Tuesday, December 21, 2010

Poughkeepsie Journal Misstates Property Value Data

The Poughkeepsie Journal has been remarkably consistent in its property tax analysis mistakes.  It keeps making the same mistake, but in different forms.  The mistake is to focus on assessed values when market values are the appropriate parameter.  For towns assessed at full market value, it makes no difference, because assessed values are market values.  But for towns not assessed at full market value, using assessed values can give garbage results.  On the good side, the Journal is reporting about important trends in property taxes, even if it gets the numbers wrong.

A front-page feature story in today's Poughkeepsie Journal by reporter John Davis is headlined, “Assessments lose $1.8 billion”.  The subtitle reads, “18 of 22 Dutchess County towns and cities have taxable real estate decrease from 2009 to 2010”.  (Headlines in print edition.)  As we will see, the $1.8 billion and the 18 towns are incorrect.  The story's first two sentences restate these numbers, and add two important facts:
  1. Tax rates are going up.
  2. Tax bills may not be going up.
I have to say, it's excellent that the Poughkeepsie Journal is calling attention to some of the important trends in property taxes in Dutchess County:  Property values down — check; tax rates up — check; tax bills flat — check.  Unfortunately, the story is marred by many misleading and incorrect numbers, including those in the headlines.  All the mistakes relate to the 7 Dutchess County towns not assessed at full market value. Most revealing of the Poughkeepsie Journal's misunderstanding about property values is the following story excerpt:
A reduction in taxable assessed values is most noticeable in the towns and cities that are committed to keeping them aligned with the current market values — qualifying them for a 100 percent equalization rate by the state. They range from a drop of 12.7 percent in the overall assessed values in the Town of Clinton to a 1.12 percent reduction in Amenia.  The towns that are not assessed at full market value will see either a slight increase or decline in their overall taxable values.  [emphasis added to original]
The reason a reduction in taxable assessed value is “noticeable” in towns assessed at full market value is that changes in assessed values are changes in market value.  That's the whole point of maintaining assessments at full market value.  It is market value (also known as “home value”, “full value”, “full market value”, and “property value”) that is meaningful in the real world — not assessed value.  The only people who need care about assessed value are assessors and other property tax geeks.

All Towns Have Dropped in Value

For towns not assessed at full market value, assessed values typically don't change year-to-year.  That's the whole point of not assessing at full market value!  For towns not assessed at full market value, the change in market values is reflected in the change in the equalization rate.   That's why it's not meaningful to compare assessed values.  To properly compare such a town's taxable value in 2009 and 2010, you must first convert the assessed values to market values by dividing them by the equalization rate for each year.  Once you do that, you find that in place of a “slight increase or decline” all towns had a decline, and for all but one town, the decline was double-digit.  The following table compares the Poughkeepsie Journal's numbers and those I obtained from the Dutchess County Real Property Tax Service Agency (RPTSA):


The Journal's mistake results in wildly optimistic market value increases for these towns.

Dutchess County's Property Values Are Down $2.7 Billion

Just as you can't compare assessed values across years for towns not assessed at full market value, you also can't just add together a bunch of assessed values of different towns not assessed at full market value.  It would be like adding together lengths measured in yards, meters, fathoms, rods, and cubits. You can't do that until you've converted them to a common unit of measure.  That's why the headline “Assessments lose $1.8 billion” is incorrect.  First of all, it makes no sense to talk about Dutchess County's “assessments” unless you mean that word as a loose term referring to market value.  Secondly, and more important, Dutchess County's market value declined $2.7 billion, not $1.8 billion.  Readers of my recent blog post Dutchess County 2011 Tax Rate Is Highest In Decade already know that Dutchess County's market value has declined 7.7 percent from last year (see table in that post).  That table also lets them calculate the $2.7 billion difference between Dutchess County's 2009 market value and its 2010 market value.  Once again, this data comes right from the RPTSA.

Poughkeepsie Journal's Record of Misunderstanding

It's been nearly a year since I wrote Poughkeepsie Journal's Incorrect Tax Rate Analysis.  That post outlined what is essentially the same misunderstanding as described above, but applied to tax rates, rather than to property values.  As I noted in that post, Poughkeepsie Journal management refused my request last year to speak with reporters, and it stood by its figures.  This year, the Journal has continued to publish a series of articles by different reporters, all with the same incorrect tax rate analysis.  My post last month describes four such stories.  So it's clear how today's story fits into the pattern.

I have two reasons to doubt that Poughkeepsie Journal reporters or management have vetted today's story or the previous ones with a third party knowledgeable about property tax matters:
  1. In my conversation nearly a year ago with Poughkeepsie Journal management, it became clear that management was dead sure they were right and I was wrong.  If you're dead sure, there's no reason to check things out with someone else, right?
  2. If they had consulted a knowledgeable third party, they presumably wouldn't keep making the same mistake.
I would like to think that a knowledgeable third party could be found just about anywhere.  I know I've found many.  On the other hand, I have to admit that I've also found many local officials — many more than I expected — who should know better, but who simply don't get it about property taxes.  On the third hand (yes, I have three hands), you can't go wrong talking with the good folks at Dutchess County RPTSA or the New York State Office of Real Property Tax Services.

Wednesday, December 15, 2010

Petito Elected Fairview Fire Commissioner

Local attorney Joseph Petito won reelection last evening as a commissioner in the Fairview Fire District. He received 58 out of 62 votes cast. (The other 4 votes went to various write-in candidates.) Petito began serving as commissioner last summer when he was appointed by Fairview's Board to fill out the term of Tom Ashline, who died on March 7, 2010.

This year's election was officially uncontested.  It also turned out to be uncontested in fact, unlike last year's “uncontested” election. Last year, 29 write-in votes — more than enough for victory in a normal election — went to Chairman of the Board John Anspach, but newcomer Bob Gephard won anyway because of a concerted effort to get out the vote.

Petito's reelection can be seen as completing the power shift, begun in 2008, from the old guard to the newcomers.  This year's election is the third in a row in which a newcomer has been elected to the board, thus establishing a solid majority over the old guard.  The lack of visible opposition to Petito may indicate an acceptance of newcomer Board Chairperson Jill Line by supporters of the old guard. 

Dutchess County 2011 Tax Rate Is Highest In Decade

In this second of two posts on property tax for Dutchess County government, I show how this tax has evolved over the last decade.  

In a previous post, I stated that market values in Dutchess County have doubled in a decade, but that the tax rate is about the same as a decade ago.  This does not mean that we've seen a steady increase in market value during the decade.  This also does not mean that the County's tax rate been constant during the decade.  In fact, as I show below, both of these assertions are false.  But why should we care about these details?  Isn't it enough to know where we stand now, and where we stood a decade ago?

I think not.  The trend in the past decade is not at all what one would expect from just looking at 2002 and 2011.  Therefore, the future cannot be extrapolated from just those two years of data. Unless you've just arrived here from Planet 10, you know that there was an economic meltdown two years ago.  Has this affected the County tax situation?  You betcha!  Let's see how.  Here's what's actually been happening to the Dutchess County government's property tax situation in the last decade:


I don't know about you, but looking at all these digits makes my eyes glaze over.  We can see better what's happening by charting each column.  The biggest part of the story is the trend in market value:
 

The above chart shows clearly that although market values have doubled from 2002 to 2011, they actually more-than-doubled from 2002 to 2008, and have dropped 15 percent in the last three years.  That's the economic meltdown right there.  Note that although real estate values began dropping in early 2008, the  effect is delayed from a tax viewpoint.  That's because the government figures market values a year and a half behind the property tax bill.  For example, your January 2011 tax bill is figured based on the market value of your property as of July 1, 2009.  The drop in market values since 2008 has actually been accelerating, as can be seen clearly from the following chart:


This decrease in the tax base is a major reason for the increase in the tax rate.  But there's another.  Since the tax base has been getting smaller, the cost of services from County government has been decreasing also, right?  Just kidding!  When does that ever happen?  Here's the trend in tax levy — the major source of income for Dutchess County government:


