Assessment Year 2016 Assessment Valuations / Mass Appraisal Summary Report

Assessment Year 2016 Assessment Valuations / Mass Appraisal Summary Report Overview Following up on last year s work, additional work was done cleaning up the sales data. The land valuation model was further refined. As land is the underlying component that is included in virtually every sale the land model was reviewed and calibrated first. In calibrating the land we looked at site values, then acreage rates and then frontage rates. After the land model was calibrated, building (improvement) values were analyzed in light of the new land values and refinements were made to reflect market value. Assessment Summary The process of arriving at assessed values involves the specification and calibration of a market model that is then applied to properties based on property characteristic data in our records. Any opinion of value, even if it is just off the top of one s head is based on a model. Whether it is a property owner describing what he thinks his home is worth, or a neighbor s opinion, or a Realtor s opinion or an appraiser s opinion, all opinions of value are based on a model. Your model might include (or be influenced by) your preferences such as the paint color, the style, where the building sits on the property, the property location, maybe even childhood memories and other factors. We strive very hard to have our model reflect the market as closely as possible and to take personal preferences out of the equation as much as possible. In setting assessed values, which are then used for calculating the distribution of the property taxes as set by the budgets of the taxing districts and voter approved levies, there are constitutional provisions, state statutes, state rules and appraisal principles that must be followed. A constitutional mandate and one of the core principles is that assessed values be set in a manner that is uniform; that is, that they be fair and equitable. This means that we apply the valuation model uniformly and that we strive to have all classes of property assessed at the same market level. Anything that treats one property differently than the others risks creating constitution violating inequities. That is why in the appeal process the presumption of correctness lies with the Assessor and the assessed values, in order to maintain equity in taxation. AY 2016 Assessment Valuations Report 11/2/2016 9:19 AM Page 1 of 12

We are committed to answering taxpayer questions as best we can and we will take into consideration any information regarding their property that a taxpayer can bring to light. We will apply that information in an equitable manner within the established market model. Here are some of the factors that we see operating in the market and/or property characteristics that influence value: Waterfront View Topography Privacy Acreage Size Quality and/or Utility of the Land Appraisal Overview As reviewed above, every opinion of value is based on a model. For generating assessed values for the administration of property taxes you also need a system or methodology of applying your model. The core or basis for assessed values must be firmly based on appraisal principles. Generally those principles are then applied in one of two methods, either an individual appraisal or a mass appraisal system. Both appraisal methods utilize the same appraisal principles, they just utilize different work flows. If both individual and mass appraisal techniques are utilized it is imperative that they be calibrated in a manner that insures uniformity and equity of values. Generally, most assessed values are arrived at utilizing a mass appraisal system and methodology. Alongside the mass appraisal system there are sometimes a few unique properties that require an individual appraisal approach. Here we will refer to those properties as unique properties. It is imperative to understand that there is a significant difference between unique properties, outliers and disgruntled taxpayers. Unique properties have characteristics that are so unique and significant that the mass appraisal system cannot accurately arrive at a value for them. These circumstances are rare. Properties may have unique aspects while still being able to be valued within the mass appraisal system. There are various methods to handle these unique conditions including applying a cost-to-cure, incorporating a unique adjustment within that property record and other methods depending on your CAMA (computer assisted mass appraisal) system s capabilities. Outliers relate to sales. There always are sales transactions that have prices that are lower or higher than the norm. They are valid sales but they are not indicative of market value. They are an outlier. Neither of the above should be confused with a disgruntled taxpayer who just wants his property treated differently or valued by a different market model or different opinion of market value. A key constitutional component of assessed values is the aspect of uniformity. Treating an individual property differently creates inequities in taxation. Rarely are claims such as my property isn t buildable or it is worthless land true. As an example one tract of land that had reduced taxes for years because it was worthless and not buildable now has a subdivision of 8 lots on a portion of it, with room for more. In almost all cases a correct valuation AY 2016 Assessment Valuations Report 11/2/2016 9:19 AM Page 2 of 12

