4-13.Policy Issues Relating to Volatility of Taxable Property Values. (LO4-1) Park City experienced unusual volatility of taxable property values over a particular five-year period. For the first three years of this period, the "pre-recession period," average property values in the city increased by more than 35 percent. Then the nation plunged into a sudden and deep recession, and like communities nationwide, Park City experienced a steep drop in property values. During the year the recession occurred and the year following, the market value of residential property in Park City decreased by an average of 50 percent. Assessed valuation of Park City's taxable property often lags behind changes in the market value of the property. State law requires that the Park County Equalization Board reassess residential and other taxable properties located in the county only when actual sales of properties occur. Properties that have not sold must be reassessed at least every three years. To spread its workload, the equalization board reassesses approximately one-third of taxable property in the county each year. This means that during the pre-recession market value growth period, many properties had assessed valuations well below market value. Even worse, during the recession period, despite the fact that the market value of some residential properties had dropped below the amount of mortgage debt owed on them (so-called underwater properties), many of these same properties continued to be assessed at values well above actual market values. Property owners who believe their assessed valuations are in error or above market value can file formal appeals with the state Equalization Review Commission. In judging property assessment appeals, the commission relies heavily on actual sales data but also has broad authority under state law to exercise professional judgment in deciding whether and how much to adjust appellants' property assessment. Required a. Read and evaluate the foregoing information about Park City's taxable property assessments. Put yourself in the position of a homeowner and explain what concerns you may have and what plausible actions you might take in each of the following situations. (1) During the first two years of the pre-recession period, your property had not yet been reassessed, so your assessed property value may have been undervalued. (2) During the third year of the pre-recession period, you received notice that the assessed valuation of your property increased by 35 percent. (3) During the year of and year following the recession, your property has a market value less than what you owe on your mortgage, yet the assessed valuation of your property has increased. Moreover, property tax rates have increased because average assessed valuation in the city has decreased. b. Put yourself in the role of city manager of Park City and explain what issues you will likely face as you develop a budget and recommend a property tax rate to the city council during (1) the prerecession period and (2) the recession period