Notice that the tax levy has doubled in the past decade.  But unlike for market value, there is no dip in tax levy after 2008.  This fact is Bad News for the tax rate, as we'll see shortly.  Here's a closer look at how the tax levy has changed year-by-year:


The tax levy increase for 2011 isn't missing — it's zero!  The goal of zero tax levy increase for 2011 was proposed by County Executive William Steinhaus in his original budget message in October, and the County Legislature essentially concurred with this spending limit.  A year ago, Steinhaus also proposed a zero tax levy increase for 2010, but the legislature chose to increase the tax levy by 7 percent.  In both cases, Steinhaus and the legislature cynically focused on the change in the tax levy, rather than on the tax rate, which they knew (or at least Steinhaus knew) would tell a more sobering story.  And here is the story, which Steinhaus has gone out of his way to hide:


The tax rate is simply the tax levy divided by the taxable market value.  As you can see, the 2011 tax rate is the highest in 10 years, though admittedly by only a few cents.  Still, the trend of the last three years is ominous.  The tax rate increases can be seen more clearly in the following chart:


You did know that Dutchess County's tax rate is up 8.4 percent, right?  Although Steinhaus has made a major effort to hide this information, the Poughkeepsie Journal has been doing a good job to inform its readers of the 8.4 percent tax rate increase.  The Journal has reported this fact frequently this season, including in today's story, which announces the final budget outcome.  This is a big improvement for the Poughkeepsie Journal, compared with last year at this time.  As I've blogged here and here, Steinhaus was silent about the tax rate increase last year, and the Poughkeepsie Journal just went along with it.  Once again, a big improvement in reporting by the Poughkeepsie Journal.

So what does this all mean?  To start, the trend of the last three years is drastically different from what one would think looking just at 2002.  The county tax rate hit a low in 2008, and has been increasing at an average of more than 10 percent per year since then.  The 2011 tax rate is up 34 percent over that in 2008.  In other words, holding the tax levy constant, as Steinhaus has been proposing, isn't good enough to keep the tax rate from rising significantly.  That's because the economic meltdown has caused property values to fall dramatically in recent years.

The economic meltdown of 2008 is the worst economic event in the memory of most people alive today.  It doesn't just affect real estate values.  It affects us in 100 different ways.  The 8.4 percent increase in the Dutchess County property tax rate is just one more of these ways.

Acknowledgement:  Many thanks to the Dutchess County Real Property Tax Service Agency for providing most of the data used in this report.

Monday, December 13, 2010

Dutchess County Taxes in 2002 and 2011

In this first of two posts, I show how property taxes of Dutchess County government today (well, next month) compare with those of a decade ago.  Briefly, they're equally as steep as a decade ago, but the charges are twice as high because we're twice as wealthy.  In a subsequent post, I'll detail the path taken by Dutchess County property tax throughout the last decade.

In order to pay for the services it provides, Dutchess County government charges every taxable property in the county.  This charge appears on your January property tax bill, along with charges for other local governments (town, fire, etc.).  By New York State law, the county charge is a fraction of the current market value of your property, and is the same fraction for every taxable property in the county.  Every year, the fractional amount changes.  But every year, the market value of your property changes too.  So the amount you pay each year changes, because of changes in both the fractional amount set for that year and your market value for that year.

Fraction Is Tax Rate

Although the fraction charged could be expressed as a decimal value or as a percentage, it is traditionally measured as a tax rate in dollars per thousand dollars of market value.  For example the 2011 Dutchess County tax rate is $3.07 per thousand dollars of market value.  This is the same as the fraction 0.00307, or as 0.307 percent.  For a taxable property with market value of $100,000 for the 2011 tax year, the county tax is $3.07 x $100,000 / $1,000, or $307.  If you used the fraction or percent representation, you'd get the same result.  That's because $3.07 = 0.00307 x $1,000.

The Tax Rate Is What Matters

As I have argued elsewhere, the tax rate — not the amount of your tax — is the most meaningful measure of how steeply you're being taxed.  That's because the tax rate takes into account the fact that market values change.  Follow me here:  If your neighbor's property is worth $200,000, you'd expect her to pay twice as much tax as you at $100,000.  This is fair and reasonable because your neighbor is twice as wealthy as you, as measured by the market value of her property.  Now suppose your own property is worth $100,000 in 2002, but appreciates to $200,000 in 2011.  If nothing else changes, that is, if the tax rate is the same in 2011 as in 2002, then you'd expect to pay double the tax in 2011 as in 2002.  After all, you're twice as wealthy as you were then.

Market Appreciation Is Like Getting a Second  House

Think of it this way:  Suppose you owned a $100,000 house in 2002.  Somewhere along the way, somebody just gave you a second house of equal value.  For free.  No mortgage.  Now you own two $100,000 houses instead of just one.  Great deal, right?  Only problem is that you need to pay property taxes on both houses.  So your property taxes have doubled.  Of course, nobody actually gave you a second house; it's just that your current house is worth twice as much as before.  But you really are twice as wealthy, as you'd realize if you go to sell your $100,000 house and find that you can get $200,000 for it. 

Yes, I know, you might not be planning to sell, and you can't really afford the double taxes — the “free” house you were “given”.  Unfortunately, there's no way to decline your market appreciation.  And consider that you probably wouldn't “decline” to take the extra $100,000 you'd get for selling your house.

This Is Real

Folks, the above dynamic is not a hypothetical example.  It is pretty close to what's been happening.  Property values in Dutchess County have nearly doubled in the decade from 2002 to 2011.  And the tax rate in 2002 was $3.02, just a few pennies less than the 2011 tax rate of $3.07.  So the typical property owner in Dutchess County may be paying twice as much county tax as ten years ago.  But that's because the typical property owner is twice as wealthy, as measured by the market value of the property.

Well, this analysis is a little oversimplified.  It doesn't take into account the significant increase in Dutchess County market value caused by new development and property improvements.  So the typical property owner isn't quite twice as wealthy in 2011 as in 2002.  But close enough to establish the general idea.

What Has Been the Trend?

Since Dutchess County's market value for 2011 is double that of 2002, does that mean we've seen a steady increase in market value during the decade?  No, it does not.  Since Dutchess County's 2011 tax rate is about the same as in 2002, does that mean that the tax rate has been constant for the entire decade in between?  No, it does not. Both inferences are incorrect.  In a subsequent post, I'll show the trends in property tax for Dutchess County government in the last decade.

Wednesday, December 1, 2010

Why Should Property Taxes Fall When Market Values Do?

I was glad to receive the following thoughtful anonymous comment today on my post Town of Hyde Park Misunderstands Property Tax Rate Increases:
All of Mr. Rubin's charts and discussions are rather confusing and redundant. His point is that even if your tax bill stays the same from one year to the next, tax amount as a percentage of market value has increased since your property value has decreased. His gripe has nothing to do with budget methodology but instead is focused on the decline in market value of the property.

One's mortgage payment doesn't fall when the home price falls. One's heating bill doesn't fall when the home price falls. One's car payment doesn't fall when the home price falls. One's food price doesn't fall when the home price falls. Why exactly should property taxes be any different?

Using Mr. Rubin's rationale, property tax bills should have doubled from 2001 to 2009 simply because home prices doubled in that time period.

Municipalities have no control over the market value of property. They do have control over expenditures and assessments.
I welcome the above comment for a number of reasons:
  1. The commenter appears to understand and accept my argument.
  2. I agree with most of what the commenter says.
  3. His/her comment gives me a great opportunity to clarify some things.  Here goes:
“The Charts and Discussions Are Confusing”

Hmmm.  I did my best.  Please say more specifically what needs clarification.

The Charts and Discussions Are Redundant

I couldn't agree more!!!  I feel like I've been writing the same thing over and over, in numerous posts spanning more than a year.  It's only recently that a few people have shown that they understand what I'm saying.  Hopefully, I'll not need to keep doing this much longer.

