Sinkholes had their fifteen minutes of fame last week when one opened up in in front of President Trump’s Mar-A-Lago estate in Palm Beach, Fla. An abundance of creative and comical memes followed the sinkhole announcement, but it’s no laughing matter for taxpayers in communities where sinkholes have caused properties to deteriorate. Local governments likely face the same frustrations in light of the fact that sinkholes can wreak havoc on property tax revenue.
Taxpayers and taxing authorities in Harrisburg, Pa., are currently experiencing this first hand. Fox 43 reports that some homeowners residing on one particular street are refusing to pay property taxes because they feel their homes have been rendered worthless by a sinkhole. The sinkhole has reportedly been an issue for several years and has led to the forgiveness of property taxes on 53 homes in 2014, according to local news source Penn Live. The source also reported that residents requested tax forgiveness in 2015 as well, but due to budgeting concerns, the Harrisburg school board balked; the question as to whether affected residents will see property tax relief remains unanswered.
Residents of Fraser, Mich., were also recently affected by a sinkhole, which may cost more than $100 million dollars to fix. The sinkhole was discovered on Christmas Eve 2016 and prevented several Fraser residents from returning home for weeks. Some of these taxpayers directly affected by the sinkhole reported that their property taxes had actually increased, requiring them to challenge their assessments before the local Board of Review and possibly to the state’s tax tribunal in the future in cases where the city is unwilling to modify the assessment.
There are similar reports out of Florida, where sinkholes are common. Specifically, in 2013, Pasco County reported that sinkholes cost the county $750,000 in tax revenue while the school district lost $835,000. The county property appraiser can reduce the property’s value by 30 percent once a sinkhole is confirmed, inevitably causing the property’s taxable value to decrease as well.
The Mar-a-Lago sinkhole has received more global attention than probably any other sinkhole—ever. But, much less infamous sinkholes force ordinary taxpayers and concerned local governments to face a very realistic conundrum. On one hand, property tax revenue is required to fund repairs. On the other hand, a decline in property value will lead to less local property tax revenue.
Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Should affected taxpayers be given tax relief for the negative impact of sinkholes on their property values? If so, how can states and local governments make up the tax revenue required to repair the issue?
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