PORTLAND, Ore. (Portland Tribune) — Earlier this year, the certified letter came. The return address: Clackamas County assessor’s office. Inside was a bill charging nearly $3,000 in back property taxes.
For Kari Petersen and her family of three, that letter was more than a bill. It was a bomb. A run of medical expenses in 2014 caused them to downsize to a modest house in Oregon City — with a bathtub repurposed from a mobile home and an original 1940s toilet. And even with that, the family was maxed out.
So the unexpected county tax bill going back three years “put us up against the wall,” Petersen says.
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Her experience reflects a growing trend that is hitting some Oregon homeowners hard: the process by which county assessors go after taxes for which they belatedly realize they’d neglected to bill you, after realizing your home is worth more than they thought.
The term? “Omitted property tax.”
Some counties more than others have been taking up the practice with gusto: In Clackamas County, the assessor sent out just 17 notices for omitted property taxes in 2012. In the first half of 2017, the office sent out 496 such notices, a more than 50-fold increase.
In Washington County, the assessor’s office sent out 480 notices in the first half of 2017, more than its total for all of 2016.
How is this vast growth possible?
In the old days, homeowners would have to physically invite in an assessor to have them discover unreported home improvement projects and other omitted property.
With small staffs to inspect and evaluate hundreds of thousands of properties, assessors simply could not keep up.
Today, however, assessors don’t need an invitation to your home to get a peek into what has been going on. They’ve already got that ability without your consent or knowledge, thanks to internet postings and listings.
RMLS, Zillow, Trulia, Redfin, Realtor.com, Facebook, Craigslist and satellite images all provide valuable clues to assessors that homes may have been improved without giving the assessor proper notice.
Then there are the more traditional means: phone calls from neighbors, brokers, prospective buyers and even the homeowners themselves.
Whatever the method, the results are clear.
“It’s a huge increase” in activity going after property tax value that the assessors had earlier missed, says Steve Anderson, a former broker and tax appeal administrative law judge who now consults with aggrieved homeowners about their tax bills.
Consultant seeks reductions
Anderson often can’t help people hit with omitted property tax notices. But sometimes he can.
In Petersen’s case, he worked hard to figure out what drove the surprise assessment boost.
The family had bought the house from a flipper — which is normally a red flag warning of an impending property tax increase, according to Anderson. Flippers often do unpermitted work, he said.
But in this case, the crew hadn’t done much to the house other than replace the foundation.
Similarly, the family had put on a new roof and replaced a chainlink fence with a more attractive picket one. And it had repainted the upstairs and downstiarts.
But none of those should trigger a finding that the asssesor had forgotten to bill somebody: rather, they are considered simple maintenance, Anderson said.
What probably got the assessor’s attention? The home flipper had purchased the home for $55,000 before reselling it to the Petersens for $217,000.
Anderson met with county assessor’s staff, giving them a tour of the house and showing how little had been done to the house since the couple bought it.
In the end, the tax hike was cut in half, making the Petersens $1,500 richer. And their prospective tax bills going forward would be cheaper, too.
The investment in Anderson of $350 was well worth it, Petersen said. “We’re glad that we came across Steve.”
In any event, county asssessor’s efforts to boost revenues have increased Anderson’s business as well.
Calls with complaints about receiving an unexpected property tax bill going back years are now commonplace.
“I used to get one of these a month,” Anderson said. “And now it’s like one a day.”
He says the complaints often are from people who bought a home a few years before, only to realize their tax bills have been inacccurately low, and now they must settle their debt to the county.
“I had one case in West Linn where the property taxes doubled because of the work done on the property by the previous owners,” Anderson said, “And no one told the buyer anything about it whatosever.”
Assessors often hear from angry property owners unhappy to learn their property value has gone up and that they still owe money from years ago, because the property tax bill they received was too low.
At times like those, assessors tend to reply that they are the tax collector for schools and local agencies. Without them, classroom sizes would be even larger.
“This is what we do,” says Washington County Assessor Rich Hobernicht.
Moreover, the law on collecting omitted property taxes doesn’t really give assessors’ a choice on whether to update outdated tax assessments. The law says assessors “shall” issue such notices — a requirement — not merely that they have the option.
“The assessor’s responsibility is whenever we discover, receive creditable information, or have reason to believe property has been omitted from assessment and taxation … we are required statutorily to give notice to the owner of the intent to add the value to the roll,” said Clackamas County Assessor Bob Vroman
Michael Vaughn, the Multnomah County assessor, says they have a duty to collect the information and bill people who haven’t adequately reported new property value.
And they are only as good as the information they receive — sometimes they have to wing it.
Says Vaughn, “About 60 to 70 percent of the property owners won’t let us inside.”
And while homeowners may get permits showing the improvements done on a property, local agencies often are slow to turn those in. In some areas they mail information about the permits individually to the county assessor. Those letters must be opened and manually processed — a recipe for lengthy backlogs in smaller counties.
Vroman and Hobernicht, his counterpart in Washington County, say they can’t explain their offices’ increases in omitted property notices over the years, other than that the tools have imprroved.
In Multnomah County, unlike Clackamas and Washington counties, the numbers of omitted property tax notices have not gone up over the years.
Vaughn says the county tries to be reasonable and be understanding, reserving its most significant tax penalties for property owners who intentionally try to hide things from the county.
That’s where the county has racked up significant successes. One enterprising staff member, for example, realized that Fred Meyer’s corporate parent does not report major acquisitions of equipment or other improvements in a timely way.
Audits of the chain’s stores have turned up millions of dollars in property taxes owed that have boosted Multnomah County coffers.
But even if it’s understandable, it doesn’t make the process any more palatable to homeowners suddenly hit with a bill due to no fault of their own.
Petersen, the Oregon City homeowner recently hit with an omitted property tax notice, says her experience made her realize that assessors’ property tax rolls are perpetually behind, and property owners are paying for it.
“That’s really challenging for homeowners to all of a sudden come up with extra money because the county is behind. If we had known ahead of time, we could have started budgeting.”