Why Should Property Taxes Be Different From Mortgage, Heating Bill, etc.?

Great question! The question can be rephrased as, “Since mortgage payment, heating bill, car payment, etc. do not fall when the home price falls, why should property taxes be any different?”

Unlike other household expenses, property taxes are directly coupled to your current home price.  The coupling is through the tax rate.  The ratio of your property tax to your home price is essentially your tax rate in dollars per thousand dollars of market value.  The tax rate measures how steeply your property is taxed.  If your tax amount does not fall in proportion to the drop in your home price, then your tax rate goes up, and you are being taxed more steeply than before.  In other words, your wealth, as measured by the market value of your property, is being taxed at a higher rate than before.  This is bad because you're paying more tax, in proportion to your wealth, than before.  Also, if you sell your house, your house will be less attractive to a buyer than a similarly valued house in a jurisdiction with a lower tax rate.  Tax rate is also a measure of how steeply your municipality is charging taxpayers for its services.  Perhaps the worst thing about increasing tax rates when property values fall is that it is tempting for municipalities to maintain the higher tax rate even after property values rise again.  When this happens, your tax bill will increase in proportion to the increase in your property value at the same time that the municipality is (correctly) saying, “We're not increasing the tax rate.”

By Your Reasoning, Property Tax Bills Should Have Doubled From 2000 to 2009

That's right! Or almost right.  It's really 2008 when home prices stopped increasing, so let's go with that.  And there are some technical issues with fairly comparing taxes before 2001, so let's look at the interval 2001 to 2008:

Doubling of property tax bills is exactly what has happened in some municipalities from 2001 to 2008.  For example, my report, The Big Three Fire Districts of Dutchess County, shows that in the Arlington Fire District, the LaGrange Fire District, and the Fairview Fire District, taxable market values more than doubled from 2001 to 2008, but the tax rates in each of these districts stayed very close to constant during this period.  This implies that the tax levy (roughly proportional to tax bills) has doubled during this period.  See my report for detailed charts of market value, tax levy, and tax rates for each of these fire districts for this decade.

Admittedly, the Town of Hyde Park has not followed this pattern.  Although property values have doubled there from 2001 to 2008, as they have in most jurisdictions in Dutchess County, the Hyde Park tax rate as shown here has actually decreased quite substantially during this period.  Therefore, Hyde Park's tax levy has only increased 31 percent from 2001 to 2008, rather than doubling.  In my view, this is actually a pretty good record.  (For what it's worth, the records for the Town of Pleasant Valley, the Town of Beekman, and the Beekman Fire District are similar to that of Hyde Park.)

In summary, doubling of tax bills has occurred in the high-priced fire districts, but not in the three towns I've looked at in detail.  Thus, the record is mixed. 

Municipalities Control Expenditures and Assessments, Not Market Value

A interesting observation, but only two-thirds right!  Obviously, municipalities control expenditures (to the extent they can be controlled, what with mandates, union agreements, and many other “locked in” costs).  And obviously, municipalities do not control market values.  But a municipality does not “control” assessments, not as long as the Town Assessor lives up to his/her oath of office.  According to New York State Real Property Tax Law, assessors are sworn to assess properties in such a way that every assessed value divided by the Town's equalization rate is equal to the market value of that property.  The assessor gets to set the equalization rate for the Town, but has precious little leeway in doing so.  In fact, if the State thinks the assessor's equalization rate is “wrong,” it will overrule the Town and set the equalization rate to what the State thinks it should be.  The rules for assessing individual properties are quite elaborate, and leave only a small amount of leeway to the assessor.  It is more accurate to say that the assessor administers the assessment process, rather than “controlling” assessments.

At least that's the theory.  Obviously, in the real world there are all kinds of inaccuracies, errors, delays, mistakes, and disputes, many of which are only settled in court.  But the basic principle of how assessments work is simple, fair, and fundamentally driven by market values.  In summary, the only way a municipality has for controlling the tax rate is by setting the tax levy, which is primarily controlled by expenditures.


I hope I've shed some light on the matters raised by the anonymous poster.  I encourage others (or the same poster!) to post comments that can further the discussion.

Wednesday, November 24, 2010

Town of Pleasant Valley's Tax Rate Increase Mistake is Entrenched

On Monday I reported that the Town of Pleasant Valley's 2011 property tax rate increase of 9.19 percent, as reported in the Poughkeepsie Journal, is wildly inaccurate, and that the correct rate increase is 23.3 percent.  On Tuesday, I reported that the principle blame for this mistake lies with the Town of Pleasant Valley, rather than with the Poughkeepsie Journal (which has been known to make mistakes of exactly this kind).  Today I've determined that the calculation mistake by the Town of Pleasant Valley is not a single isolated error, but has been a systematic part of the Town's fiscal methodology for at least the last three years.  Pleasant Valley's 2011, 2010, and 2009 Town budgets all show this mistake on the first page.  In other words, the government of the Town of Pleasant Valley has no idea how much it is increasing its tax rate each year.

A Bad Example — Dutchess County Government

To put this mistake into perspective, consider how a more sophisticated government, such as that of Dutchess County, handles tax rates and tax rate increases.  County Executive William Steinhaus' 2011 Budget Message does not even mention tax rates, let alone tax rate increases.  You can be sure of three things:
  1. Steinhaus knows full well exactly what the proposed tax rate and tax rate increase are.  The county has an entire department that is expert at such matters.
  2. The County tax rate will increase in 2011.  That's because the County's taxable market value has decreased, Steinhaus is proposing to freeze the property tax levy at the 2010 level, and the County Legislature is very likely to increase the tax levy.  Even a frozen tax levy guarantees increasing the tax rate if the market value has decreased.
  3. The omission of tax rate information in Steinhaus' budget message is no accident.  The omission is a deliberate attempt to make the situation sound not as bad as it really is, by focusing on the tax levy, and not the tax rate.  Steinhaus is skilled; he did exactly the same thing last year
In summary, Steinhaus avoided making any false statements, and he avoided telling the Really Bad News (a significant tax rate increase), all the while knowing full well what's really going on with County finances.  I'm definitely not recommending Steinhaus' approach for the Town of Pleasant Valley — or for any municipality.  By withholding the most important tax parameters — the tax rate and the change in the tax rate — Steinhaus makes it essentially impossible for his constituents and other stakeholders to sort out what's really happening to property taxes.  This is the opposite of open government, and should be roundly condemned.

A Worse Example — Town of Pleasant Valley

However, Steinhaus' approach is better in two ways than what the Town of Pleasant Valley has been doing:
  1. Steinhaus knows what's really going on regarding changes to the tax rate.  The government of the Town of Pleasant Valley does not.  The Town thinks it's only increasing the tax rate by 9 percent, when it's really increasing the tax rate by 23 percent.  So, unlike the executive branch of Dutchess County Government, the Town of Pleasant Valley is flying blind.
  2. Dutchess County taxpayers and other stakeholders don't know how much Steinhaus is proposing to increase their tax rate.  As bad as this is (and it's Bad!), it's still better than for the taxpayers and other stakeholders of the Town of Pleasant Valley, who think they know, but what they know is wrong!  In my view, not knowing is better than “knowing” something that's wrong.
It is disturbing, to say the least, that the Town of Pleasant Valley and its stakeholders think they know what's happening, when the reality is quite different.  It's probably too late to do much about this for 2011.  However, for the 2012 proposed budget, the Town of Pleasant Valley should publish the correct tax rate increase.

Tuesday, November 23, 2010

Town of Pleasant Valley Misunderstands Property Tax Rate Increases

It's the Town of Pleasant Valley, and not the Poughkeepsie Journal, that is primarily responsible for calculating the wildly incorrect tax rate increase of 9.19 percent reported in the Journal on November 20.  My post yesterday to this blog, Town of Pleasant Valley Increases Tax Rate 23.3 Percent, explains why the published tax rate increase is incorrect, and how to calculate it correctly.

