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McCarthy: $1K property tax hike means $40K drop in home value

Norwalk Council 022514 059
Councilman David McCarthy (R-District E).

Correction, 9:17 a.m.: Nora King is a real estate appraiser.

NORWALK, Conn. – A $1,000 tax hike equates to a corresponding $40,000 drop in property value, according to a Rowayton representative on the Common Council.

Rowayton residents are being hit hard by the property revaluation, Councilman David McCarthy (R-District E) said at Tuesday’s council meeting, echoing comments made by others. He tried to persuade fellow council members to make taxes lower overall by shaving $1.5 million off Finance Director Thomas Hamilton’s recommended budget cap; that failed, as only McCarthy and fellow Rowaytonite John Igneri (D-District E) voted for it. The council eventually voted unanimously to shave $.5 million off Hamilton’s recommendation.

In the process of arguing for the larger drop, McCarthy said:

“A way of looking at this is that every $1,000 that we increase someone’s tax  is decreasing the value of their home by around $40,000. That’s an impact that people feel.”

Zoning Commissioner Nora King, another Rowayton resident and a certified real estate appraiser, found that hard to swallow.

“That sounds like a very uneducated statement from someone who doesn’t understand property taxes or market values of homes. That is a cookie-cutter statement that he would have a very hard time supporting,” she said in an email. “What brings property values down is an inferior educational system, crime, poorly maintained roads and a low commercial tax base. Taxpayers do not want to pay high taxes when they feel they can’t send their kids to public schools, or drive down their roads without hitting a pot hole. They also do not want to see commercial businesses revalued at much lower rates.”

McCarthy used mortgage calculations to support his statement. If a taxpayer has to pay the city $1,000, that’s $1,000 that can’t be used to pay the mortgage or make another investment.

“Now if you were a savvy investor and made 20 percent on your investments then $1,000 means a lot of money. What I did was I said if you take $1,000 and … I used 4 percent as a mortgage rate. The way you do that mathematically is you take $1,000 and divide it by .04. That’s an annuity formula if you look it up. That results in $40,000. So if I had $1,000 invested at 4 percent as an annuity that would equal $40,000.”

Everything is an investment, he said. Supply and demand has nothing to do with this calculation, he said.

“We’re not talking about real estate. We’re talking about taking $1,000 – if I raise your taxes $1,000, I haven’t impacted your house. All I’m doing is taking an extra $1,000. … If you own a house and I raise your taxes $1,000, the only thing that has happened to you is at the end of the year you’re going to be $1,000 poorer.”

Taxes in the Sixth Taxing District, Rowayton, are going up as the revaluation conducted by Vision Governmental Solutions found that property values there did not drop as much as they did in other areas of the city. Rowayton’s tax burden is going up 8.2 percent, McCarthy said.

“I have seen properties that are increasing by as much as 25 percent on their tax bills before the new budget is factored in,” he said.

King agreed that’s an issue.

“If you really look at the latest revaluation it lacks a general overall knowledge of neighborhoods, waterfront properties, new construction and commercial real estate,” she wrote. “We all need to remember that Mayor (Harry) Rilling is not the one who hired the tax assessor or renewed his contract. Mayor Rilling has inherited this current revaluation from the last administration.”

Comments

13 responses to “McCarthy: $1K property tax hike means $40K drop in home value”

  1. EDR

    Remind me to hire Mrs.. Kimg to sell my property when I move! Real estate taxes are ad valorum taxes meaning they are assessed according to value. If she feels that the commercial property sector is undervalued then I suggest that she has a gripe with the assessor’s office and not Mr. McCarthy. Also remember there are two parts to the equation – the grand list of assessed values and the mil rate or the tax rate derived from dividing what the city spends by the grand list.

    Why don’t all of you elected politicians please stop and take a breath and realize for once it is me and neighbors money they you are spending and act responsibly. It seems to me that you use politics to attack the wrong side of the equation because it is easier.

  2. David McCarthy

    EDR…agreed, by and large. Ms King’s statement … and demonstrative of her inability to even consider another’s point of view. I clearly stated that “A way of looking at this is that every $1,000 that we increase someone’s tax is decreasing the value of their home by around $40,000.” I was clear with Nancy that it was not the only way.

    The only thing uneducated is Ms. King’s lack of knowledge of basic finance. My statement, which is meant to describe a point in time impact, is simple.

    …all other things being equal, two identical houses, raising the taxes on one by $1k results in the loss as I describe. For Ms. King’s benefit, here is a link to the formula to calculate the value of an annuity.

    http://www.investopedia.com/articles/03/101503.asp

    This comment has been edited to comply with our policy.

