Villages, Towns Across the State Harmed by Assessment Errors

About 60 miles to the southwest, hugging the Illinois-Wisconsin border in Kenosha County, the small village of Twin Lakes has been negotiating a large problem — one Shorewood officials know all too well.

Twin Lakes and Shorewood both saw legislation drawn up in the wake of assessment errors, which overstated the value of their villages by tens of millions of dollars.

In Shorewood, property taxpayers were facing an extra $2 million on their collective tax bills due to an error, which overstated its Tax Incremental District No. 1 by about $77 million. In Twin Lakes, officials lobbied their local lawmaker, state Rep. Samantha Kerkman (R-Powers Lake), for a solution to valuation error via legislation that exaggerated the village’s overall value by $70 million.

Kerkman co-authored a bill with state Sen. Alberta Darling (R-River Hills) on Shorewood's behalf, which will exclude the village from the state-imposed limit on property tax levies, and will allow village officials to move around money to mask the effects of the error from property taxpayers.

Both bills were signed into law Nov. 9 by Gov. Scott Walker, but as it turns out, the errors aren't unique. Many other villages, towns and cities across the state have had similar run-ins with errors associated with their assessed value, which in many cases force officials to increase tax levies and ask property owners to pay more than they should have paid.

In fact, the state Department of Revenue made 670 corrections this year, after municipalities said the published value was reported as inaccurate in 2010.

Now, Kerkman is proposing a new bill that would allow local officials a chance to catch errors before the state publishes them.

State officials' hands tied

As the law is written, after a municipality's value is published, the state Department of Revenue can’t correct errors. According to Equalization Section Chief Scott Shields, the department is bound by state statute to wait until the following year to correct the error, at which point the state lowers the equalized value by an equal amount.

In Shorewood’s case, Village President Guy Johnson said the village caught the error the same day the numbers were published and released, but it was already too late.

Shields said Shorewood's tax district's value was already wrong when it reached the department in an electronic file from the contracted assessor for the village, Mark Brown of Associated Appraisal Consultants, Inc. A department employee contacted the assessor when the tax district value seemed too high. He said the assessor confirmed the value.

Brown said the error occurred when the value was entered into a new electronic data entry program and three extra zeros were added.

State law prohibits municipalities like Shorewood from increasing their tax levies for any reason other than through development or referendum. However, the new law excludes Shorewood from the levy limit law.

The error would have forced Shorewood to ask property owners to pay an estimated $2 million extra in property taxes next year, but with the help of the bill, village officials plan to decrease the levy by $2 million, borrow or use cash on hand to fund the difference, and then raise the levy the following year by the same amount.

In Twin Lakes, Kerkman's bill revised a current program in which the Department of Revenue is required to provide loans to communities facing an exaggerated equalized value to help offset the effects of the error. The loans either go to the actual property owner or the municipalities, depending on whether tax bills have been sent out yet. An error would have to represent 10 percent or more of the total value of the area, but under Kerkman's revision, it was reduced to 7.5 percent.

These are temporary fixes though, Tammy Rongstad, a spokeswoman for Kerkman said. While in discussion over the fix for Twin Lakes, Kerkman said she would work on another bill, which would allow local officials to see numbers 14 days before being published by the Department of Revenue.

"She has approached department officials and asked them if they would be willing to do that," she said. "Willing to give them a grace period. Just send it out two weeks early. This would eliminate a lot of the errors we're seeing."

Errors are typical

Along with Shorewood and Twin Lakes, Hartford reportedly is dealing with a large error and Warren in central Wisconsin is pursing legislation after the village was undervalued by $4.7 million, though the bill appears to have stalled.

Department of Revenue spokeswoman Stephanie Marquis said valuation errors are typical - with hundreds of corrections made every year. However, most aren't due to enormous data entry errors like Shorewood, but minor changes after numbers have been published.

Dan Thompson, executive director of the Wisconsin League of Municipalities, said he's seen a lot of villages, towns and cities across the state deal with the errors every year, granted they're not at the magnitude of Shorewood’s or Twin Lakes'.

"They tend to be small enough that they can wait and correct them the next year," Thompson said.

 Johnson says he's pleased with the work Darling and Kerkman put forward on the bill as well as co-sponsors Rep. Sandy Pasch (D-Whitefish Bay) and Sen. Lena Taylor (D-Milwaukee).

“We were very proactive with the error,” he said. “We did dodge a bullet.”