission equalizes the value of a class by adding to or deducting from the value of the class. This is done in a similar manner to the County equalization process described above. A factor is applied to the class, with the result being the final State equalized value of the class. If value is added to or deducted from the class within a county, the State Tax Commission does not separately adjust the value of the class within each individual assessment jurisdiction. Instead, the State Tax Commission adjusts the value of the entire class uniformly within the County.
The Role of the County Equalization Department
Michigan Compiled Law 211.34 requires that the County Board of Commissioners establish and maintain a department to survey assessments and assist the Board of Commissioners in equalizing assessments. For Calhoun County, the department established to meet this requirement of the law is known simply as the Equalization Department. The Equalization Department consists of one director and four property appraisers. By law, the Equalization Department may furnish assistance to local assessing officers. Such assistance may include the development and maintenance of accurate property descriptions; the discovery, listing, and valuation of properties for tax purposes; and the development and use of uniform valuation standards and techniques for the assessment of property.
In accordance with guidelines established by the State Tax Commission, the Equalization Department works with City and Township assessors to ensure proper equalized values for real and personal property throughout the county. The equalization process establishes the property tax base for Calhoun County and other taxing entities located within county boundaries. Other taxing entities relying on the property tax base for revenue within Calhoun county include 18 local school districts, 5 intermediate school districts, 2 community colleges, 2 district libraries, 4 Cities, 5 Villages, and 19 Townships. Property tax revenue is an important funding source for Calhoun County, with approximately 50 percent of the County’s general fund revenues generated by property taxes each year. The Equalization Department plays an important role in establishing a fair and equitable property tax base upon which Calhoun County and many other taxing entities rely heavily.
Each year, the Equalization Department studies the level of assessment for each class of property in each City and Township located in the county. This study is accomplished using sales and appraisal studies. For each class of real property, the Equalization Department performs either a sales study or an appraisal study. Over 90 separate studies are conducted by the Equalization Department for real property each year (personal property for the 23 assessment jurisdictions is analyzed separately using different methods). These studies are used to determine the total value of the real property classes being studied. The total value of a class being studied as determined by the Equalization Department is compared to the total value of the class as determined by the local assessment jurisdiction. If necessary, the Equalization Department will recommend to the County Board of Commissioners that value be added to or deducted from the class as part of County equalization so that the average level of assessment of the class is 50 percent of true cash value. The primary purpose of the Equalization Department is to ensure, as part of County equalization, the correction of any inequities between the property classes of local assessment jurisdictions that may arise due to an over-assessment or under-assessment of a property class.
Additional Responsibilities of the Equalization Department
In addition to the important role the Equalization Department plays in the equalization process, the Equalization Department is responsible under Michigan Compiled Law 211.34d for calculating the annual millage reduction fraction (i.e., the "Headlee" rollback fraction) for each unit of local government located in the county. Taxing entities such as Cities, Villages, Townships, local school districts, intermediate school districts, community colleges, and district libraries rely on these rollback fractions and other related information to establish their millage rates at a lawful level each year.
The Equalization Department is also responsible for assisting the County Board of Commissioners in its duty under Michigan Compiled Law 211.36 and 211.37 to certify the property tax levies of the various taxing entities within the county each year. This duty, commonly known as apportionment, requires the County Board of Commissioners to examine records which pertain to authorizations to raise money by property taxes for any purpose within the county. Provided its examination does not uncover a defect in an authorization to raise money by property taxes and provided that the necessary proceedings to authorize the raising of money by property taxes have been properly held, the County Board of Commissioners certifies the millage levies of taxing entities within the county. The Equalization Department creates an annual apportionment report and provides other assistance as necessary to assist the County Board of Commissioners with its responsibilities related to apportionment.
Michigan Compiled Law 211.27d further requires the Equalization Department to report on the taxable value of property in Calhoun county to the State Tax Commission each year. This report shows the total taxable value of property in the county, the total taxable value of each of the 23 assessment jurisdictions in the county, and the total taxable value for each classification of property in each assessment jurisdiction as well as in the county. This report also shows the taxable value of property receiving the homeowner’s principal residence exemption or the qualified agricultural property exemption in each of the 23 assessing units in the county and for the county overall.
As discussed above, the Equalization Department has statutory and formal duties relating to the equalization process, millage rollbacks, apportionment, and taxable value reporting. The Equalization Department also has important informal responsibilities. These informal responsibilities include the provision of various administrative assistance to other departments within the Calhoun County governmental framework. The Equalization Department also acts as a liaison between the State Tax Commission staff, the County Board of Commissioners, local assessment jurisdictions, other taxing entities, and the general public. Additionally, throughout the year, staff of the Equalization Department provides informal education regarding property tax administration to real estate professionals and the general public. The Equalization Department also periodically conducts, coordinates, and/or participates in formal training sessions on assessment administration topics for the benefit of assessors and other interested parties. Further, the Equalization Department has daily contact with the public and serves as a valuable source of property-specific information for property owners and real estate professionals and others acting on behalf of property owners.
