Unearthing Property Tax Scandals

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Unearthing Property Tax Scandals

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Presentations text content in Unearthing Property Tax Scandals


Unearthing Property Tax Scandals

By: Matt Clark, Newsdaymatt.clark@newsday.com@MattTheJourno


Property Taxes Matter


How it works…

Assessor determines value of property, and lists it on a tentative

assessment roll

Property owners

challenge assessments

they believe are inaccurate, resulting in changes to the final

assessment roll

or if not resolved quickly, a

tax refund

Assessors also determine who receives property tax exemptions that reduce taxes for nonprofits, the elderly, veterans, clergy, homesteaders and others

Governments set their budgets, including the size of their

property tax levies

, which ultimately determine

tax rates

— the levy divided by value of all property

Property owners are billed and those who don’t pay risk having a

tax lien

attached to their



How it works…

ABC School District wants to raise $10,000 in property taxes. This is called a levy.The county assessor assesses the three homes in the district at a total of $600,000. This is the tax base and is recorded on an assessment roll.$100,000 $200,000 $300,000 = $600,000


How it works…

$100,000 x 1.7% = $1,666.67$200,000 x 1.7% = $3,333.33$300,000 x 1.7% = $5,000.00Total taxes: $10,000

Tax bills are calculated by multiplying the

tax rate

by each home’s assessment.


When the levy breaks…

Old: $100,000 x 1.7% = $1,666.67New: $100,000 x 2.0% = $2,000.00Old: $200,000 x 1.7% = $3,333.33New: $200,000 x 2.0% = $4,000.00Old: $300,000 x 1.7% = $5,000.00New: $200,000 x 2.0% = $4,000.00Total (old and new): $10,000

Bad assessments make property taxes less fair


When the levy breaks…

Exemptions lower an assessment before the tax rate is applied, resulting in a taxable assessment.$300,000 x 1.7% = $5,000.00-$100,000 clergy exemption$200,000 x 2.0% = $4,000.00

Bad exemptions are just as unfair


Records you may need…

Assessment roll (should have exemptions)

Exemption manuals

State reports on assessment accuracy

Sales and deeds (arms-length?)

Inventory data (how many bedrooms, etc.)

Assessment challenges

Tax bills

Tax sales/liens/scofflaws

Tax refunds

U.S. Census Bureau data


Assessments are never perfect…

No three appraisers are likely to agree on a single valueExperts recognize a range of values, varying by up to 10 percent, to be accurate

Sales are used to establish assessments, and can be used to check them

Lots of sales can be used as a sample of the entire assessment roll’s accuracy in an analysis known as a




Arms-length sales are key to testing assessment accuracy…

Check an assessment’s accuracy by comparing it to recent sales of that property or similar, nearby (same taxing districts) properties

Sales data is not public in some states, which means you may need to rely on appraisals, list prices or experts’ opinions

What do the ratio studies of the assessor or the state’s property tax office show?


Ratio studies…


International Association of Assessing Officers is a valuable resource, publishes standards including for ratio studies

Coefficient of Dispersion

– Measures average error of assessments, should range up to 10.0 or 15.0 depending upon area

Price-related Differential

– Measures




and should be

between 0.98 and 1.03.

Coefficient of Price-Related Bias

– More modern measure of


/progressivity. Values within plus or minus 5 percent are acceptable, but if they reach plus or minus 10 percent they are unacceptable



Fractional assessing

, taxing only a portion of a property’s market value — even just 0.25%

$300,000 appraisal X


assessment ratio = $225,000 assessment

$300,000 appraisal X


assessment ratio =

$750 assessment

Focus on the full market value determined by your assessor before they apply the assessment ratio

If you find a $300,000 house


at $150,000,

check to see if

other homes are similarly


In many areas there are also

property classes

like residential, commercial, etc. each with their own assessment ratios and tax rates — yeah, it’s complicated


Case Study

Assessment challenges are often accused of eroding assessment accuracy and fairnessChallenges are often heard by a board of appointed citizens, may have political tiesBoard decisions can be appealed in courtStory 1: http://bit.ly/2k3gZAwStory 2: http://bit.ly/2kBIDI4

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