Pleasant Valley Town Supervisor (and Budget Officer) John McNair asserted today that, “The rate increase is as stated in the Poughkeepsie Journal.”  In other words, McNair considers the 9.19 percent tax rate increase reported in the Poughkeepsie Journal to be correct.

Given that the 9.19 figure is wrong, and considering that this incorrect figure reflects more favorably on the Town of Pleasant Valley than the correct figure of 23.3 percent, some might conclude that McNair is intentionally fabricating budget figures; in other words, lying.  I doubt this is the case, for two reasons:
  1. Although government officials deliberately make misleading statements every day of the week, they generally prefer to avoid lying.  Instead, they make assertions that are true (but irrelevant), or that are difficult to dispute.  The 9.19 figure is neither.  It's false, and it's easy to show that it's false.  Why would a government official lie about something that is so easy to refute?
  2. Other institutions that should know better have been calculating tax rate increases incorrectly.  I've already found two:  The Town of Hyde Park has been making this mistake for at least three yearsThe Poughkeepsie Journal has been making this mistake for at least 10 months.  In both cases, I've found evidence that these have been honest mistakes — not deliberate deception.
The tax rate increase mistakes committed by the Town of Hyde Park and the Poughkeepsie Journal are entrenched.  So far, both institutions have vehemently denied that their published tax rate increase percentages are incorrect.  How entrenched is the Town of Pleasant Valley's tax rate increase mistake?  I don't know, but I'm hoping to find out.  Stay tuned.

Monday, November 22, 2010

Town of Pleasant Valley Increases Tax Rate 23.3 Percent

The headline on the front page of the November 20 Poughkeepsie Journal (print edition) reads, “Pleasant Valley OKs 2011 budget; tax rate rises 9.19%”.  So why does the title of this post say the increase is 23.3 percent?

If you're a regular reader of this blog, you already know the answer.  It's the same refrain I've written about numerous times in this blog, such as here, here, here, and here.  The 9.19% figure was arrived at by directly comparing the 2011 tax rate with the 2010 tax rate, with both rates measured in dollars per thousand dollars of assessed value.  Such a comparison makes no sense, because the two tax rates correspond to different equalization rates.  It would be like comparing today's Dow Jones industrial average, measured in dollars, with yesterday's, measured in Euros.

Correct Computation Requires Conversion

To compare tax rates in dollars per thousand dollars of assessed value, one must first convert them to dollars per thousand dollars of market value by multiplying them by their corresponding equalization rates.  Thus, Pleasant Valley's 2010 tax rate is $3.79 per thousand dollars of assessed value.  Multiplying this by the 2010 equalization rate of 52 percent yields a tax rate of $1.97 per thousand dollars of market value.  Similarly, the 2011 tax rate of $4.12 per thousand dollars of assessed value multiplied by the 2011 equalization rate of 59 percent yields a tax rate of $2.43 per thousand dollars of market value.  Now the converted tax rates, $1.97 and $2.43, can be directly compared, yielding a 23.3 percent increase.  (If you try this at home, be sure your input data and all calculations are good to at least 6 significant figures.  Otherwise, noticeable round-off errors can accumulate.)

Who's To Blame for Mistake?

This is by no means the first time that the Poughkeepsie Journal has published wildly inaccurate tax rate increases for jurisdictions with varying equalization rates.  In the past, I have had direct confirmation that  Poughkeepsie Journal reporters have performed the mistaken calculations.  However, in the Town of Hyde Park, it is clear that the municipality itself is primarily responsible for the mistaken calculations.  For Pleasant Valley, I have not yet been able to determine whether it is the Town or the Poughkeepsie Journal that is responsible for the mistake.  I'll post again when I find out.

Friday, November 19, 2010

Town of Hyde Park to Increase Property Tax Rate 16.9 Percent

At a special meeting to begin within the hour, the Hyde Park Town Board is expected to approve its 2011 budget, and to announce that this budget will result in roughly the same tax rate (0.4 percent decrease) compared with last year.  If you are asking why the title of this post refers to a 16.9 percent tax rate increase, then you haven't been reading this blog recently.  My post of November 11 explains that the Town of Hyde Park has not understood how to properly calculate property tax rate increases.  The Town has incorrectly assumed that it can simply compare the tax rates in dollars per thousand dollars of assessed value from year to year.  However, this procedure is invalid for jurisdictions like Hyde Park with equalization rates that change every year.  By not properly computing the tax rate increase percent, the government of the Town of Hyde Park, and the citizens who are evaluating its budget, are flying blind.  Since posting on November 11, I've learned that the same flawed 2011 budget process was also present in the 2010 and 2009 budget processes.  I have not determined whether this fundamental flaw was present in Hyde Park budgets prior to the 2009 tax year.

Staffing Changes

I've also since learned that the Hyde Park Town Board has enacted some significant staffing changes during the last half year:  Twenty-three year veteran bookkeeper Joanne Lown was fired in June 2010 in what some claimed was an unceremonious procedure.  The Board simultaneously abolished her position, replacing it with a new comptroller position.  Ann Boehm was then hired as a temporary, part-time comptroller until her full-time replacement by Darlene Deary on September 15.

Why is Hyde Park's 2011 Tax Rate Increase so High?

Hyde Park's equalization rate for 2011 property taxes is 54 percent, up 17.4 percent from 46 percent for the 2010 taxes.  This major increase in equalization rate swamps the small (0.8 percent) increase in assessed value, causing Hyde Park's taxable market value to decrease 14.1 percent.  The large drop in market value means that even if the 2011 tax levy were unchanged from 2010, Hyde Park would see a double-digit increase in tax rate.  However, the tax levy for 2011 is expected to increase a small amount (0.4 percent) to $4,490,122.  Doing the math results in a 16.9 percent tax rate increase.

Response of Town Officials

My repeated attempts to contact Town of Hyde Park officials were not fruitful until Monday, November 15.  By that time, officials apparently figured it was too late to do anything about the tax rate calculation error for this budget cycle.  News stories this week about Hyde Park in the Poughkeepsie Journal continue to report wildly inaccurate tax rate increase information, as they have done since last month.  In my view, Hyde Park Town Supervisor Tom Martino owes it to the public to accurately and faithfully report the correct tax rate increase percent for the 2011 budget — not the wildly inaccurate tax rate increases being claimed.  Taxpayers will eventually be able to determine the true tax rate increase when they get their tax bills.

Remedy

In order to correct this unfortunate problem in future years, no action is needed by the Town Board.  The problem can be corrected administratively by whoever is responsible for preparing the budget details, presumably Deary.  Once she makes this correction, citizens — and the government itself — will be able to see what the true financial situation is.

100 Percent Equalization

In addition, however, the Town Board might be wise to consider modernizing the assessment process by moving to 100 percent equalization, as all but 8 jurisdictions in Dutchess County have already done. Once this is accomplished, the misunderstandings of recent years will not be possible.  And the move to 100 percent equalization has considerable additional benefits as well, without incurring any cost or penalty.

Monday, November 15, 2010

Poughkeepsie Journal Still Reports Inaccurate Tax Rate Increases

This is the second of two posts commenting on the Poughkeepsie Journal's recent coverage of property tax issues.  The first post complimented the Journal for including tax rate increase information in headlines, lead sentences, and sidebars.  This one criticizes the Journal for consistently publishing wildly inaccurate tax rate increase information for jurisdictions with changing equalization rates.

Last year (August 2009 to early spring 2010), Poughkeepsie Journal property tax stories occasionally included tax rate increase data.  These stories contained inaccurate tax rate increases for some jurisdictions because of an analytical mistake.  This year (beginning August 2010), essentially every property tax story includes tax rate increase data.  Furthermore, this data is much more prominently displayed than it was last year.  It's great that readers are now much better informed about tax rate increases.  Unfortunately, last year's analytical mistake still has not been corrected, despite the new focus on tax rate increases.  This means that inaccurate tax rate increases are published more often — and more prominently — than last year.  And when I say inaccurate, I mean wildly inaccurate.  The published tax rate increases are much lower than the actual tax rate increases, leading readers to think that the tax situation is much better than it really is.  It's a shame that the Journal's greatly improved coverage of tax rates and tax rate increases is marred by inattention to the issue of accuracy.