can be achieved by applying the correct grading and rating of attributes within the valuation model along with applying appropriate adjustments. Sales Data Primary sales data utilized for this year s analysis included: Sales from 2014 and 2015. For some analysis the data set was expanded back to 5 years due to low sample numbers. For the two years of 2014 and 2015 there were: 524 transactions Of which 388 were transfers 130 were considered non-market 76 were considered secondary market And 182 were considered to be market sales Of the market sales a rough breakdown would be: 44 land sales 102 residential property sales 27 manufactured home sales (both in parks and on private land) 6 commercial property sales 3 other sales (boat house, houseboat, limited use / recreational property, etc.) Note that while non-market and secondary market transactions are transfers of ownership they do not meet the definition of a market sale and are not representative of market values. They generally should not be used in any analysis and when they are used they require extreme scrutiny and appropriate adjustments to the sales price. Note that data cleanup is a continual process so these figures are subject to change. Market Summary Indications are that market value or prices continued to increase through 2015. Here is a summary of residential sales. Note that: o 2016 numbers are for the first 10 months only. o The volume of sales in 2015 is triple that of 2011. o The median sales price for 2015 is double the median price for 2011. AY 2016 Assessment Valuations Report 11/2/2016 9:19 AM Page 3 of 12

Residential Sales Summary Note: 2016 is a partial year, ie. for 10 months YTD Year of Sale Count Median Avg Sale Price 2010 27 $193,000 $199,981 2011 17 $115,000 $161,144 2012 32 $150,000 $164,470 2013 36 $158,500 $181,682 2014 40 $159,000 $175,324 2015 57 $219,000 $207,946 2016 YTD 54 $214,500 $244,478 $300,000 $250,000 $200,000 $150,000 $100,000 Avg Sale Price Median $50,000 $0 2010 2011 2012 2013 2014 2015 2016 YTD Count 60 50 57 54 40 30 27 32 36 40 Count 20 17 10 0 2010 2011 2012 2013 2014 2015 2016 YTD AY 2016 Assessment Valuations Report 11/2/2016 9:19 AM Page 4 of 12

Market and Assessment Analysis There are three approaches to value: the cost approach, the income approach and the market approach. When using the market approach the market sales, by law, are the basis for determination of market values and the setting of assessed values. If the cost approach is utilized the resulting value then needs to additionally be adjusted to market to meet the requirements for assessed value. The income approach, when utilized, has to be done in a manner that arrives at market value. Overall our assessed values still lag behind the current market. Assessed Values / Market Valuation / Model Calibration See Addedum A for a summary of final rates that were applied. Land model calibration adjustments were made to the land tables in PACS. o The first step would normally be the calibration of the Site Value as the core component, however, this year the first step was a preliminary adjustment to Site Value followed by a refinement to the steps in the acreage table to try to eliminate the issue of greater and lesser values around certain acreage break points or acreage sizes. o After the acreage tables were refined the Site Values were further adjusted as the core component. o Acreage rates were calibrated next utilizing the refined tables with the new steps. Based on the analysis refinements were made to the acreage rates. o Frontage types were reviewed and rates adjusted. In general, in rebalancing the land components more emphasis was placed on the site value and therefore front foot rates for waterfront generally went down. This is not an indication of a decreasing market value but rather is simply indicative of the rebalancing of the land components. In summary: All frontage rates went down. This correlates to the refinement of the balance between the site, site development, acreage and frontage components of land value. o Once the land value components were calibrated we focused on the calibration for Market Area. Currently we are still utilizing Inspection Areas for the Market Areas until we can transition that portion of the model. Within this limitation we did create a limited ability to separate Area 2 between the Elochoman and Skamokawa areas this year. Once the land model was calibrated assessed values were reanalyzed to determine the calibration of the building or improvement portion. As a result we calibrated the Valuation Estimator for new values as well as the trending or statistical update factors. Assessed values of Manufactured Homes were analyzed separately. As a result of the analysis the model was calibrated. Commercial Properties o Analysis of assessed values for commercial properties indicated no change for AY2016 AY 2016 Assessment Valuations Report 11/2/2016 9:19 AM Page 5 of 12

