Property-tax envy

A state law that limits a home's assessed value means some Santa Fe homeowners are paying much higher taxes than their neighbors

Anita Aldeis and Julia Ulibarri have an understanding neighbor in Tony Cervone. Not everyone would be so agreeable about his property tax situation.

The house Cervone owns at 329 Rosario Hill is assessed at $253,920, while those of Aldeis and Ulibarri, which are similar, are assessed for less than $77,000 each.

And he pays three times as much in property taxes.

Such a discovery might send a lot of people running to the Santa Fe
County Assessor's Office looking for protest forms, but Cervone knows it
would be futile.
In 2000, the Legislature passed a law to protect homeowners from spikes in the real estate market. It limits the annual increase in the assessed value of most homes to 3 percent.

The law also requires the tax assessor to revise the assessed valuation when a property is sold. The sales price becomes the new assessed value, so long as it was at the market rate.

As a consequence, many Santa Feans are paying much more than their neighbors in property taxes.

After Cervone bought his home in 2004, its assessed value jumped from $74,163 to $253,920 -- a 242 percent increase.

But Cervone said he doesn't begrudge his neighbors' low tax bills. ``I know my neighbors, and they're not rich,'' he said. ``I wouldn't want to see their taxes go up. Now if they want to see mine go down, of course I'd be happy about that.''

Inequities abound

Although the price of homes in Santa Fe has risen dramatically in the past 10 years, the valuation of many properties hasn't really changed.

According to Domingo Martinez, who takes office as the Santa Fe County assessor Jan. 1, the county revaluates property every two years.Benito Martinez, Santa Fe County assessor since 1997, did not return two phone calls requesting comment for this story. He did not run for re-election this year because of term limits.In one case, a building owned by District Court Judge Stephen Pfeffer at 1709 Paseo de Peralta has been valued at about $57,530 since 1996, according to tax records.

The house, rented out as office space, is blocks from the up-and-coming Railyard area.

The values of some other homes -- even those in high-priced, historic areas -- have risen only slightly.

Mabel Rios' home at 728 1/2 Canyon Road is valued at $178,716, and another house the family owns at 730 Canyon Road is valued at $149,721, according to tax records. In 10 years, those assessments have increased respectively by only 9.9 percent and 6 percent.

Patricia Jeanne Priest owns a home at 1150 Cerro Gordo Road valued at
$75,813, and Suzanne Fuqua owns a home at 1152 Cerro Gordo Road valued at $86,073, according to tax records.

Priest's valuation has increased $5,999, or 8.6 percent, in the past 10 years, and Fuqua's has increased $12,000, or 16 percent, in the past 10 years, according to tax records.

Meanwhile, on Calle Princesa Juana, an older street on the city's south side not far from Wal-Mart on Cerrillos Road, assessments have increased steadily over the decade. Ten homes in a row had valuations that ranged from $103,875 to $135,494, according to tax records.

Although none of them have apparently sold since 1996, their assessed values have increased by about 40 percent.

The result of low assessments and the 3 percent limit is that many homes in Santa Fe are on the tax rolls at far less than their selling price.

For example, 747 Baca Street was on the market the week of Sept. 18 for $289,500, but its assessed value was $101,752 -- 35 percent of a Realtor's perception of its possible value. Next door at 749 Baca Street, the owners had the property for sale for $242,000, while it was listed on the tax rolls at $109,129 -- 45 percent of its perceived value.

The New Mexican looked at assessed values in six Santa Fe neighborhoods, and found the Casa Solana neighborhood best illustrated the tax disparities in Santa Fe because the lots are mostly the same size and the homes are often similar and easy to see from the curb.

Domingo Martinez said that with the exception of the new construction of custom homes, assessors rarely go inside a home to determine its value.

In the Casa Solana cases, the disparities are all apparently the result of a home sale.

For example, Paige Ingebritson owns a house at 118 Camino de las Crucitas. Tax records show the home is valued at $247,280, while the homes on either side are valued at $143,703 and $135,031.

Ingebritson's home would appear to be of lesser value out of the three, but not by much. The lots are the same size, according to maps at the Santa Fe County Assessor's Office, but the assessment at Ingebritson's home increased by more than $100,000 in January. Ingebritson did not return a phone call requesting comment.