The analytical mistake is to not account for changes in equalization rates.  My post last year described the mistake in detail, and how to fix it.  This mistake is manifest only for jurisdictions whose equalization rate changes in 2010.  I found five stories this season (since August 2010) with wildly inaccurate tax rate increase percentages.

Hyde Park School District

On August 27, 2010, a short, unsigned story entitled, "New school-tax rate adopted for Hyde Park" appeared on page B-1 of the print edition.  The lead sentence claimed that the Hyde Park school tax rate will increase “less than 1 percent”.  The brief article concludes by listing the tax rates — in dollars per thousand dollars of assessed value — for the 5 towns within the Hyde Park School District, together with purported tax rate increases in each town.  The listed tax rate increases ranged from 0.55 percent in Hyde Park to about 3 percent in the Towns of Clinton, Poughkeepsie, and Rhinebeck.  These listed tax rate increases are wildly inaccurate.  The tax rate increases in the article were apparently calculated by subtracting the 2009 tax rate from the 2010 tax rate, with both rates measured in dollars per thousand dollars of assessed value, and then saying that the result is somehow a percent, rather than a tax rate.

The correct tax rate increase is 19.31 percent for the portion of all 5 towns in the Hyde Park School District.  Not incidentally, New York State real property tax law requires the tax rates in all the municipal segments of a special district (like the Hyde Park School District) to be equal, when expressed in dollars per thousand dollars of market value.  This fact implies that the school tax rate increase will the same for all properties in the school district regardless of which Town they're in.

Arlington School District

On August 31, 2010, a front-page story was entitled, “Average Arlington tax bill to go up 7%”.  A sidebar listed 9 towns with portions in the Arlington School District, and their corresponding tax rates in dollars per thousand dollars of assessed value and tax rate increases.  Six of those 9 towns are at 100 percent equalization rate; for them, the published tax rate increases around 16 percent are correct.  For the 3 remaining towns, the published tax rate increases are as follows:  Hyde Park:  -1.5 percent; Pawling: 10 percent; Pleasant Valley:  2.1 percent.  These numbers are wildly incorrect.  The correct tax rate increase for these three towns is about 16 percent, the same as for the other 6 towns, as required by New York State law.  The math works out, once you convert from assessed value to market value.

Staatsburg Library District

A story entitled, “Staatsburg seeks library-tax hike”, appeared on September 9, 2010.  The lead sentence is, “Residents of the Staatsburg Library District are being asked today to approve a 13.7 percent tax-rate increase.”  Once again, this number is wildly incorrect.  The correct tax rate increase is 33.5 percent It's the same issue as in the above school districts:  Staatsburg, in the Town of Hyde Park, has seen its equalization rate increase 17.4 percent.  The story failed to take this fact into account.

Town of Hyde Park

Two stories about the Town of Hyde Park's budget appeared on October 13 and November 11, 2010.  These stories stated that the Town proposes to raise the tax rate by 17 percent and 14.5 percent, respectively.  My most recent post discusses this case in considerable detail, concluding that the Town of Hyde Park government does not understand how property tax increases work.  Their most recent claim of a 14.5 percent tax rate increase is really a whopping 32 percent tax rate increase.  So once again, the published tax rate increase is wildly incorrect.  Although the Poughkeepsie Journal got it wrong again, they surely had plenty of “help” in this case from the Town of Hyde Park.

Getting it Right

The  Journal's masthead proudly proclaims, “The Poughkeepsie Journal corrects errors of fact.”  Yet the Journal has continued to publish wildly inaccurate tax rate increases for jurisdictions with changing equalization rates, despite my blog post on the subject last year.  Admittedly, some of the blame belongs to the government of the Town of Hyde Park, which has provided copious inaccurate public information.  But the Journal has not yet made a serious attempt to avoid publishing tax rate increases that are just plain wrong.

Thursday, November 11, 2010

Town of Hyde Park Misunderstands Property Tax Rate Increases

The Town of Hyde Park's budget process is seriously flawed because the Town misunderstands how much it's squeezing its property taxpayers — its primary source of income. The Town claimed to be proposing a 17 percent tax rate increase (according to an October 13 Poughkeepsie Journal story), now reduced to a 14.5 percent tax rate increase (according to a story in today's Poughkeepsie Journal).  But both these numbers are wrong.  The Town of Hyde Park is proposing at least a 32 percent tax rate increase, according to my calculation based on publicly available information.  The Town's mistake comes from a fundamental misunderstanding of the meaning of property tax rate increases.  For the benefit of the Town, I'll try to explain in simple terms:

Property Tax Rate

In New York State, real property is taxed in proportion to the market value of the property.  (In the geeky world of property taxes, market value is usually referred to by various other names, such as “full value” or “true value assessment”.)  The property tax rate, measured in dollars per thousand dollars of market value, is the proportionality constant.  In other words, the amount of tax paid on a given property is equal to the market value of that property multiplied by the tax rate in dollars per thousand dollars of market value.  For example, if a particular jurisdiction has a tax rate of $10 per thousand dollars of market value, then the tax on each property will be exactly one percent of the market value of that property (100% x $10/$1,000).  Thus the tax rate in dollars per thousand dollars of market value measures how steeply a property is taxed.

Property Tax Rate Increase

Since tax rate in dollars per thousand dollars of market value measures how steeply a property is taxed, increases in this tax rate measure how much more steeply a property is being taxed.  For example, if a jurisdiction has a tax rate of $2.00 per thousand dollars of market value in 2010, and then it proposes a $2.50 tax rate in 2011, the proposed tax rate increase is simply 100% x ($2.50 - $2.00)/$2.00, or 25 percent.  So in 2011, properties would be taxed at a 25 percent higher rate than in 2010.  That's all there is to it. 

Assessed Value and Equalization Rate

The above narrative has not mentioned the concepts of assessed value and equalization rate.  That's because assessed value and equalization rate play no fundamental role in how steeply properties are taxed. How steeply properties are taxed is measured in terms of market value.  Assessed value and equalization rate are historical artifacts of the legacy process for collecting taxes.

What this means is that quantities involving assessed values generally cannot be compared with each other.  The only exception is if the quantities correspond to the same equalization rate.  Of the 20 towns in Dutchess County, 12 have had a constant equalization rate (of 100 percent) for the last few years.  Unfortunately, Hyde Park isn't one of them.

Hyde Park's Meaningless Assessment Charts

In order to compare Hyde Park data involving assessed value, this data must first be converted to market value.  If this is not done, the results will be meaningless.  For example, the “History of Taxable Assessment” chart on page 10 of Hyde Park's 2011 preliminary budget is garbage.  I don't know how else to say it.  The chart shows a steady increase in the meaningless quantity “Taxable Assessment” from around $850 million in 2001 to $940 million in 2010, an increase of roughly 10 percent.  Neither the shape of this curve, nor the 10 percent increase, correspond to anything meaningful in the real world (or in any mathematical world).  To create a meaningful chart, the assessed values must be converted to market values by dividing each one by its corresponding equalization rate.  Like this:



Note that the market value more than doubles from 2001 to 2009, and then declines.  This behavior is in general agreement with the market value of most other jurisdictions in Dutchess County.  The “12 Year Period Town Assessment” chart on page 9 of Hyde Park's preliminary budget suffers from the same problem — and has the same kind of solution.

Hyde Park's Meaningless Tax Rate Chart

The “History of Tax Rate per 1,000 of Assessed Valuation” chart on page 11 of Hyde Park's 2011 preliminary budget is also garbage.  To create a meaningful chart, the tax rates measured in dollars per thousand dollars of assessed value must first be converted to dollars per thousand dollars of market value, by multiplying each by its corresponding equalization rate.  Here's the result:



Notice that the Town's “Assessed Valuation” chart looks nothing like the corrected chart.  The corrected chart shows the tax rate dropping steadily through the decade until 2008, when the tax rate starts to increase by ever-larger percentages.  The rightmost bar is the proposed 2011 tax rate, based on an assumed tax levy of $5,080,000, as reported in today's Poughkeepsie Journal.  The proposed 2011 tax rate of $2.92 is $0.71 greater, or 32 percent greater, than the 2010 tax rate of $2.21 per thousand dollars of market value.