Results and Measurements of Mass Appraisal Model and Assessed Values The changes to the mass appraisal valuation model and the assessed values resulted in: o An overall assessed value ratio of 0.93 for the mean and 0.92 for the median. o We made further improvements in the core measurements. COD: Last Year 20.1119 This Year 16.3330 COV: Last Year 25.1879 This Year 20.7126 PRD: Last Year 1.0109 This Year 1.0111 (No Change) o Further improvement in the distribution of values between the land and building portions was achieved. o Note that all of the statistical measurements, graphs, and tabular (numeric) data indicate that our assessed values are very good in regards to uniformity of values, level of assessment, range of ratios, etc. This was accomplished through lots of hard work in spite of the complexities of the market and the limited number of sales within the county. o Following are further details on the results of our analysis and the new assessed values. This graph shows the final overall results. Note how close the mean and median are. The very acceptable overall range of ratios. The indications of good uniformity as shown through the statistical measures. AY 2016 Assessment Valuations Report 11/2/2016 9:19 AM Page 6 of 12

0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00 1.10 1.20 1.30 1.40 1.50 1.60 1.70 1.80 1.90 2.00 WC AY2016 at 20161013- Countywide- All- 2 Yr- Trend V2, NOL, Possible Final V1 Summary Report IAAO Standards for COD Statistics SFR 15.0 or less Current Proposed SFR-newer/homog 10.0 or less 170 170 Count (Number of Records with Ratio) Income Properties 20.0 or less 0.4231 0.4231 Minimum Ratio Income-Urban area 15.0 or less 1.4917 1.4917 Maximum Ratio Vacant Land 20.0 or less 1.0687 1.0687 Range 0.9273 0.9273 Mean (This is the average ratio for your sample.) 0.9204 0.9204 Median (This is the mid-point value for your sample. Preferred measure of central tendency.) 0.9171 0.9171 Weighted Mean 6.2340 6.2340 Sum of the Square of Deviations 0.1503 0.1503 AAD 0.1921 0.1921 Standard Deviation Coefficients (0=Normal Distribution) 16.3330 16.3330 COD (Good indicator of confidence level.) Kurtosis 0.2634 20.7126 20.7126 COV Skewness 0.3541 1.0111 1.0111 PRD- Price-Related or Factor Differential Alt.Cyhelsky's Skew 0.0353 (PRD s/b between 0.98 & 1.03, IAAO) Alt.Pearson's Skew 0.1080 (PRD over 1=Regressive) Trending Factors Normal / Skewed Distribution Evaluation 0.95 Target Level -0.0069 Differential Mean to Median 1.0245 Factor on Mean 88 Number of data points below the mean. 1.0322 Factor on Median 82 Number of data points above the mean. 1.0359 Factor on Weighted Mean *Note- # below/above works on data sets up to 5,000 pts. 2.0000 1.9000 1.8000 1.7000 1.6000 1.5000 1.4000 1.3000 1.2000 1.1000 1.0000 0.9000 0.8000 0.7000 0.6000 0.5000 0.4000 0.3000 0.2000 0.1000 0.0000 Summary 1.6000 1.4000 1.2000 1.0000 0.8000 0.6000 0.4000 0.2000 0.0000 Ratios by Sale Date 25 Histogram of Ratio Frequency 20 15 10 5 0 AY 2016 Assessment Valuations Report 11/2/2016 9:19 AM Page 7 of 12

Closing Comments Note that the market remains a scattered market. o This is typical when you have steep or sharp increases or decreases in a market. The general perception of value becomes less defined and less consistent. When you have a market that experiences a steep increase followed by a steep decrease followed by an increase it multiplies that effect. o This can be seen in the wide range of sales prices for similar properties. By the definition of market value that assessed values must be set at, we calibrate the valuation models to generate values that fall into the core of that range. o Part of this can be attributed to the disparate position of sellers in relation to what they paid for the property. For example you have many sellers who purchased their property many years ago at a much lower price as well as sellers who purchased a few years ago at the last height of the market, paying much more. o This means that by definition you will always find individual sales that are higher or lower than assessed value. o The constitution requires uniformity in assessed values. This is achieved through the mass appraisal process whereas relying on individual appraisals can lead to a lack of uniformity, especially if some are based on a few high or low sales. Our final calibration analysis review ratio study indicates that, as a result of the valuation model changes and market calibrations, assessed values are at 93% of market value. AY 2016 Assessment Valuations Report 11/2/2016 9:19 AM Page 8 of 12