  3. Nora King

    Just for the record I am not a Real Estate Agent but a Certified Real Estate Appraiser. I am not sure who EDR is because so many people like to make comments anonymously but the reason comments have been made regarding David McCarthy is that he is making a pretty definitive statement without having the personal credentials to support those kind of numbers. There isn’t one licensed real estate appraiser that would ever come out and say a statement like that. This data cannot be supported by paired sales and market valuation data.

  4. Oldtimer

    McCarthy has been the strongest, and possibly the only resident, advocate for the boondoggle Rowayton Ave project, and now, suddenly, he is making noises as if he knew real estate appraisal. Maybe we should get his expert opinion on the effect on the value of the properties closest to where the work is planned on Rowayton Ave. Any bets he will come up with some argument those values will increase because of the project ?

  5. Correction made: Ms. King was described as a real estate agent but that was incorrect.

  6. Mike Mushak

    I have to laugh now, because McCarthy just claimed in another article that the total cost to Norwalk taxpayers for the Rowayton Ave boondoggle is less than $6,000! WHAT???? Nora King recalled a number of $4-600,000 of total cost to the city in meetings when she was Councilmember a few years ago. That makes more sense as the standard formula for landscaping budgets is 10% of a total project cost, do $280,000 on the $2.8 million project.
    .
    If we take McCarthys absurdly hysterical $6000 number for staff and landscaping combined, and we cut that in half let’s say to allow $3,000 for landscaping, that is just FOUR spindly trees at the average $750 cost per tree the city contractor charges! So, a veritable forest of mature trees is being chopped down, and just 4 trees will be planted? That will be news to Rowaytonites and even to Hal Alvord, who promised “abundant landscaping” in the Jan 28 Council meeting to replace all the mature trees being chopped down. If 4 trees is abundant landscaping, we have some much bigger problems in Norwalk than we were even aware up till now!
    .
    This is just another McCarthyism like so many others. He just makes it up as goes along.

  7. Piberman

    Does Councilman MvCarthy see any connection between Norwalk’s stagnant property values amidst a national boom, stagnant grand List, per capita spending up 55% over past two decades amidst only 10% income growth and a City attractive only to renters, not home owners or business interests ? Or is he only concerned about higher taxes ? Horse left the barn Councilman and its time to pay attention to City finances. Suggest you ask yourself how a BET can properly function without experienced senior financial management professionals as members. Can you explain your approval of the former Board Chair of NEON to the BET ? Just going along ? Can you identify any other city in our state where both the mayor and Council have abrogated management if city finances to a Finance Head ? Long past time to pay serious attention to the City budget and ask why we can’t have better management and lower spending Councilman. Not rocket science,

  8. Suzanne

    Why shave off .5 million or 1.5 million? What does this represent? How was this calculated? Is there an existing “cushion” in the budget that would allow such arbitrary numbers to be voiced and voted on? What does the Council know about the budget that we do not?

  9. the donut hole

    The contrast in styles could not be more clear here.
    .
    One person deals with hard numbers and financial analysis as a back stop to control costs.
    .
    The other deals with subjective measures and selective acceptance of what fits her story and money seems to be no object.
    .
    Unfortunately for us, too much of the latter has a say in how things are run and that is exhibit A for why this state is in the shape it is in.

  10. bill

    We in the private sector are looking at .5-2% raises per year until another recession hits, and then we are looking at 0 or salary decreases, and yet our public unions get 3+% a year. Rilling better keep the unions’ increases at less than 2% at the next negotiation or there will be a figurative riot by taxpayers in this city.

  11. EDR

    Councilman McCarthy is trying to help the folks in his district and you all attack him because you think your idea is better. Didn’t Councilman Igniri vote with him. Wow- if you all hate Norwalk that much please move somewhere else.

  12. Suzanne

    Disagreeing with points of strategy is not “hating Norwalk”. It is, rather, asking for accountability and clear data to support a decision that affects everyone. I would much prefer Mr. McCarthy representing the entire town than just “his district”, EDR, and, also, some degree of accuracy and support for his calculations rather than a simple vague reference to the Internet. As a taxpayer, I have reached Councilman fatigue, particularly with Mr. McCarthy as claims are made regarding the budget, property valuations, development issues, education, even Council expenses without any supporting data or analysis to back up statements made. This back-up information would then prove to us, as taxpayers, that the issues have not only been “thought about” but verified.

  13. Mg

    “The way you do that mathematically is you take $1,000 and divide it by .04. That’s an annuity formula if you look it up. That results in $40,000. ”

    Actually it’s 25,000, not that it has any basis in reality anyways. Please leave the math to the professionals, preferably one that knows how to use a calculator.

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