Home foreclosure and unemployment rates are on the rise in North Carolina, but a new batch of property revaluations, and the tax hikes that often accompany them, could make life even more difficult for some residents.

By law, counties must revaluate property at least every eight years, although commissioners can opt to revaluate earlier. The new values must be approved by Jan. 1 of the year they take effect. That requirement is causing angst in North Carolina counties where public outrage has prompted commissioners to rescind recent appraisals.

The problem is tied to the slumping economy. Property values had consistently risen in recent years, but the mortgage crisis put the real-estate market in a tailspin. So homeowners are angered at the prospect of paying taxes on property that’s listed in county records for more than any potential buyer would pay for it.

“I know people who sweat out the tax bill every year. People can’t pay it,” said Thomas Harrington, a lawyer from Eden. He is chairman of a new grass-roots committee that is circulating a petition to fight the revaluations.

Rockingham County’s most recent revaluation, which commissioners ended up scuttling, would have raised the value of some properties by several hundred percent, Harrington said. That, mixed with high unemployment and foreclosure rates, threatens homeowners.

“You couldn’t sell a dozen Krispy Kremes in Rockingham County right now,” he said. “We are in terrible shape.”

The dire economic picture is fueling local opposition to revaluations. Almost half a million North Carolinians were unemployed in March, according to data from the Employment Security Commission. The unemployment rate in a number of counties is approaching the mid-teens.

Rockingham, where unemployment stands at 13.5 percent, is one of three counties that have decided to put off property revaluations for at least two years.

That move has spawned a controversy of its own. Since revaluations must be approved by the first of the year, the state government says that it’s too late for counties to rescind their decisions to proceed. This places commissioners, already facing pressure from local residents, in even hotter water.

Delaying the revals

Rockingham, Caldwell, and Stanly counties all voted unanimously earlier this year to put off their revaluations after initially deciding to move forward. Due to the eight-year threshold, Rockingham would not have had to revaluate until 2011, while Caldwell and Stanly could have waited until 2013. Many counties revaluate more regularly so that property owners won’t be rocked by dramatic increases in their tax assessments.

According to preliminary data from the N.C. Department of Revenue, 10 counties are already at the eight-year threshold and have no choice but to revaluate this year: Alamance, Duplin, Edgecombe, Gates, Lenoir, Martin, Mitchell, Nash, Polk, and Warren.

Just because a county revaluates property doesn’t mean taxes will go up. The county commissioners set the tax rate and can adjust it to fit the new revaluations in the budget. Homeowners also can appeal appraisals if they think the county misjudged their property value.

That’s not good enough for residents worried about higher taxes. Rockingham County commissioners got an earful Feb. 9 from 750 residents who attended a public hearing devoted to the revaluations.

“[T]he people cannot afford a tax increase,” said Michael Smithwick, a Reidsville resident who spoke at the meeting. “An increase will take food off the tables and medicine out of their medicine cabinets. It will hurt small businesses because people will not be able to have the money to buy the necessities of life.”

Two weeks after the public hearing, commissioners voted to rescind the revaluation, even after receiving an opinion from a UNC public law professor advising that it was too late for the county to scrap the new values.

Several other counties, including Harnett, Orange, and Forsyth, have considered putting off their revaluations, but in each case commissioners decided to proceed.

Many counties have seen grass-roots resistance to the revaluations. In Orange County, where the tax assessor says that property values have increased by an average of 25 percent over the past four years, angry residents have formed a group called Orange County Tax Revolt. Members packed out several recent county commission meetings.

AG weighs in

In April, the attorney general’s office and the Department of Revenue issued memoranda arguing that counties may not rescind revaluations after having approved them before the first of the year. The memos prompted at least one county, Harnett, to forgo efforts to drop the revaluations.

“The Machinery Act contains no authorization for a board of county commissioners to rescind its advancement of a general reappraisal or its approval of a schedule of values once that schedule becomes effective on 1 January. Thus, the county must proceed in accordance with the schedule of values approved by the board of county commissioners,” wrote Kay Hobart, special deputy attorney general, in an advisory memo dated April 8.

Hobart also pointed out that a higher revaluation does not always translate into higher taxes. “A county always has the option to reduce its tax rate to counterbalance a higher appraisal,” she wrote.

Harrington says he doesn’t buy that argument. “I don’t care what they do with the tax rate. The folks who have their property go up 200 or 300 percent are going to pay more,” he said.

Lawmakers act

Public outrage over the revaluations has prompted a bipartisan group of state legislators to jump into the fray. Rep. Nelson Cole, D-Rockingham, has introduced legislation that would amend statutory law specifically to allow counties to rescind their revaluations.

A House local government committee approved the bill by unanimous voice vote April 29, sending it to the House Finance Committee.

“The citizens of the state don’t need this to be taking place right now in these economic times,” Cole said prior to the committee’s vote.

Rep. David Lewis, a Harnett County Republican and co-sponsor of the legislation, said in a press release that the revaluation process is flawed.

“Requiring people to pay more of their already strained budgets in taxes due to inflating their property values is not wise policy,” he said.

The Orange County Board of Commissioners also recently heard from Rep. Bill Faison, D-Orange, who urged the county to rescind its most recent property appraisals.

“We’re in the worst time since the Depression, and people are scared,” Faison said, according to the Durham Herald-Sun.

David N. Bass is an associate editor of Carolina Journal.