Assessment Year 2016 Assessment Valuations / Mass Appraisal Summary Report Addendum A Assessment Year 2016 Valuation Model Overview This addendum provides an overview of the rates applied within the Assessment Year 2016 valuation model. Please note that because the calibration of the rates included a rebalancing of the distributions between site, acreage, waterfront and building values you cannot look at just one part (an acreage rate for instance) and say that your value went up by that certain percent. Summary The basic components to the valuation model are as follows: Site Value o This is the core or base value of having a site. o The site value also covers up to the first acre of land. o The site values contributing factors include site quality, land utility, topography, view, privacy, shape and location. Acreage o This portion applies to land over an acre. o The contributing factors on the rate are the amount of acreage, the quality of the acreage and the location of the property. Frontage (waterfront) o This portion applies to waterfront. o The contributing factors are number of front feet, type of frontage and location. Buildings o There are a number of categories of buildings: Primary Building Commercial Primary Building Manufactured Home Primary Building Single Family Residence Primary Building High End Residence Outbuildings Which include cabins, detached garages and carports, shops, pole buildings, barns, sheds, docks and piers and others. AY 2016 Assessment Valuations Report 11/2/2016 9:19 AM Page 9 of 12

Summary of Rates Land Valuation Rates AY2016 Area 1- Area 1- Area 1- Lot/Site Value - Base Base Town Suburban Rural Low 1000 11000 6000 1000 Base 10000 20000 15000 10000 Moderate (Average) 20000 30000 25000 20000 Good 30000 40000 35000 30000 Very Good 50000 60000 55000 50000 Excellent 65000 75000 70000 65000 Outstanding 90000 100000 95000 90000 Area 1- Area 1- Area 1- Lot/Site Value - Market Area Factored Town Suburban Rural Area 2 Area 2E Area 2S Area 3 Area 4 Low 11550 6300 1050 1000 800 1050 Base 21000 15750 10500 10000 8000 10500 Moderate (Average) 31500 26250 21000 20000 16000 21000 Good 42000 36750 31500 30000 24000 31500 Very Good 63000 57750 52500 50000 40000 52500 Excellent 78750 73500 68250 65000 52000 68250 Outstanding 105000 99750 94500 90000 72000 94500 Acreage Minimal Base Area 1 Area 2 Area 2E Area 2S Area 3 Area 4 0.0001 2500 2625 2500 2500 2500 2000 2625 1.00 2500 2625 2500 2500 2500 2000 2625 2.50 2375 2493.75 2375 2375 2375 1900 2493.75 5.00 2250 2362.5 2250 2250 2250 1800 2362.5 7.50 2125 2231.25 2125 2125 2125 1700 2231.25 10.00 2050 2152.5 2050 2050 2050 1640 2152.5 12.50 2000 2100 2000 2000 2000 1600 2100 15.00 2000 2100 2000 2000 2000 1600 2100 17.50 1500 1575 1500 1500 1500 1200 1575 20.00 1000 1050 1000 1000 1000 800 1050 30.00 900 945 900 900 900 720 945 40.00 750 787.5 750 750 750 600 787.5 50.00 600 630 600 600 600 480 630 100.00 450 472.5 450 450 450 360 472.5 200.00 375 393.75 375 375 375 300 393.75 400.00 225 236.25 225 225 225 180 236.25 800.00 130 136.5 130 130 130 104 136.5 1,600.00 75 78.75 75 75 75 60 78.75 1,000,000,000.00 75 78.75 75 75 75 60 78.75 AY 2016 Assessment Valuations Report 11/2/2016 9:19 AM Page 10 of 12