Call to Action

In my view, the Town of Hyde Park needs to replace its faulty comparisons of assessment-related data with corrected information based on properly converted quantities.  Until it does so, the government of the Town of Hyde Park, and the citizens who are evaluating its budget, are flying blind.

Tuesday, November 9, 2010

Poughkeepsie Journal Improves Truth-in-Taxing Reporting

The Poughkeepsie Journal has substantially improved its reporting on  property tax issues this season, by including tax rate change information in headlines, lead sentences, and sidebars.  By including and highlighting this “truth-in-taxing” information, the Poughkeepsie Journal has taken a major step forward in informing its readers about what's really happening with their property taxes.  This first of two blog posts describes the truth-in-taxing improvements in recent Poughkeepsie Journal stories.  A forthcoming post will describe how the Poughkeepsie Journal continues to publish wildly inaccurate tax rate increase percentages for certain jurisdictions — just as it did last year. 

In my Truth-in-Taxing series begun last year, I criticized the Poughkeepsie Journal for, among other things, failing to make tax rates and changes in tax rates the central issue in its stories on property taxes.  I've argued in  Truth in Taxing that tax rate information is the key parameter for describing property taxes, especially in this era of falling property values.  I ended one blog post about a year ago with the following words:
Readers of the Poughkeepsie Journal need the tax rate and change in tax rate in order to understand the essence of what's happening. This means they need the change in the tax rate in the headline itself, in the lead sentence, and possibly also in the sidebar information — not buried in the tenth paragraph, or omitted entirely. The change in the tax rate is the story. Most recent Poughkeepsie Journal stories related to property taxes have failed to provide truth in taxing disclosures. I would very much like truth in taxing to become standard policy in the Poughkeepsie Journal's property tax reporting.  [emphasis in original]
What a difference a year makes!  Last year (late August 2009 to early spring 2010), Poughkeepsie Journal property tax stories rarely placed tax rate change in the headline, the lead sentence, or the sidebar, though there were a few exceptions.  All too often, tax rate information wasn't in the story at allThis year (beginning in late August 2010), the situation is reversed:  Nearly every story I've seen on property taxes includes the tax rate change in the headline, the lead sentence, or the sidebar — sometimes in all three.

Town of Fishkill Withholds Tax Rate

Here's the one exception that proves the rule:  The Town of Fishkill, for which reporter Susan Campriello wrote two stories.  The first of these stories, published October 14, 2010, includes an elaborate “excuse” by Town of Fishkill Comptroller Robert Wheeling as to why he hadn't “yet” provided 2011 tax rate information.  The second story, published November 8, simply notes that Wheeling failed to provide this information.  In both stories, Campriello includes in the sidebar last year's tax rate, as well as a note that this year's tax rate is “unavailable”.  In this way, Campriello makes it unmistakably clear to the reader that the tax rate information is important, and that a government official is withholding it.  (By the way, you can be sure that Fishkill's tax rate increase will be large:  Just the tax levy alone has increased by 10 percent.  Combining this with an estimated 6 percent decrease in Fishkill's tax base means that Fishkill's tax rate will probably increase about 16 percent.)

Tax Rate Increase Is Prominent

Apart from the stories on Town of Fishkill, I've seen 12 other stories on property taxes since end of August.  Here's how they've dealt with tax rate information:  Eight of the 12 stories had sidebars; every sidebar included the tax rate and the tax rate increase amount.  Eight of the 12 stories (not quite the same 8) stated the new tax rate in the lead sentence.  Two of the 12 stories stated the tax rate increase amount in the headline, and a third story in the subheading.  The headline of a fourth story ambiguously reads “Hyde Park plan raises taxes 17%”.  That could mean anything.  Only by reading the story does one learn that the “17%” is actually the tax rate increase.  Partial credit for that.  Another partial credit for the headline, “New school-tax rate adopted for Hyde Park”.  At least it focuses attention on the tax rate.

In summary, every one of the 12 stories includes the tax rate change in the headline, the lead sentence, or the sidebar.  The Poughkeepsie Journal has made a major improvement in implementing Truth-in-Taxing in its coverage of property tax issues.  I'm gratified to see what appears to be a new editorial policy to focus on tax rates and changes in tax rates.

Major Calculation Errors Persist

My praise for the Journal's truth-in-taxing efforts is less than wholehearted because this season's stories continue to calculate tax rate changes incorrectly for certain jurisdictions.  This means that the Poughkeepsie Journal is now giving greater prominence than last year to tax rate changes that are inaccurate — wildly inaccurate.  My next blog post will discuss this issue in detail.

Sunday, April 18, 2010

Poughkeepsie Journal Fails Its Readers – Again

Once again, the Poughkeepsie Journal fails to properly inform its readers about property taxes.  There is an important story about property taxes, but the Journal fails to tell it. 

Today's front page feature story, Property taxes weigh heavily in Dutchess, by Joseph Spector, is full of numbers and statistics, but it fails to mention – fails to even mention – any tax rates or changes in tax rates.  This is just like having a story about high sales taxes and never mentioning any sales tax rates or changes in sales tax rates.  It makes it impossible for readers to understand what’s going on. 

School Tax Report is Misleading

As just one example of misleading reporting, the story refers to school officials saying that “the school-tax-levy increase in the current school year was 1.85 percent, the lowest in at least 10 years.”  This sounds like a bright spot in the tax picture – but it is not.  Dutchess County property values were down 5 percent in the current school year.  Therefore, school tax rates are up approximately 7 percent.  In other words, property owners paid 7 percent more of their wealth – as measured by the market value of their properties – to schools this year than they did last year.  Not a bright spot at all.

School officials aren’t stupid.  They deliberately talk about tax levy increases now, because that makes things sound better than they really are.  But the Poughkeepsie Journal has a duty to expose this deception by showing how school tax rates were stable in the past but are increasing now.  It's the tax rate that allows you to make a fair comparison with the past.

Comparison to Westchester is Misleading

Here’s a second example of misleading reporting:  The story asserts that “Westchester and Nassau counties … have the highest taxes in the state”.   It sounds like these counties have it worse than Dutchess.  But the Journal fails to point out that Westchester and Nassau also have the highest property values in the state.  If your property’s market value is greater, of course you’re going to pay more taxes!  Saying it another way, if you can afford to buy a house in Westchester, you can afford to pay the taxes.  But your tax rate could be the same as or lower then in Dutchess.  There’s no way to tell from this story.  It's the tax rate that allows you to make a fair comparison.

Journal Misses the Real Story

People belly-ached about property taxes ten years ago, and they're bellyaching about property taxes now.  The difference is that up until two years ago, property tax rates have been relatively stable, whereas now property tax rates are dramatically increasing.  Because property tax rates are starting to increase significantly for the first time in many years, complaints about property taxes are much more justifiable now than they were in the past.  This is the real story.  It's too bad the Journal hasn't told it.

Many of my previous Truth in Taxing posts to this blog describe a pattern of failure by the Poughkeepsie Journal to properly inform its readers about property tax issues.  To view these posts, click on label “Truth in Taxing” in the right column of this page.

