Councilmember Eric Christ: Property Valuations and HB 581

Source: Peachtree Corners Post 2 Councilmember Eric Christ’s recent newsletter.

I’ve received several questions about Constitutional Amendment #1 (also known as House Bill 581) related to property valuations that was on the ballot last November. I’m not a property tax expert, but here are some of the things I’ve learned about this bill while researching this for constituents.

1. A limit on valuations, not taxes — Many people are surprised to learn that, despite the news headlines and social media posts, HB 581 is not a “cap on property taxes.” It does limit the annual increase in property valuations to no more than inflation. But property value is just one of the two factors involved in determining your taxes. The actual tax owed is still calculated by multiplying the valuation by the tax rate (the “millage rate”), so a taxing entity can adjust the tax rate to generate the revenue needed to pay for the cost of the services they provide. And if the tax rate is raised, the tax owed could still increase faster than the rate of inflation even with the HB 581 restriction on valuation increases.
2. Only applies to homeowners — The limit on valuation increases only affects property used as a primary residence. Valuations for rental residences and commercial properties can continue to increase based on the housing market. The owners of those properties will continue to pass along the increased property taxes to their tenants in the form of higher rents.
3. Starting valuation year is 2024 — The baseline valuation for your home is 2024, not when you purchased the house. So the calculation will start with the 2024 appraised value and then increase by inflation each year.
4. Appeals no longer automatically lock the value — Before HB 581, if you appealed your property appraisal, the value was then automatically frozen for three years, even if the appeal board did not agree with you and kept the appraised amount the same. Now, the value is only frozen for three years if the board reduces your appraised value. If they don’t adjust the appraisal, the value can continue to rise each year. (Of course, you could file another appeal the next year and try again.)
5. Voters approved an opt-out clause — The amendment approved by voters included a provision that enables taxing entities like schools and counties to opt out of the valuation limits if they hold three public hearings and file a certificate with the state by March 1, 2025. Over half of the school districts across Georgia have stated their intent to opt out along with many counties. In order to provide them more time to consider opting out, State Representative Shaw Blackmon (R-Bonaire), the chairman of the House Ways & Means committee, has already submitted a bill that would extend the deadline until May 1.

Why are some taxing entities considering opting out? 

For schools, it appears that many are concerned that a state-wide valuation methodology may not be a good fit for every locality. Since public schools can only generate revenue from property taxes and state and federal aid, their options to cover lost income due HB 581, other than raising tax rates, are limited.

The law provides an option for other taxing entities like counties to implement a new 1% sales tax to offset reduced property taxes, but HB 581 specifically excludes schools from this sales tax option.

Some county governments like Gwinnett are considering opting out because they already have a valuation limit that is better for homeowners than the HB 581 methodology.

In Gwinnett, valuations for calculating county government property taxes are locked from the year you purchase the home. The taxable value can never increase as long as you own the house. This Value Offset Exemption (VOE) methodology means that as long as tax rates stay the same, your county government property taxes stay same.

The county feels the effort spent tracking two taxable values and calculating the state-wide methodology each year when the VOE will always be the better methodology is wasted administrative time.  (The Value Offset Exemption does not apply to school property taxes.)

To sign up for Councilmember Christ’s newsletter or find him on social media, visit linktr.ee/votechrist.