The foundation for property taxation in Kentucky comes directly from the Constitution of Kentucky (Section 3, 170, 171 and 172), which requires that all property be taxed unless specifically exempted by the Constitution. The Constitution further directs that taxable property must be assessed at its fair cash value, estimated at the price it would bring at a fair voluntary sale. The PVA is required by law to physically examine each parcel of taxable real property no less than once every four years.
What is Market Value?
Finding the market value of your property involves discovering the price most people would pay for it in its present condition. It is not quite that simple though because the PVA assessor has to find what this value would be for every property, no matter how big or small. The PVA's job does not stop there. Each year it has to be done all over again because as we all know the market value of almost everything changes from one year to the next.
Why Have a Property Tax?
Properties are assessed so that those of us who want the advantages of having schools, fire and police protection, and other public benefits (which means just about all of us), can absorb our fair share of the cost, in proportion to the amount of money our individual properties are worth. The property tax is part of a well-balanced revenue system. It is a more stable source of money than sales and income taxes because it does not fluctuate when communities have recessions. When the community spends your tax dollars on better schools, parks, and so on, your property values rise. Some of the windfall benefits you receive are recaptured by the property tax.
How Property is assessed
To find the value of any piece of property the PVA must first know what properties similar to it are selling for, what it would cost to replace it, how much it takes to operate and keep it in repair, what rent it may earn, and many other dollar facts affecting its value, such as the current rate of interest charged for borrowing the money to buy or build properties like yours. Using this information, the PVA can then determine the property value using the three methods listed below:
Sales comparison approach:
The first method compares your property to like properties that have sold recently. These prices must be analyzed very carefully to get the full picture. When using the sales comparison approach, the PVA must always analyze many sales to arrive at a fair valuation for your property. Size, quality, condition, location, and time of sale are important factors to be considered.
The second method to value your property is based on how much money it would take, at current material and labor cost, to replace your property with one similar. We would then minus depreciation and add the value of the land to determine the current value.
The third method is to evaluate how much income your property would produce if it were rented as an apartment house, a store, or a factory. The PVA must consider operating expenses, taxes, insurance, maintenance costs, and the return most people would expect on your kind of property. While all three methods may be used, more weight may be given to one method. Assessed Values May Change from Year to Year. When market value changes, so does assessed value. The PVA office has not created the value. PEOPLE DETERMINE VALUE by their transactions in the marketplace. The PVA office simply has the legal responsibility to study those transactions and assess your property accordingly.
Assessed Value and the Tax Rate
The PVA office has nothing to do with the total amount of taxes collected. The PVA's primary responsibility is to find the fair market value of your property, so that you may pay only your fair share of the taxes. The amount of tax you pay is determined by the TAX RATE applied to your property's ASSESSED VALUE. The tax rate is determined by all the taxing agencies - city or county, school districts, library, state and others. The PVA offices also keeps track of ownership changes, maintains maps of pacel boundaries, keeps descriptions of building and property characteristics up to date, keeps track of individuals and properties eligible for exemptions and other forms of property tax relief, and most importantly, analyzes trends in sales prices, construction costs, and rents to estimate the value of all assessable property.
Your Rights and Responsibilities
If your opinion of the value of your property differs from the PVA, you must have a conference with a member of the PVA staff. You can help by providing accurate information such as one or more of the following:
- Comparable sales information
- Appraisal no older than 12 months
- Replacement cost per insurance cost
- Cost of new construction
- Proof of Structural damage