Many of the records generated and maintained by the Equalization Department are public information and, as such, may be utilized by the public, including independent fee appraisers and other real estate professionals. The compilation and dissemination of this information provides an indirect benefit to any individual who wishes to buy, sell, finance, or refinance property in Calhoun county. In the course of performing its duties, the Equalization Department compiles information and prepares several reports that are of interest to a variety of individuals. Reports prepared by the Equalization Department annually include the equalization report, the taxable value report, the apportionment report, millage rate summaries, industrial tax abatement reports, top owner reports for the county and for each local school district, and detailed taxable value and State equalized value breakdowns by local school district. These reports are available free of charge via the links at the top of this Web page. The Equalization Department also provides copies of maps, copies of aerial photographs, and other items. Click here for a document fee schedule listing the charges for these and other items available through the Equalization Department.
Assessor: The person representing the City or Township where a parcel of property is located who is responsible for assigning an assessed value to property each year.
County equalized value (CEV): County equalized value is the assessed value as finalized by the County equalization process (see the discussion above concerning the equalization process). In most units of government, the assessed value and the County equalized value will be the same.
State equalized value (SEV): State equalized value is the assessed value as finalized by the County and State equalization processes (see the discussion above concerning the equalization process). In most units of government, the assessed value and the State equalized value will be the same.
Taxable value (TV): Taxable value is the amount on which property taxes are paid. A parcel’s taxable value multiplied by the appropriate millage rate for that parcel yields the yearly property tax amount for that parcel. In most cases, taxable value is simply the lesser of the State equalized value and the capped value for the year in question. However, in the year following a transfer of ownership as defined by law, the property’s State equalized value is automatically used as the taxable value for the property, even if the capped value is less than the State equalized value. The taxable value is capped again the second year after the transfer of ownership and for subsequent years until another transfer of ownership occurs for the property.
Capped value: The capped value is the result of a formula established in law. According to this formula, losses are subtracted from the previous year's taxable value, the resulting figure is multiplied by the inflation rate multiplier for the year or 1.05 (whichever is less), and then additions are added to produce capped value.
Losses: Although losses include many things such as a property being removed from the assessment roll because it has become exempt from taxation, losses are probably best understood as being a part of a property which has been physically removed or destroyed. For example, the removal of a garage or a house burning would result in losses for a parcel of property. See Michigan Compiled Law 211.34d for a complete listing of the different types of losses.
Additions: Although additions include many things such as a property returning to the assessment roll after it has been exempt, additions are probably best understood as being a part of a property which has been physically added. For example, adding a family room or finishing a basement are considered additions to a property. See Michigan Compiled Law 211.34d for a complete listing of the various types of additions.
Homeowner’s principal residence exemption percentage: A homeowner’s principal residence is generally entitled to an exemption from paying local school operating millage. This percentage represents the portion of a property that is exempt from school operating taxes as a homeowner’s principal residence. Additional information regarding the homeowner’s principal residence exemption can be obtained by visiting the Michigan Department of Treasury Web site.
Qualified agricultural property exemption percentage: A property that is qualified agricultural property can receive an exemption from paying local school operating millage. This percentage represents the portion of a property that is exempt from school operating taxes as qualified agricultural property. Additional information on the subject of the qualified agricultural property exemption can be obtained by visiting the Michigan Department of Treasury Web site.
Property transfer: In the year following a transfer of ownership as defined by law, the taxable value of the transferred property is uncapped and will equal the State equalized value that is established for the property in the year following the transfer of ownership. Some transfers of property are transfers of ownership and some are not. To avoid surprises concerning what is and what is not a transfer of ownership for taxable value uncapping purposes, it may be worthwhile to research this topic. For additional information with regard to transfers of ownership, visit the Michigan Department of Treasury Web site.
Property Transfer Affidavit (Form L-4260): A Property Transfer Affidavit is a form that must be filed with the assessor in the City or Township where the property is located by the new property owner within 45 days of a transfer of ownership. Failure to do so can result in a fine of $5.00 per day, up to $200.00. This and other forms are available by visiting the Michigan Department of Treasury Web site.
True cash value: The true cash value of a property is defined by law as the property’s usual selling price. This is the market value of the property.
Sales study: A sales study is a compilation of properties that have recently sold in arms-length transactions (i.e., unrelated buyer and seller, etc.) in an assessment jurisdiction. The appropriate assessments for the properties in the study are added together, as are the sales prices for the properties in the study. The aggregate assessed value is then divided by the aggregate of the sales prices and an indication of the overall level of assessment for the class of property being studied in the assessment jurisdiction is produced.
Appraisal study: An appraisal study begins with the selection of a representative sampling of parcels from the class of property to be studied. The selected parcels are then appraised and the values of the appraisals are added together, as are the assessed values for the appraised parcels. The aggregate assessed value is then divided by the aggregate appraised value to yield an indication of the overall level of assessment for the class of property being studied in the assessment jurisdiction.