DAYTON — The majority of residential and commercial property owners in Montgomery County will see their property values fall as part of a 2011 update, including some double digit declines.

“This is something we couldn’t have imagined 10 years ago,” County Auditor Karl Keith said. “It’s eating into home equity.”

Keith said overall valuation loss in the county could be as much as $3 billion. The county is finalizing the update and expects to send it to the state for tentative approval by the end of the month.

Property owners will be notified of their new values in late June or early July. Dayton, Trotwood, Riverside, Harrison and Jefferson townships along with parts of Kettering, Moraine and Oakwood will experience the deepest value cuts.

“That’s our bull’s-eye,” Keith said. “One long-term common issue is aging housing stock. Market for those properties has fallen off.”

Ohio law requires that each property in the state go through a reappraisal every six years. In addition, every three years, values are updated. That triennial update is now underway in Montgomery and Greene counties. Miami County did an update in 2010 and Warren County 2009.

The triennial update is a statistical analysis. Appraisers do not visit properties. Updates currently underway are based on market sales in 2008, 2009 and 2010.

On April 12 the Ohio Department of Taxation recommended residential properties in Montgomery County drop overall by 7 percent and commercial properties by 8 percent, based on a sales-ratio study. Keith predicted a 4 to 5 percent decline.

“In no time since the Great Depression have we seen loss of valuation like this,” said Lou Caldwell, southern Ohio area manager for the Appraisal and Tax Division of Tyler Technologies, the firm hired by Keith to conduct the update.

Lower values affect county tax coffers

Declining property values can lower property tax bills, assuming there are no new tax levies approved. How much the tax bill declines depends on the type of millage being assessed and how low the effective rates have previously been adjusted due to the state law that limits increases in taxes when property values rise.

In the 2008 county reappraisal, nobody took bigger hits on their property values than some of the homeowners on Governor’s Trail in western Kettering.

On Friday, resident Tom Borchers said he’s not thrilled his home value could decline, but he’s also not dwelling on it.

“People are going to buy homes based on what they can afford,” he said. “If I was worried about it I wouldn’t have bought the house.”

Denny Jaros, owner of P & D Body Shop on Wayne Avenue in Dayton, said he hoped commercial valuation declines had bottomed out after the last reappraisal.

“It just seems like a tremendous amount of things are hitting us all at the same time,” Jaros said. “We’ve got to build up the tax base. We’ve got to get jobs here.”

Schools, counties, cities will feel cuts

Montgomery County taxing authorities — school districts, cities and the county— will lose between $4.89 million and $9.78 million in tax revenue depending on the percentage decline in total county value, according to the auditor’s office. This comes as many grapple with proposed loss of state funding.

“Talk about a perfect storm and I don’t think we’ve gotten to its full fury yet,” said Trotwood City Manager Michael J. Lucking, estimating the city will lose revenue of around $500,000 from state cuts. “There are a lot of unknowns. Right now, we’re just being guarded in terms of how we look at our financials.”

Montgomery County’s general fund will take an estimated $1 million hit due to property value reductions, County Administrator Deborah Feldman said. That loss follows a $20 million decline in general fund revenue since 2008, and $9 million in proposed state cuts.

“At this point, the loss of any revenue is extremely serious,” said Feldman, adding the county will be re-evaluating all services and how money is spent.

Greene County fares better than most

Greene County Auditor David A. Graham believes residential properties there could fair slightly better than the state recommended 7 percent decline.

“My thought is that we’re looking at a 5 percent decline in residential values countywide,” Graham said. “Some (properties) may go down more than that, some will break even and others will see a slight increase.”

During previous updates, Montgomery County properties were grouped into neighborhoods of about 1,000 structures, and a percentage increase or decline based on sales was applied to them. The volatility of the market required a different approach in 2011, Keith said.

Montgomery County based its 2005 triennial update on more than 30,000 valid residential home sales, compared to just 10,936 for the current update. There were twice as many invalid sales in 2011, than in 2005.

An invalid sale is a property transfer that is not a true arms-length transaction. For example, one party could be under duress, such as a sheriff’s foreclosure sale, a transaction involving a bank or governmental agency, a court-ordered sale or a sale in which the parties are related, according to the auditor’s office. “Applying a factor to 1,000 properties in a neighborhood didn’t seem fair,” Keith said.

Instead, Tyler established equity on homes individually considering valid sales and also what was happening in the neighborhood.

“It was more laborious,” Caldwell said. “We’re working closely with the county to achieve a level of fairness.”

Some property owners will experience an increases in value, Keith said. Others will see declines reach 10 percent or more.

The value changes will be set in 2011 and be reflected on 2012 tax bills.

“The declines will be at a level that some properties owners will see tax relief,” Keith said.