Owners of high value homes in St. Louis are paying significantly too little in property taxes -- and owners of low value homes are paying a bit too much -- according to an independent study. It says bad appraisals are the culprit. And, in St. Louis County, the study shows, the average value of a home set by the assessor is 20 percent too low -- not too high, as many homeowners have long contended.

The report by the Public Policy Research Center at the University of Missouri at St. Louis also criticized appraisals of businesses in the city and county. It suggests that the data the city used makes it nearly impossible to figure out the proper taxes. And in St. Louis County, values for businesses, like homes, were an average of about 20 percent low. Figures in the only other jurisdiction examined, St. Charles County, were in line, the report said. The study was paid for by the Missouri Growth Association, reacting to a furor in 2002 over revelations that the St. Louis County assessor hiked home values that resulted in escalated property taxes without first examining the property, as required by law. The association is a trade group that looks out for the interests of commercial property owners. The study reviewed property sales and compared the sale price to the value used thereafter for tax purposes. The study's finding in St. Louis County is not the same thing as saying those owners should pay 20 percent more in taxes. Indeed, there might be no change at all if everyone's property was uniformly appraised too low. But the report says some values are set even lower than the 20 percent, while others are higher, resulting in unfair property taxes.

So who decides what the property is worth?

It's the job of the tax assessor, who must decide what a property's value is on the open market. That amount is multiplied by the tax rate to calculate the tax bill.
Currently, only charter counties -- such as St. Louis and St. Charles and the city of St. Louis -- require that sale prices of property be compiled and used in making appraisals.

The law says the appraisal should be 100 percent of the market value. Professional standards give leeway from 95 percent to 105 percent.

The Public Policy Center studied the sales of the 28,283 buildings -- 2,771 in St. Louis, 15,831 in St. Louis County and 9,681 in St. Charles County.
"The research concludes that under Missouri law, the property tax assessments in both St. Louis city and St. Louis County are too low and, therefore, all the property tax rates they pay are too high," said Mark Tranel, the director. "The only way for the system to be fair is if everybody is appraised at a level at or near 100 percent, as required by law and demanded by professional standards."

St. Louis County Councilman Kurt Odenwald, R-Shrewsbury, complained at the height of the 2002 controversy that the assessor was overvaluing homes in the county, causing property tax bills to unfairly skyrocket. Odenwald said he was shocked at the study's suggestion that appraisals were 20 percent too low.
"I know that there are many, many homeowners in St. Louis County who would not agree that they are assessed too low," said Odenwald. "Studies like these undermine the confidence property owners have in the system."

Tranel countered, "It is not the study that undermines taxpayer confidence. It's when assessments aren't at the proper level and the proper consistency that undermines the confidence in the property tax system."

A problem studied

For its work, UMSL was paid $17,000 by the Missouri Growth Association. Its executive director, Sandy Rothschild, who runs a private firm to help taxpayers appeal their appraisals, said the study validated problems he had noticed in both the city and county.

For example, he said, someone who paid $220,000 for a house would logically be glad to see a assessor's appraisal for $200,000. It implies a break on the tax bill, so the owner probably would not appeal to get the amount changed. Yet, the lower appraisal could be a false sense of relief, he noted, because there is no way to know whether a neighbor with an identical house is appraised at $180,000.

Because the values are not correct, some people are paying more than they should and some are not, Rothschild said.

"So, roughly half of the people in St. Louis city and county are getting a good deal and the other half are getting a bad deal," he said.

The lead researcher, Steve Gardner, said things in the city are better than a few years ago. "Even so," he said, "the study documents that the poorer taxpayers are paying more than their fair share."

Assessor Ed Bushmeyer did not argue with the findings, but pointed out that property values, particularly for high-end homes, have soared in the last several years, making it difficult to play catch-up.

By law, property values can be increased by assessors by any amount necessary to make them correct in every odd calendar year. (In St. Louis County, however, if the assessor hikes a property value by more than 15 percent, he must physically examine the property and notify the owner.)

"In periods of rapid value increases, there is going to be a bit of a lag before we see it reflected in the property" assessment," Bushmeyer said.

He also said the city's older housing is hard to appraise accurately. By contrast, homes in many areas of St. Charles County are in new, homogeneous neighborhoods, where values are much easier to set.

The study found St. Charles County put appraisals at about 95 percent of the sales price.