Wednesday, April 7, 2010

The Big Three Fire Districts of Dutchess County

Of the 30 fire districts and fire protection districts in Dutchess County, I call the Arlington, LaGrange, and Fairview fire districts the big three fire districts. They are the big three in two different ways:
  • They have the three highest tax levies.
  • They have the three highest tax rates.
I've just posted a report to my sister website Fairview Fire Tax about the big three.  This report compiles current and retrospective information about tax levies, tax rates, market values, and exempt percents for the big three fire districts into a series of 24 bar charts, 8 tables, and 4 pie charts, with analytical commentary.  Bar charts include a ten-year history of market values, tax levies, and tax rates, and annual changes in these values.  Some highlights of the report:
  • Fairview has the highest fire tax rate in Dutchess County.  However, if fire taxes were billed universally – to tax exempt as well as to taxable properties – Arlington would have the highest universal tax rate, with Fairview second.  Economies of scale should have favored Arlington’s universal tax rate, since Arlington is four times larger than Fairview, both in total market value and number of fire stations.  Yet Arlington’s universal fire tax rate is 30 percent greater than Fairview’s.
  • From 2001 to 2008, the tax rates of all the big three fire districts have decreased.  With the economic meltdown, 2009 and 2010 tax rates in Arlington and LaGrange (but not Fairview) have significantly increased. In 2008, Fairview’s tax rate was 61 percent larger than Arlington’s, but in 2010, Fairview’s tax rate has become only 20 percent larger than Arlington’s.
  • Nearly half of Fairview’s market value is tax exempt. Fairview’s exempt percent has been 47.7 percent plus or minus 0.2 percent in each of the last three years, when adjustment is made for a 2008 tax assessment blunder by the Town of Poughkeepsie Assessor's office.
  • If the City of Poughkeepsie’s fire department were a fire district, it would be in the Big Three, both for its equivalent tax levy and its equivalent tax rate.
The big three are high priced fire districts.   But high priced fire districts also tend to be high quality-of-service fire districts.

Wednesday, March 31, 2010

Fairview's 2008 Exempt Percent Understated due to Assessment Blunder

A $120 million blunder by the Town of Poughkeepsie Assessor's office in 2007 caused the Fairview Fire District's official 2008 exempt percent to understate the true exempt percent.  The true portion of Fairview's market value that was exempt from fire taxes in 2008 is not 41.7 percent as I reported, and as confirmed by a Dutchess County official.  The true portion is probably near 47.9 percent, an increase of 6.2 percent.

Background

The Fairview Fire District has the highest fire tax rate of any fire district in Dutchess County, and possibly the highest in New York State.  Until nearly two years ago, a widely-quoted reason given for Fairview's high tax rate is that 70 to 80 percent of Fairview's market value is tax exempt.  My report, Tax Exempt Properties in Fairview posted to my Fairview Fire Tax website on June 18, 2008, showed this reason to be an urban myth.  My analysis showed that for the 2008 fire tax year, only 41.7 percent of Fairview's market value was tax exempt.  This result was later confirmed by Kathleen Myers, Director of Dutchess County's Real Property Tax Service Agency. 

Fairview's 2008 exempt percent had some practical importance.  At the time my report was posted, State Senator Stephen Saland and State Assemblyman Joel Miller were sponsoring bills intended to benefit fire districts with very high exempt percents.  Also, Dutchess County Legislator James C. Doxsey was sponsoring a related resolution.  All these efforts ended after my report was posted, because Fairview would not have been eligible to benefit from any of them. 

41.7 Percent Figure Has Been Unchallenged

There has been no credible challenge to the assertion that 41.7 percent of Fairview's market value for the 2008 fire tax year is tax exempt.  And how could there be?  After all, the 41.7 figure is based on a primary source of data — the 2007 assessment roll for the Fairview Fire District — the same data used in the preparation of 2008 fire tax bills.  Each assessor signs an oath every year certifying that all properties have been assessed at a uniform percentage of market value.  There simply isn't a more authoritative basis for calculating Fairview's exempt percent.  There would seem to have been no reasonable basis for questioning the 41.7 percent figure.

There is now.

There's Been a Mistake

A mistake has been made which substantially affects Fairview's exempt percent for the 2008 fire tax year.  In 2007, the Town of Poughkeepsie Assessor's Office contracted with Queens property assessment consulting firm MJW Consulting to assist it in a town-wide reassessment of properties, including most of the Fairview Fire District.  At the time, various other municipalities in the Hudson Valley had also contracted with MJW Consulting.  The Town of Poughkeepsie and many other municipalities cut ties with MJW Consulting in 2008 following allegations about the firm's performance.  But during the contract MJW Consulting reassessed many properties in Fairview, including a property with parcel ID 134689-6162-09-072632-0000.  MJW Consulting assessed this parcel, which contained a small house and other structures, at $190,500, apparently ignoring the value of these other structures.  What were the “other structures” on this parcel?  These other structures were most of the main buildings of the St. Francis Hospital complex, whose market value the previous year was over $140 million.  Oops!

Town of Poughkeepsie Assessor Kathleen Taber apparently folded MJW Consulting's assessments into the 2007 assessment roll without running a sanity check on the data.  In other words, Taber certified the 2007 assessment roll with most of the assessed value of St. Francis Hospital omitted.  For the next assessment roll, Taber found and corrected the blunder.  But it was too late to correct the 2007 assessment roll.  The blunder only affects analyses of Fairview for the 2008 fire tax year (2007 assessment roll) — both mine and Kathleen Myers'.  It certainly makes sense to adjust these analyses to correct for this blunder.

Correcting for the Blunder

According to Kathleen Taber, a reasonable guess for the assessed value of the main St. Francis property for the 2008 fire tax year is around $120 million — more than 600 times the official assessed value for that year.  Adjusting my 2008 analysis of Tax Exempt Properties in Fairview using this corrected estimate for the main St. Francis parcel shows that 47.9 percent of Fairview's market value was tax exempt for the 2008 fire tax year.  This figure happens to be the same as Fairview's exempt percent for the 2010 fire tax year, and less than half a percent more than Fairview's 2009 figure of 47.5.  In summary, Fairview's exempt percent has held remarkably steady in the last three years, ranging from 47.5 to 47.9. 

The corrected St. Francis assessment also affects the ranking of the tax exempt institutions in Fairview.  My 2008 report Tax Exempt Properties in Fairview listed St. Francis Hospital as the fourth largest not-for-profit institution in Fairview, after Marist College, Dutchess Community College, and Hudson River Psychiatric Center.  After correcting for the assessment blunder, St. Francis Hospital easily moves up to second place, with market value substantially greater than that of Dutchess Community College.

My forthcoming report, The Big Three Fire Districts of Dutchess County, provides more details of Fairview's exempt percent and up-to-date ranking figures.
    Acknowledgment:  I'm grateful to Town of Poughkeepsie Assessor Kathleen Taber for patiently answering a series of email inquiries regarding the main St. Francis parcel.

      Wednesday, February 17, 2010

      Ranking of Town Tax Rates

      A recent post displayed the ranking of town tax rate increases in Dutchess County.  This post ranks the town tax rates themselves. The tax rate measures how steeply your wealth — as measured by the value of your property — is taxed.  Do you know how your town compares with other towns in Dutchess County?  Here's the ranking for 2010:

      Town of Poughkeepsie

      The Town of Poughkeepsie is in first place.  Its 2010 tax rate of $3.39 per thousand dollars of market value (for homesteads outside the City of Poughkeepsie) is the highest of all 20 towns in Dutchess County.  This means that if you own a home in the Town of Poughkeepsie, your wealth — as measured by the market value of your property — is taxed by the town at a higher rate than if your home were in any other town in Dutchess County.  The Town of Poughkeepsie had a tax rate increase of 3.5 percent in 2010, which is  lower than for most towns in the county.  But already in 2009, Poughkeepsie was safely ahead of the pack.  Not only was the Town of Poughkeepsie's 2009 tax rate higher than any other town's 2009 tax rate, but the Town of Poughkeepsie's 2009 tax rate is higher than any other town's 2010 tax rate.  In other words, no other town has “achieved” as high a tax rate in 2010 as the Town of Poughkeepsie did in 2009.

      Towns of Pine Plains and North East

      In 2009, the Town of North East had the second highest tax rate in Dutchess County, just edging out the Town of Pine Plains.  But North East is one of only two towns in Dutchess County which did not increase its tax rate this year, while Pine Plains' tax rate went up 9 percent — more than most towns in the county. The Pine Plains “surge” allowed it to “advance” to second place, leaving North East in third position.

