Overall property values in Spokane County, as assessed by the Spokane County Assessor's Office, declined last year for the first time since 1983. Property owners might not see a drop in taxes as a result, however, since the average property tax rate is up.

In this environment, some people involved with the assessments are expecting a record number of property owners to appeal their valuations for the fourth consecutive year.

"I'm hoping that number of appeals is going to be lower," says Spokane County Assessor Vicki Horton. "But even though valuations are going to be lower, taxes are going to increase."

The county's total assessed value in 2010 was $38.1 billion, down 1.8 percent from $38.8 billion in 2009, assessor's records show. Assessments for property taxes due this year are based on last year's valuations, and tax notices for 2011 were to be mailed out this week, Horton says.

While values are down, the average property tax rate in Spokane County this year is up more than $1 per $1,000 valuation, the Assessor's Office says. Due partly to a number of approved school levies, the average property tax rate in Spokane County this year will be $12.94 per $1,000 of valuation, Horton says. That's up from an average county property tax levy rate of $11.86 per $1,000 valuation in 2010, assessor records show. Under the 2011 levy rate, a typical home valued at $165,000 will have a 2011 tax assessment of about $2,135 this year, about $180 more than the tax bill for a $165,000 home a year earlier.

With two months left to submit appeal petitions on 2010 valuations, protests likely will approach or top last year's record of 3,008 appeals, which was 44 percent higher than the 2,085 petitions filed contesting year-earlier valuations, says Joe Mann, chairman of the Spokane County Board of Equalization.

The six-member Board of Equalization is responsible for assuring valuations reflect fair value, Mann says. Appeals here escalated sharply in 2008 as financial and real estate crises erupted around the country.

"Some appeals we received included newspaper articles about those kinds of things," he says.

Property owners were expecting to see their property values drop and some were shocked when their assessed values went up, Mann says.

"Spokane County was slow to enter the real estate decline," he says.

The Board of Equalization is appointed by the Spokane County Commissioners, although it operates under supervision of the Washington state Department of Revenue. For an appeal to be successful, the taxpayer has to provide convincing evidence that the county's valuation is inaccurate, because the assessor enjoys the presumption of correctness, Mann says.

"In most years, we can count the times we found in favor of the property owner on less than two hands," he says.

In 2009 and 2010, however, the Board of Equalization ruled in favor of the property owners more often than it had in earlier years, Mann says. Partly due to staffing cutbacks and lower morale in the Assessor's Office, revaluations often didn't include enough data to back up the valuations being appealed, he says, adding that he thought the assessor could use a half-dozen more appraisers.

Horton, a longtime county appraiser, took over the assessor's job in January after defeating her former boss, Ralph Baker, in the November election. She says she's reorganizing the office, has hired two appraisers to fill vacancies, and is trying to fill a third such position.

"That's all I can do financially for now," she says. "I hope to get at least two more appraisers here, but, for now, we're going to try to work with what we have."

Connie Kline, a levy specialist with Spokane County, says most taxing districts have authority to raise their levy rates to compensate for fluctuations in property values.

"Taxing districts submit levy requests for how much money they want to raise," she says. "When assessments drop, levy rates will increase to get that same tax dollar."

An exception would be if a taxing district already has reached a statutory limit on its tax rate, such as Spokane County Fire District 1, which includes the cities of Spokane Valley and Liberty Lake.

"The fire district has been at its limit for a couple of years," Kline says.

One taxing district in which the levy rate dropped was Spokane County Fire District 9, which covers a broad area north of Spokane and Spokane Valley. That district recently paid off a bond, Kline says.

Joseph Hollenback, an appraiser in the Assessor's Office, says the county currently is doing appraisals for the 2012 tax year, and he's seeing some signs of stabilization in value, but not a quick recovery.

"I see values coming down, but not at the level it did last year," Hollenback says. "I have some concerns that it's going to be a long drag to get out of this."

He says foreclosed properties, which might sell at reduced prices in forced sales, aren't supposed to factor into determining fair-market property values.

"Market value is supposed to be based on arm's-length transactions, which would involve a ready buyer and a seller not under duress," Hollenback says.

If foreclosure and other stressed-property sales become more prominent, however, the subject deserves analysis to determine whether a certain number of such sales should be considered part of the market, Hollenback says.

Mann, who also is president of the Spokane Association of Realtors and managing broker at Windermere/Spokane Valley Inc., says about 23 percent of real estate sales in Spokane County in 2010 involved distressed properties.

"You can't ignore that," he says. "It's a reality of the marketplace."

Mann says he's worried that the rate of distressed property sales might increase this year.

"We have a number of concerns about people who are late on payments by less than 90 days," he says. "We don't have a way to know what that number might be. It could drive values down further."

Hollenback also says he's anticipating the number of appeals in 2011 will be similar in number to 2010.

"We're dealing with less sales information to formulate opinions," he says.

Hollenback says values of some of the higher-priced residential real estate are continuing to fall.

"The high-end market segment is much shallower than some of the others," he says. "We've seen some pullbacks in the price range of $400,000 to $500,000."

He says valuations in other segments of the residential market and the commercial market as a whole don't appear to be dropping as much.