Municipal Assessment Values vs. Sales Data A means of determining equity in the property tax system Karl Green Department of Community Development
Why study assessed values? Not often well understood or discussed Tax bills are confusing Increases of property values on tax bills cause ill-ease By studying assessed values, we understand how well our community is distributing the tax burden equitably
Local municipality is the incorporated City or Village; or the unincorporated town government
The Average Assessment Ratio shows the average rate the municipality is assessed at when compared to the municipality s Fair Market Value
As the average assessment ratio lowers - there is greater potential for tax payer inequities? 1. True 2. False
True or False: If my assessed property value goes up my taxes will go up 1. True 2. False 3. Depends
What causes your portion of property tax to increase? Increased tax levy, with no changes to individual or municipal assessed values. Increased individual assessed values while municipal assessed values: Reduced Stayed the same Increase at a lower rate than your individual increase
Your property tax is determined by Indiv. Prop. Assessed Value x Municipal Mill Rate Municipal Mill Rate = Total Tax Levy Total Municipal Assessed Value Indiv. Prop. Assessed Value x Total Tax Levy Total Municipal Assessed Value
Therefore If Indiv. Prop. Assessed Value x Total Tax Levy Total Municipal Assessed Value If the assessment roll is maintained regularly & every residence is assessed regularly Then the individual property tax rates will be most equitable
But what does keeping our assessments accurate really do? Maintains fairness Like it or not, our local taxes are funded by the value of our property. If we are inaccurate with our assessments then there is potential for inequity among tax payers i.e. If someone is under paying, someone else is over paying
What is the price our municipality is willing to pay to ensure everyone is paying an accurate amount for their property? Cost of municipal assessment vs. impact of inequity
$ of Assessment Impact of inequity
So - Why am I studying assessed values? To determine if any inequity may be present in the system! To understand how much difference exists (range between accuracy of assessments in municipality)
The Study: Where do we get our data? Register of Deeds office records all deed transfers in La Crosse County Sorted by municipality Department of Zoning, Planning & Land Information Tax assessment for each parcel for every year
How did we get our data? It was relatively easy to acquire IT Department has ability to create code to query various data sets. Worked with IT to combine two sets of data: All deeds have a tax parcel All tax parcels have annual assessments for each tax parcel Compared by individual municipality
What is an arms-length sale? 1. A sale between two people for a residential property 2. A sale between a willing buyer and a willing seller in which the property has been adequately exposed to the real estate market 3. A sale where you stand an arms length from the buyer
However, We needed to remove non-arm s length sales from the data Arms length sales occur between a willing buyer and a willing seller, and should illustrate market conditions A sale is not considered an arm s length sale if affected by: Relationship between buyer and seller External condition requiring sale Job position change Divorce Foreclosure Insufficient market exposure» Gift» Family inheritance» Land sold to exempt organization or Government
Also keep in mind We are looking mainly at residential properties So of the total property transfers how many were residential homes? This question is hard to answer Not all property sales/deed transfers are recorded like an arm s length residential sale Quit Claim Deed Trustee s Deed Life Estate Transfer Marriage/Divorce
We need to compare: Arms length homes sales in municipality to Total existing homes in municipality As we remove non-arms length data from the data pool we need to be sure we have a large enough sample group to ensure adequate representation So does the number of arms length sales we see in each year compare with previous and future years? Short answer: Yes! Homes sold Total Homes
On my graphs I show total annual sales as a percentage of total homes
The main calculation Sales Price/Assessed value For example: Sales price is $105,000 Assessed value is $100,000 The sales to assessment ratio is 1.05 or the sale price was 5% higher than the assessed value Any % greater than 1 means the sale price is greater than the assessed value
Ex: Town of Holland arms length sales in 2004 Any value >1 means sales price was higher than the assessed price
Explaining the graph The frequency represents the number of sales
Explaining the graph The Bin indicates the % over /or under the assessed price 1.5 means sale price was 50% higher than assessed price
Ok now what! Do we look at each individual municipality for each individual year? Can we determine the degree of a problem?
Your assessor is attempting to hit a small target The small target is the.. Bulls-eye or Market sale price, The assessor s dart (the assessed value) should get close to the bulls-eye (the market sale price)
What does the assessment ratio represent? A) The ratio of total assessed value to total equalized value in a municipality B) The number of properties within a municipality that have running water C) The percent of properties that are assessed at the equalized value
Case Example Town of White House has an assessment ratio of 75% The town has two property owners: Property owner A is assessed at 90% value Property owner B is assessed at 60% value The inequity comes from the difference between individual assessment ratios Although low municipal avg. assessment ratios allow for these errors they are not the cause The cause stems from an out of date assessment roll The assessment roll does not reflect each individual property s as accurately as cost allows As cost allows is up to each individual municipality
Town of Onalaska- 1998
Town of Onalaska- 1999
Town of Onalaska- 2000
Town of Onalaska- 2001
Town of Onalaska 2002
Town of Onalaska- 2003
Town of Onalaska- 2004
Town of Onalaska- 2005
Town of Onalaska- 2006
When looking at these values need to remember If somebody is underpaying somebody else is overpaying. If large variations in the assessed value to sales value is occurring the property assessment roll may not be updated If assessors aren t adequately updating the property assessment roll - increased potential for property tax inequity among town property owners With assessors we get what we pay for. Most assessors probably wouldn t care if you agree to pay them more to maintain better records Do our town contracts or RFP s w/ assessors allow enough time/cost for maintaining an equitable property tax assessment book? If there is something broke with the system, who should fix it?
True or False: If my assessed property value goes up my taxes will go up 1. True 2. False 3. Depends