Allan Dalzell of Omena is seeing the effects of plummeting residential property values in Leelanau County first hand – and so is his local township government.

As a private property owner and a member of the Leelanau Township Board of Review, Dalzell and many others similarly positioned are gearing up to hear challenges to property tax assessments in hearings beginning next month and, at the same time, contemplating the effects of what will surely be a steep decline in local government revenues from property taxes next year.

“The assessed value of my own property dropped from around $475,000 last year to around $404,000 this year,” Dalzell said. “Even I had to look twice at the notice I received in the mail last week before I really understood what was going on.”

Tax assessment notices started going out to property owners throughout the county this month. Unlike the tax bills that went out in December 2009 showing a roughly 4.4 percent increase in the taxable value of most properties, the new assessment notices show that the assessed value of properties is continuing to go down and – for the first time for many taxpayers – so are taxable values.

Leelanau County Equalization Director Laurie Spencer last week presented a study outlining changes in the true cash value of various types of properties in Leelanau County between 2008 and 2009. Residential properties, representing nearly 89 percent of the total value of all properties in Leelanau County, went down in value by nearly 8 percent overall.

Eight percent represents a drop of some $548 million in the true cash value of all residential properties in Leelanau County over one year. The figure is based on sales studies and other analyses undertaken annually by the Equalization Department. The true cash value of all property types in Leelanau County, including commercial, agricultural and industrial, dropped about 7.3-percent last year.

“True cash value,” however, is usually considerably higher than the “state equalized value,” and the “assessed value” of a property listed on tax assessment notices – often twice as high as those figures. Usually the lowest but most important figure on a tax assessment notice is the “taxable value” of a property which, in most cases, dropped by about three-tenths of one percent over the past year.

That drop is attributable to a “negative Consumer Price Index (CPI)” or “deflation” rate of about three-tenths of one-percent between 2009 and 2010. That followed a year in which inflation was unusually high at 4.4 percent – and taxable values generally rose by that amount on tax bills that went out in December 2009, even as assessed values dropped.

“Just about everybody will see that tiny drop in their tax bill next year based on the negative CPI,” explained Kit Wilson, a tax assessor who works for a number of municipalities in Leelanau County and throughout the region. “Anyone whose taxes were ‘uncapped’ because of an ownership change will see a very significant decrease in taxable value because assessments are falling far below the prior year’s value.”

Under state law, property owners pay taxes on the lesser of the assessed value, the state equalized value, or the prior year’s taxable value times the CPI. In the current climate, that means they’re likely to pay taxes amounting to three-tenths of one percent less unless one of three things happens, Wilson explained: they add a new building to their property, the property is “uncapped” and they pay even less, or the size of a property changes because multiple properties are combined, raising the taxable value.

“It really can be confusing,” said Dalzell, “and that’s why people sometime show up at Board of Review meetings, and we try to sort it out for them. In my own case, I combined some properties last year so, even though my assessed values went down, my taxable values went up.”

In Leelanau Township, however, that was the exception to the rule. Overall, Leelanau Township saw the largest dip in property values, nearly 13 percent, between 2008 and 2009.

“We had a lot of very highly valued waterfront properties in this township,” Dalzell said. “And I think the value of some of those properties just fell farther because they had farther to fall.”

At the other end of the county, the only township to see an increase in residential property values was Empire Township where values increased some 7.65 percent overall.

Empire Township supervisor Bill Bolton said that last year a number of very expensive waterfront properties on Big Glen Lake were sold at very high prices – and that’s what accounts for almost all of the increase in Empire Township. Bolton’s analysis was corroborated by Spencer during her briefing to the county board last week.

Spencer explained that the “Equalization Study” she presented last week is submitted annually to the State Tax Commission at the end of each calendar year. She said she wanted to give the board time to digest the property value figures prior to April when she presents the annual Equalization Report.

That report will show how the true cash values outlined in the study presented last week have affected the taxable values for 2010 – and how much less in taxes the county and other units of government can expect to receive in 2011 after tax bills go out later in the year.