Acreage Moderate (Average) Base Area 1 Area 2 Area 2E Area 2S Area 3 Area 4 0.0001 5000 5250 5000 5000 5000 4000 5250 1.00 5000 5250 5000 5000 5000 4000 5250 2.50 4750 4987.5 4750 4750 4750 3800 4987.5 5.00 4500 4725 4500 4500 4500 3600 4725 7.50 4250 4462.5 4250 4250 4250 3400 4462.5 10.00 4100 4305 4100 4100 4100 3280 4305 12.50 4000 4200 4000 4000 4000 3200 4200 15.00 4000 4200 4000 4000 4000 3200 4200 17.50 3000 3150 3000 3000 3000 2400 3150 20.00 2100 2205 2100 2100 2100 1680 2205 30.00 1800 1890 1800 1800 1800 1440 1890 40.00 1500 1575 1500 1500 1500 1200 1575 50.00 1200 1260 1200 1200 1200 960 1260 100.00 900 945 900 900 900 720 945 200.00 750 787.5 750 750 750 600 787.5 400.00 450 472.5 450 450 450 360 472.5 800.00 260 273 260 260 260 208 273 1,600.00 150 157.5 150 150 150 120 157.5 1,000,000,000.00 150 157.5 150 150 150 120 157.5 Acreage Excellent Base Area 1 Area 2 Area 2E Area 2S Area 3 Area 4 0.0001 10000 10500 10000 10000 10000 8000 10500 1.00 10000 10500 10000 10000 10000 8000 10500 2.50 9500 9975 9500 9500 9500 7600 9975 5.00 9000 9450 9000 9000 9000 7200 9450 7.50 8500 8925 8500 8500 8500 6800 8925 10.00 8200 8610 8200 8200 8200 6560 8610 12.50 8000 8400 8000 8000 8000 6400 8400 15.00 8000 8400 8000 8000 8000 6400 8400 17.50 6000 6300 6000 6000 6000 4800 6300 20.00 4200 4410 4200 4200 4200 3360 4410 30.00 3600 3780 3600 3600 3600 2880 3780 40.00 3000 3150 3000 3000 3000 2400 3150 50.00 2400 2520 2400 2400 2400 1920 2520 100.00 1800 1890 1800 1800 1800 1440 1890 200.00 1500 1575 1500 1500 1500 1200 1575 400.00 900 945 900 900 900 720 945 800.00 525 551.25 525 525 525 420 551.25 1,600.00 300 315 300 300 300 240 315 1,000,000,000.00 300 315 300 300 300 240 315 AY 2016 Assessment Valuations Report 11/2/2016 9:19 AM Page 11 of 12

Waterfront Base Base Area 2 Area 2 RVR Area 2 SL Area 3 Area 4 Area 4 SL Area 4 SL OD Area 4 SL SL Marina Minimal 64.00 12.50 15.00 64.00 120.00 22.50 76.50 Moderate (Average) 85.00 25.00 22.50 85.00 235.00 45.00 152.00 Good 67.50 112.50 Excellent 135.00 50.00 112.50 135.00 300.00 90.00 216.00 Special Tidelands 4.50 River 10.00 Waterfront Factored Area 1 Area 2 Area 2 RVR Area 2 SL Area 3 Area 4 Area 4 SL Area 4 SL OD Area 4 SL SL Marina Minimal 67.20 12.50 15.00 51.20 126.00 23.63 80.33 Moderate (Average) 89.25 25.00 22.50 68.00 246.75 47.25 159.60 Good 70.88 118.13 Excellent 141.75 50.00 112.50 108.00 315.00 94.50 226.80 Special Tidelands 4.73 River 8.00 Market Area (Neighborhood) Area 1 Area 2 Area 2E Area 2S Area 3 Area 4 Land Factor 1.05 1.00 1.00 1.00 0.80 1.05 Improvement Factor * Residential 1.4553 1.2825 1.386 1.6008 1.21 Commercial 1.2 1.1 1.1 1.05 1 Land With Buildings 1 1 1 1 1 Manufactured Homes 1.21 1.21 1.21 1.21 1.21 MH on Leased Land 0.85 0.85 0.85 0.85 0.85 Chevron Park 0.85 Indian Village Park 0.85 Timber 1.2 1.1 1 1.05 * Improvement Factor applied as trending to valuations generated in different years by inspection area. AY 2016 Assessment Valuations Report 11/2/2016 9:19 AM Page 12 of 12