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Energy Use Over the Last Year In the ADU

That's very cool, but that's not the real story. 

Posted by Kol at 11:03 PM 3 comments 

Thursday, February 21, 2013

One Data Point for the Property Tax Impact of an ADU

My property tax appeal was successful. My property taxes were officially lowered from $4,021.75 to $3,154.21 for 2013.

This is still a big increase from my 2012 tax burden of $1,599.43, but it's a fair increase based on Multnomah's tax code.

For others who are considering the fiscal impacts of an ADU to their current property tax, the important numbers to note in terms of possible tax increases are that my ADU cost  ~$100K to build, it was valued at ~$90K by the county, and that this additional 'real market value improvement' increased my taxes by ~$1,500.

A property tax increase post-ADU, should be proportional to the contributory value of the improvements. Using my increased tax figures as a baseline, and assuming that I understand Multnomah tax code correctly, if an ADU adds between $50K-$150K of contributory 'real market value' to a property, the property taxes would go up proportionally from ~$850-$2,550/year.
To figure out how an ADU may impact your property tax if you're in Multnomah County, simply multiply the assumed increase in assessed property value by 0.017. That will tell you approximately how much your taxes will increase after you've added an ADU to the property.

And take my formula with a grain a salt be cause I am just a guy with extra time on his hands and MS Excel.
Posted by Kol at 3:15 PM 1 comments Labels: finance, tax


Successful Appeal of the County's Initial Assessment of the Contributory Value of the ADU

In my last post, I described how the county attributed approximately $142K of contributory value from the new ADU. This translated to a HUGE annual property tax hike; from $1,599 to $4,021. What I didn't describe in that post was that upon receiving the County letter in the mail, I immediately gathered together evidence that my ADU was actually worth far less (it is worth ~$100K) and wrote an appeal to the County Board of Property Tax Appeals. I submitted the appeal package in full the following day at the County tax office.

When I spoke with the kind lady behind the County desk, she informed me that the assessor, who I'd allowed into the property, had noted in his records that I had added a 1,350 sq ft ADU. Given that the City of Portland's regulations only allow ADUs of up to 800 sq ft, I had evidence to prove that his spatial calculations were necessarily off target by ~68%. I also learned that the County assessor likely applied a simple numeric formula to this miscalculated sq footage to come up with the obscenely high contributory value for the ADU of $142K (eg. 1,350 sq ft x $105 sq ft= $142K).

A couple months after submitting my appeal paperwork, a 2nd assessor contacted me and visited the property. When he arrived, he explained that he had read through my appeal documentation, which had included a full copy of a 3rd party appraisal. Upon visiting and measuring the property, he concurred that the initial assessment of the size of the ADU seemed incorrect and he shared that he'd never seen an ADU add more than $100K to the value of a property.

It's worth noting that the initial County assessment apparently included the ADU attic space in his sq footage calculations, whereas the City did not count the attic as living space. The 2nd assessor agreed that the attic should not be counted in the sq footage calculations.

It's also worth noting that the County assessment includes the total building footprint (i.e. the exterior walls) in the sq footage calculation, whereas the City only counts interior space (i.e. drywall to drywall). The County includes exterior dimensions because assessors must be able to assess the building from the outside since homeowners aren't required to allow assessors entry into the home and many homeowners deny entry. These two variables help explain why the first sq ft assessment was so off target. However, I never would have known about this sq footage miscalculation had the kind lady behind the desk not mentioned it; this 1,350 sq ft figure wasn't in the initial letter they sent.

Today, I received an updated property tax assessment in the mail, which I am happy to report, accurately attributes ~$90K of contributory value from the ADU to the property, $53K less than their initial assessment! The "From" column relates the 2013 figures from the "This Year" column in the first image at the top of this post.

The "To" column shows the new figures according the 2nd assessment, which will override the initial assessment.

Whereas the initial assessment indicates the market values of the structures (main home and ADU) at $320,600, the new assessment has the market values of the structures at $267,600. The new assessment values the ADU at ~$90K, which tracks perfectly with my cost of construction and my private appraisal.

I don't yet have a newly updated tax bill, so I don't know what my actual annual taxes will be. But, I estimate that the updated tax on the property will probably come be about $3,100/year. Once I receive the final property tax bill, I'll post it for all to see.

If my estimate is correct, this will be $1K less per year than the initial County tax assessment. It is still a $1,500/year increase to the property tax, a two-fold increase from what my taxes had been before I built the ADU. But, based on the County tax regulations, this new property tax burden seems fair and reasonable.
Posted by Kol at 11:25 PM 0 comments Labels: appeal, appraisal, cost, finance, property taxes, size, tax New ADU Book Now Available Free ADU Resources Guide Pictures of the Finished ADU Enter Your Email to Have New Posts Delivered Welcome to the Accessory Dwelling Unit blog