Scott Shipman, the assessor there, said his office strives for accuracy in the county's 260 neighborhoods. "It assures taxpayers that they are paying their fair share of the tax burden," Shipman said.

St. Louis County Assessor Phil Muehlheausler would not comment until after he reviews the report, which he had not seen.

Taxed at two-thirds

One city homeowner, Madeleine Weidhaas, moved from Richmond Heights after soaring property taxes hit in 2002.

In April 2003, Weidhaas and her husband, Stephen Laury, found a home at 6253 Washington Boulevard in St. Louis for $335,000. They were happy when the assessor put its value at just $223,105. It was higher than before, but still just 67 percent of the sale price.

So, while Weidhaas and Laury live in a "much more upscale house" than in Richmond Heights, their property taxes turned out to be much lower, Weidhaas said.
"We don't think our house is underassessed," she said. "Our assessment went up and we weren't happy about it, but it was much better than it was in Richmond Heights."

In contrast, some people who bought homes in the $30,000 price range generally paid tax on a house the city appraised at 103 percent of its value. The study found the city's median appraisal of houses in the low price range was at about 84 percent of its value, in the middle price range at about 76 percent of its value and at the high price range at 72 percent.

Bushmeyer, the city assessor, said that even so, the taxes generated by more expensive houses are much greater. He said his staff is working hard to keep pace with the rapid increases in property values in the city.

"We began closing the gap with the 2003 reassessment, and I anticipate it will close further with the next round" in 2005, Bushmeyer said.

Business values

The study also criticized business appraisals.

It found that commercial properties in St. Louis County were appraised at same level as homes -- an average 20 percent lower than they should be -- and with the same unfair variations as with homes.

In St. Louis, the study found the commercial appraisals were low and the disparity among properties was high, but researchers' confidence in the results was limited by the small amount of data available and an unreliable system of determining the value.

"They're not really accurate or equitable," Gardner said. He added that neither the county nor the city met the professional standards.

Of particular concern was the city, where antiquated computer systems do not link the assessor's data with information from the license collector, who keeps track of businesses.

The study said commercial property in the county, on average, was taxed at 80 percent of its market value, with a margin of error of 6 percent. In the city, the figure was 90 percent, with a margin of error of 5 percent.

Rothschild said the findings are troubling, especially in the county.

"St. Louis County is so convinced that its computer generates correct values that it doesn't devote much effort to examining the sales of commercial properties to see if they are even close," Rothschild said. "In 2001, I found that less than three percent of commercial sales had been verified and this study shows that as well."

Gardner said that he hopes that the assessors use this study as a guide to improve performance in the 2005 reassessment. More importantly, he said, he hopes that boards of equalization and the State Tax Commission -- charged with making the system fair -- make studies of their own.

"Those bodies cannot truly ensure that property taxes are accurate and fair without the kind of reliable information that this type of study provides," he said.

Sen. Wayne Goode, D-Pasadena Hills, insists that however wrong St. Louis and St. Louis County may be, rural Missouri counties would be worse. That's because the assessors in rural counties do not have access to the sales prices of homes and businesses and, therefore their figures are more arbitrary.

Goode said that until the legislature requires that every county in the state use property sales records -- reported in a timely manner -- the system will never be fair. While property taxes go to local governments, the values the assessors place on the property in their counties are used to determine the amount of school funding that goes to each jurisdiction.

"The assessments in rural Missouri have lower assessed values," Goode said. "So, the counties that do assess aggressively, whether they are absolutely accurate are not, still shoulder more of the overall state tax burden."

Many St. Louis County property owners may face a higher tax bill as the assessed value of the county declines, for only the second time since 1952. The values dropped in all but four of the 23 local school districts that are fully in the county and in the St. Louis County portion of the Special School District. The school districts that showed gains were Clayton, Lindbergh, Mehlville and Ritenour.

This year's assessed value is $18.736 billion compared with last year's value of $18.841 billion. Municipalities and school, fire protection and miscellaneous districts can raise their real property rates to offset the lost value as long as the new rates do not exceed voter-imposed ceilings. Their officials must establish rates for this year by Sept. 1. The value of personal property declined 6.19 percent this year -- the third straight year it has fallen. An increase of 0.90 percent in real property values could not offset the decline in personal property values. Personal property includes vehicles, business equipment and computers. Because they depreciate as people use them, personal property values always will decline unless new investment overcomes it, Assessor Phil Muehlheausler said Thursday. The value of computers, for example, becomes fully depreciated in two or three years, he said.