Another apparent inconsistency exists on Solana Drive. Jerome Deutsch's home at 119 Solana Drive is assessed at $273,240, while his neighbors' homes are assessed at $163,630 and $143,432. Deutsch said he bought his home in 2004.

Likewise, Bryan Johnson-French and Lisa Rohleder have a home at 124 Solana Drive assessed at $265,344, while their neighbors have homes assessed at $163,026 and $141,552. The couple did not return a phone call requesting comment, but in 2003, the home was assessed at $165,367.

Deutsch was the only Casa Solana homeowner who returned a phone call requesting comment. Like Cervone, he said he doesn't mind paying higher taxes than his neighbors.

One of his neighbors is a widow who has lived in the neighborhood for years, Deutsch said, and he would hate to see her taxes increase. ``For people like Rose, I just think it's only fair that she be able to maintain that,'' he said.

Tax systems need to be sensitive to the needs of individuals, Deutsch said.

Law's intent

And that's what lawmakers envisioned when they passed the law limiting assessment increases to 3 percent a year. State Rep. Ben Lujan, D-Nambe, has said he introduced the bill in order to stop ``tax lightning,'' which occurs when property values jump so high that people who have lived in neighborhoods for years can't afford to live there any more because of the property taxes. He did not return
two phone calls requesting comment for this story.

The bill passed after voters approved a constitutional amendment in 1998 that gave the Legislature the authority to limit property valuation increases for classes of taxpayers based on owner occupancy, age or income. The amendment removed a big legal impediment to the bill.

Lujan's 3 percent-per-year limit applies to all homes, even after they sell, but it's a sale that triggers the jump. Valuing houses that change hands got much easier for the assessor in 2003 when the Legislature passed a law that requires residential sellers to report their selling price to the county.

Santa Fe's robust housing market has also driven up tax bills for property owners who bought their homes after 2001.

The median price of a home in the Santa Fe area in the second quarter of this year was $418,000, according to Multiple Listing Service statistics available on the Santa Fe Realtors Association Web site, while the median price for the same area in the second quarter of 2000 was $223,500. That's an 87 percent increase.

The combination of Lujan's law, increased property values and the required reporting of sales information to assessors has created two classes of homes -- those bought before the 3 percent limit took effect in 2001 and those bought afterward.

The tax rolls show that ``tax lightning'' strikes eventually, but it's presumably to someone who anticipates the hit.

Domingo Martinez said the 3 percent law helps Santa Fe's homeowners by sheltering them from huge property tax increases, but it also means new homeowners are shouldering a bigger portion of the property tax burden.``As time goes by, you're going to see those (disparities) become wider and wider,'' Domingo Martinez said.

Low taxes

New Mexico's law is similar to California's Proposition 13, which passed in 1978 and limits tax assessment increases to 2 percent a year.

In a 1992 decision that declared the California law legal, the U.S. Supreme Court noted some have called Proposition 13 a ``welcome stranger'' system because newcomers end up paying more in taxes than people who are established in the community.

In 1989, 44 percent of Californians had owned their homes since the law passed, but they paid only 25 percent of the property taxes, the decision states.

In New Mexico, no one has done a similar study of the impact of the state's 3 percent limit on property tax increases, said Allen Maury, a senior economist at the state Taxation and Revenue Department. But ``there's a lot of anecdotal evidence that there have been some impacts,'' he said.

If, as in California, newer homeowners are shouldering more of the property tax burden than their more established counterparts, the law could be making it more difficult for young Santa Fe natives to stay here. They face steep home prices already, without the added expense of higher property taxes.

Domingo Martinez said he agrees with the 3 percent law because the Legislature passed it, but whether you like it depends on which side of the 2001 fence you sit on. ``It helps one and hurts the other,'' he said.

In terms of the real estate market, Victor Ramos, president of the New Mexico Realtors Association, said that although the 3 percent law might encourage some people to stay in homes they've owned for years, he does not think the law has harmed the real estate market.

New Mexico's property taxes are very low compared with other states', Ramos said, so people moving to New Mexico from out of state are usually pleased to find their property tax bills comparatively low -- even if they are much higher than their neighbors'.

Deutsch, who used to live in New York, said in New Mexico, he is paying one-tenth of what he would be paying for property taxes in New York.

``We don't really have property taxes in New Mexico,'' Deutsch said.

``It's nominal.''

Contact Wendy Brown at 986-3072 or wbrown@sfnewmexican.com.