Property Tax

The Club, Membership, Property Tax, and You

Complaints about increasing property taxes are a tradition. Property taxes are seen as a penalty. When the penalty gets larger and larger the pain gets worse.

In reality property taxes are the dues you pay to belong to a club. The club has a local chapter (city - town) and a headquarters chapter (the county). At this club you have a cafeteria style list of membership benefits. Being a democratic club - everyone gets a to enjoy the benefits, and pay for them too.

Your list includes public education, fire protection, police protection, a water - sewer - local improvement district, and a host of other city and county services.

These are services everyone needs. They attracted you to the home you bought. In fact these services not only attracted you, but perhaps your neighbors or the folks down the road. They in turn helped to attract a few more residents and the area grew and folks where happy. Everyone paid their dues and the community was established and life was good. Over time, if the dues remained the same, or grew about the same as inflation, you might consider membership in this club a very good deal, and extremely worthwhile.

But over time the dues have not remained the same. They have grown and grown and now membership in the club is painful. What happened to the original good deal? What happened to the original club? What happened to the original club administrator?

At some point, you or your neighbor felt that the club should provide more choices to the membership. Perhaps the club should manage the water system, maintain streets, control pets, manage community pools - summer schools - civic events - professional sports arenas, or any number of accepted community interests and activities.

As the choices were added - more and more people where attracted to the club. More and more of the basic services (police, fire, etc.) had to be added and the new services had to grow as well. Since the club never limited membership, the local club grew all over the landscape and the distances between neighborhoods grew and grew. The cost of the basic services increase not only because of population growth but also because of the size of the geography.

Several changes took place during this time. Your club's administrator - who originally knew everyone in the small neighborhood now found administration was too much for one person. The small police force found distances to great for one crew. The same thing happened to the fire crew. What were public service jobs now became the property of full time public employee professionals. Each part of the club became the career path of a professional. In almost every case the allegiance of the professional is not to the community but to the profession. So the nature of the service changed from a service you created, to a service that existed all by itself, serving the career goals and requirements of those within the profession.

Another change took place in the surrounding countryside. Your neighbor with 5 or 10 acres found out that small subdivisions of land are worth more than the entire division. Your first neighbors might have bought a subdivision lot from your neighbor. Others saw the value of land increase through subdivision and packaged land as merchandise, speculating that the retail value would be greater than their cost. Now, entire careers are spent buying and selling land just as though it were a dozen eggs. Each land merchant hoping to resell for more than was paid.

Your club management noticed these changes. Here they were, faced with increasing staffing requirements (remember growth, new services for the residents, and new career paths for club employees). The original dues structure would not support these needs. How then to get higher dues and satisfy the membership at the same time?

Sometime, somewhere, someone noticed how much more, than you, your neighbors paid for land. What better way to increase dues than to tie the rate of dues to the value of your property? As the community grew, as land values increased, so too did the dues coming into the club. These new dollars would support new services and new people to provide the services and for the time being everyone was happy. More and more residents moved in, and their new property values continued to increase. More merchants packaged more land deals and growth continued.

But even this could not support the club. Again someone figured out that if new property was costing more and more, then the original property must be worth more and more too. This new approach helped to fuel a new source of club dues. For a while, everyone was happy. Everyone's property grew in value which proved to them that their investment was a good one. This was especially important to people who moved to your club without ever planning to stay as a lifetime member.

The club administrator, who used to know everyone, hired others to keep up with the value of property. These people could visit everyone and keep handwritten notes and information about the property. But the club grew and grew, more people were hired and the visits came less often - there was simply too much ground to cover. Then the administrators talked about averages and trends and costs of doing business. Why not keep the club costs lower by applying formulas to whole neighborhoods? Soon the visits stopped and clerks or machines were used to determine the new values. The easiest way of finding the value came from recent sales. If your neighbor paid so much per acre, then your land must be worth the same. If your neighbor didn't buy or sell, then use the sales information from someone else in the club with a similar amount of land.

If your club is attractive, if your club has a lot of services and other attractions, your membership is growing every year. Not only do you attract new members, but you attract land merchants who want to take part in this membership growth. For many land merchants their entire income comes out of the profit made by selling the land for more than was paid. Your new neighbors will gladly pay more than you did, for they know that in a few years the land will be worth even more. Your administrator is extremely happy. The more, any one, paid for a given piece of land, the more all owners of a similar piece of land will pay in dues, not just this year, but every year forever. This gives the club administrators a wonderful source of bank funds which pay, from you, compound interest.

Now what started as a small community, with a few neighbors, a volunteer fire department, and maybe even volunteer policing has grown and grown. Your club has hundreds of career minded employees who most likely don't even live in your community. You have a laundry list of services - in fact you might be a stockholder in road building, landscaping, power distribution, police, fire, library, entertainment, professional sports, transportation, vehicle repair center, recreation center, etc., etc.. All of these depend upon your dues. Year after year these services have grown. Each of them is almost a corporation in itself. Some have their own retirement systems amply paid and supported by you, which deliver benefits exceeding yours.

If you live here for a few years and sell at a profit, your membership doesn't cost very much. If you live here a long time the dues are very expensive. Your original community doesn't require the services and attention that the newest community does. Your needs are less, your income is possibly less, and your ability to complain is lessened by the influx of new residents. All of a sudden you are paying higher and higher dues to support the needs of new residents who might leave in a few years.

Unless you and thousands like you do something, the process will continue and grow. Your club will get larger and larger. The administrators will work for themselves in careers they established providing services they say you need. The dues will increase and the relationship between the land merchants and the administrators will become clouded. In fact many of your administrators will have been former land merchants, now in a position of power over today's land merchants.

What can you do? Protest, protest, protest, and protest again, every increase in dues. You can challenge, challenge, challenge, and challenge every proposed new service or facility your club is proposing. You can demand, demand, demand, and demand again that your club listen to the membership and move in the direction the members want to go - and not the direction the professionals want to go. You can insist that dues be fairly applied. You can insist that individual rights be recognized. You can protest the averages and the sales data. You can write, write, write, and write again, your commissioners, representatives and newspapers insisting that private citizens be given the same tax rights as timber companies or farmers. Your land values should not be subject to the manipulations performed by land merchants. Given that you want to stay in an area you should be able to sign up for long term classification that calls for dues to be paid, if and when the value of the property is collected by the owner. Until then the property stays valued as it was, not subject to the annual, or periodic increases claimed by rooms of machines and distant administrators.

You can force your club to get rid of unwanted services. Do you want to be in the transportation business? Entertainment? Recreation? Sports? Are there better ways to get these services? Should these services be paid for by the user or by everyone?

Has your club administration grown faster than the club? Has the cost of your club grown faster than inflation? Have the benefits of the club administrators overshadowed yours? Does the club listen to you or do you listen to the club?

Your club, like many American corporations, may have outlived its usefulness. When was the last time staff or services or benefits were reduced? When was the last major reorganization? Has the club kept up with the times? Is the club breaking even or going in debt? How well has the club managed your dues? Would you join this club again???

Written by:

Dave Palmer
October 1997

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