"Manufacturers are not adding a lot of equipment as they have in the past, due to a flat economy," Muehlheausler said. This year's value of equipment of utilities, which the state assesses, also declined, he said. This year is the off year of a two-year reassessment cycle. The value of real property remained unchanged unless owners improved or demolished it.

The only other year that values saw a decline was 1993, when the total assessed value fell by nearly $35 million or 0.28 percent. St. Louis County began operating under a charter in January 1951, and 1952 was the first prepared under the revised form of government.

The Rockwood School District was hit hard by the loss of personal property assessment, which declined by $68.4 million -- a 10.8 percent drop.

A new state law prevents the district from raising personal property tax rates to offset a decline in assessed value, said David Glaser, chief financial officer for Rockwood. So tax rates on real property would rise, he said, but he could not estimate the amount.

Nearly $49 million of the decline is the result of a State Tax Commission ruling that lowered the personal property value of equipment at the two Daimler-Chrysler plants in Fenton, Glaser said.

Glaser said he had to figure out how the district can recoup losses from that ruling, which affected personal property values for 2002, last year and this year.

Jim Baker, chief of staff for County Executive Charlie A. Dooley, said the county would work with school districts to analyze the decline in personal property values.

Baker said St. Louis County should be able to absorb losses resulting from a lower assessed value. He hopes that rising sales tax income can help overcome the property tax loss. The County Council already has set this year's total tax rate at 58 cents for each $100 of assessed valuation.

PROPERTY TAXES THUNDERING HORDES OF ANGRY VOTERS do not mob the St. Louis County Council chambers to complain that their real estate tax assessments are too low. That, more than anything else, may explain why St. Louis city and county seem to have turned the job of assessing over to Mr. Magoo.

The assessors' offices apparently can't see the full value of city and county homes. They've assessed homes at only 80 percent of their real worth, according to a new study by the University of Missouri's Public Policy Research Center. To understand why, just think back to the hullabaloo in 2001, when former St. Louis County assessor Maurice Gogarty got the bum's rush. Mr. Gogarty's sin was his stubborn insistence on accuracy: He raised assessments by 20 percent and more in some of the more affluent reaches of the county. That got taxpayers mad. They blew a gasket when they learned that Mr. Gogarty's assessors were simply driving past the affected homes, rather than getting out and inspecting them as the law required. The resulting political explosion blew Mr. Gogarty out of his job. The sad tale of Mr. Gogarty haunts today's assessors. So it's no surprise that assessors tend to low-ball property values. "They'd prefer to err on the side of caution rather than suffer the public's wrath," says city of St. Louis Assessor Ed Bushmeyer. In fact, the university study says that county assessors captured less than half the 13 percent rise in property values in the two years following the Gogarty fiasco. That doesn't matter much as long as all homes are underassessed by the same percentage. Tax rates are set according to the total value of assessed property in the district, and Missouri has an automatic rollback law. If all assessments suddenly jumped 20 percent, the tax rate would fall automatically and the taxpayer's bill wouldn't change much. In fact, the city and county may actually benefit a little from underassessment. The state school-aid formula is relatively more generous to districts with low assessments than high ones. Leaders in the metro area often complain that rural counties benefit from unreasonably low valuations because their assessors are elected. It seems that St. Louis may be playing the same game. The trouble comes when properties are assessed unequally in the same community. That's the case in the city, according to the university study. Properties in more affluent neighborhoods are getting a bigger assessment break than those in poor areas. That means that owners of lower-value homes are paying a bit more in taxes than they should. Mr. Bushmeyer notes that property values in richer neighborhoods are rising rapidly, and it takes time for assessors to catch up. That has the ring of truth, but it's not an excuse. The good news is that city assessors seem to be slowly closing the gap. Assessments will always have accuracy problems. Assessors can't see through walls to tell which old houses are feats of restoration and which are wrecks. Home values can vary widely within a few blocks, and assessors offices are leanly staffed. The city has 25 people to assess 119,000 properties. So it's nice to note that St. Charles County's assessors are doing a fine job. They have the advantage of assessing modern houses in similar subdivisions, but they've pegged assessments at a remarkable 96 percent of market value. The voters of St. Charles couldn't ask for a more accurate tally.