The sky is NOT falling, but property taxes might be...

Lower taxes: Silver lining of falling home prices
Home price declines are causing tax assessors to revalue properties downward. Taxes will follow.
Les Christie, CNNMoney.com staff writer
Last Updated: May 27, 2009: 2:25 PM ET

NEW YORK (CNNMoney.com) -- Your home value has sunk like a stone, and you're so far underwater you'll have to hold your breath for years. Can you at least get a break on your property taxes?
In some cases, yes. Many municipalities' tax bills are due in May, and the tab for 2009 could be lower.
As a rule, city and county assessors reappraise property values annually or biannually, using recent sales of comparable homes in the neighborhood to set values. So in areas that have seen significant drops in home prices, appraisals - and thereby property taxes - could also drop.
"Assessors have been flooded with requests from homeowners to reassess their home values," said Los Angeles County Assessor Rick Auerbach...

... even if tax assessors reduce appraised values to reflect market conditions it still does not automatically mean a property tax cut. Localities could still raise their tax rates, the percentage of the home's value that is used along with the assessed valuation, to calculate the final bills.
"Taxes are based on property values times [the tax rate]. We could have declining values but make up for it by raising the rate," said Bill Donegan, the property appraiser for Orange County, Fla., which includes Orlando.
This year, though, the value drops are so steep that any rate rise will probably not offset the lowered assessments. Plus, governments usually can't just raise rates indiscriminately.
"In most places there's a statuary limit to rate increases," said Ken Wilkinson, the property appraiser for Lee County, Fla., where Cape Coral home values have plunged 44% from their peaks. "In Florida, they can't be raised more than 10%."
That should lead to substantial savings. In Orange County, the average taxpayer paid about 8% less last year, or nearly $130. "They may see a bigger drop this year," said Donegan.
The savings will be more modest, or non-existent, in states with lesser price declines. Many localities will raise rates enough to offset lower assessments, according to Joseph Henchman, the Director of State Projects for the Tax Foundation, a group that studies tax policy.
"The actual [revenue] collections could still rise or stay about the same," he said.
Governments may also raise fees on water, sewage and other services to keep up with looming budget deficits. They could even create entire new taxing entities, known as tax district, to fund fire departments, law enforcement, even libraries.
The local governments must keep revenues up to pay for programs they initiated during more flush times.
"We often see a ratchet effect," said Henchman. "Spending goes up when collections are strong but stay up even when collections go down."
First Published: May 27, 2009: 2:21 PM ET

source: http://money.cnn.com/2009/05/27/real_estate/property_tax_breaks/index.htm?postversion=2009052714 accessed June 2, 2009