      Town of Pawling

      The Town of Pawling, thanks to having the largest surge of all towns in Dutchess County, has pulled away from a tight cluster of moderately-high-tax-rate towns in 2009, to solidly secure fourth place, with fifth place Hyde Park a distant $0.33 lower.

      Towns of Washington, Wappinger, and Fishkill

      The towns of Washington, Wappinger, and Fishkill have held the prizes for lowest three town tax rates for at least the last two years.  The tax rate in the Town of Poughkeepsie is 3.2 times higher than the lowest tax rate, in the Town of Washington.  For the town tax you pay on one property in Poughkeepsie, you could pay the town tax on more than three same-valued properties in the Town of Washington.

      Other Towns

      Do you know how your town ranks relative to other Dutchess County towns in the tax rate sweepstakes?



      Now you do.

      Data:  The data for this post are from a table I compiled based on tax rate information from the county government's Real Property Tax Service Agency, as explained here.  For towns containing villages, I've compiled only the tax rates for outside the villages, marked with suffix “- o”.  For towns containing separate homestead and non-homestead (commercial) rates, I've compiled only the homestead rates, marked with suffix “- h”. 

      For the record, here are the corresponding 2009 town tax rates:

      Tuesday, February 16, 2010

      Town of Pawling Tax Rate Increases 28.4 Percent

      The Town of Pawling's 2010 property tax rate increased a whopping 28.4 percent over Pawling's 2009 tax rate.  Although all but two towns in Dutchess County increased their tax rates in 2010, Pawling's tax rate increase is by far the largest.  The second largest tax rate increase of 19.0 percent, in the Town of Milan, is 9.4 percent lower. Yesterday's post to this blog gives a complete ranking of 2010 town tax rate increases in Dutchess County.

      Pawling is adversely affected by a downward trend in property values.  Pawling's taxable market value is down 5.1 percent for 2010 property tax bills.  But this fact does nothing to explain why Pawling's tax rate increase is higher than in other towns, because every town in Dutchess County has this problem.  Indeed, all of Dutchess County's taxable market value is down 5 percent.

      The Three Causes of Pawling's Problem

      I spoke with Town of Pawling Supervisor David Kelly to learn why Pawling's tax rate has increased so much more than other towns'. My understanding of our conversation is that Pawling's tax rate increase has three causes:
      1. Library Referendum:  Voters in the Town of Pawling approved a library referendum last November — before Kelly took office — resulting in an additional tax levy for the town of $270,000 in 2010 (and similar amounts in future years).
      2. 2009 Appropriated Fund Balance:   At the end of 2008, Pawling had an extra $200,000 unspent.  This appropriated fund balance was used to lower the 2009 tax rate.  This fortunate circumstance in 2009 has the effect of making the 2010 tax rate increase larger than it would otherwise have been.
      3. Budget Items:  The Town of Pawling budgeted various items as needed to support town services.
      One way to understand what all this means is with the following bar chart:


      If Pawling taxpayers had the same tax rate as last year (no rate increase), the tax levy outside the Village of Pawling would have been $2,669,726, as shown by the bar on left.  The actual tax levy of $3,428,060, resulting in a 28.4 percent tax rate increase, is shown by the bar on right.  The green and orange portions of the bar on right represent the library referendum and 2009 appropriated fund balance contributions, prorated to exclude the 15.1 percent of these contributions that presumably would be paid by taxpayers in the Village of Pawling.

      The Components of Pawling's Tax Rate Increase

      The difference between the left and right bars can be seen more clearly in the following pie chart:


      The percentages for each component show the contributions to the 28.4 percent tax rate increase.  (Rounding causes a small error in the sum.)  Comparing the above figures with the chart of 2010 town tax rate increases in my last post allows one to make the following observations:
      1. Even if the library referendum had been rejected by voters, Pawling's tax rate increase would have been 19.9 percent — still the highest of any town in Dutchess County. So one cannot blame the library referendum alone for Pawling's top ranking in the tax increase contest.
      2. If the library referendum had been rejected and the 2009 appropriated fund balance did not exist, Pawling's tax rate increase from budget items alone would have been 13.5 percent — the fifth highest tax rate increase of all 20 towns in Dutchess County.  So the budget items alone put Pawling in the top quarter of towns for tax increases.
      3. If Town of Pawling officials had limited 2010 budgetary spending so as to avoid increasing the tax rate; that is, if the above “excess” budget items were zero instead of 13.5 percent, then the remaining library referendum and 2009 appropriated fund balance would still increase Pawling's tax rate by 15.0 percent.  In this case, Pawling would still have the fourth highest tax rate increase for towns in Dutchess County, placing Pawling in the top fifth.
      To sum up, each of these three pieces of pie is so big that even one of them contributes a significant increase to Pawling's tax rate.  Pawling must now eat all three pieces. Property taxpayers will have a stomach ache.

      Library Referendum Was a Bad Idea

      I'm grateful to Supervisor Kelly for generously sharing his perspective on Pawling's property tax situation with me.  Kelly has argued, correctly in my view, that submitting the library proposal to a referendum was a bad idea, because voters approved a large expenditure without seeing the whole fiscal picture. Now the town is stuck with a tax rate increase which is way out of line — probably not what the voters intended.  The limited foresight of voters is a general problem with referenda, and a good reason to prefer the more comprehensive vision of the budget process.  Indeed, there are numerous reasons to avoid referenda.  An extreme case of tax referenda gone wild is the State of California, which has been brought to its knees by Proposition 13 and other unwise ballot initiatives.

      Monday, February 15, 2010

      Towns Increase Tax Rates

      All but two of the twenty towns in Dutchess County have increased their tax rates in 2010, compared with 2009 rates.  This fact is Bad News for property taxpayers, because the tax rate measures how steeply your wealth — as measured by the value of your property — is taxed.  Do you know how much your town's tax rate has increased?  And do you know how your town stands relative to other towns in Dutchess County?  This post compares the town tax rate increases for Dutchess County.

      First the Good News:  Two towns in Ductchess County held the line on taxes, or even decreased them:  The Town of North East has maintained essentially the same tax rate as last year, and the Town of Rhinebeck managed a small (0.4 percent) tax decrease.  Well, that's the end of the good news.

      Data:  Most data for this post are from a table I compiled based on tax rate information from the county government's Real Property Tax Service Agency, as explained here.  For towns containing villages, I've compiled only the tax rates for outside the villages, marked with suffix “- o”.  For towns containing separate homestead and non-homestead (commercial) rates, I've compiled only the homestead rates, marked with suffix “- h”.  For the Towns of Beekman and Red Hook, I've augmented the official tax rate increases to more fairly indicate the effective tax rate increase, as described in detail below.

      Now the bad, worse, and worst news:  The towns of Wappinger, Red Hook, Stanford, Poughkeepsie, Clinton, and Fishkill have tax rate increases of between 2 and 4 percent.  Not too bad.  The towns of Dover, Washington, East Fishkill, and Pine Plains have tax rate increases of between 5 and 10 percent.  Bad.  The towns of Amenia, LaGrange, Hyde Park, and Beekman have tax rate increases of between 12 and 15 percent.  Really bad.  The towns of Union Vale, Pleasant Valley, and Milan have tax rate increases of between 16 and 20 percent.  Worse than bad.  But the worst news of all is the Town of Pawling, which wins the bad-news contest with a whopping 28.4 percent tax rate increase.  I'll post separately about Pawling's situation.  Here are the results in chart form:


      Town of Beekman's Cost Shifting 

      Technically, the Town of Beekman's tax rate has decreased by 0.7 percent, as shown here.  However, this figure is misleading from a taxpayer's viewpoint, because beginning in 2010, Beekman has shifted the $319,800 cost of its ambulance service from the Town to the Beekman Fire District.  This means that the same taxpayers who paid for the ambulance service through Town taxes in 2009 now pay this cost through fire district taxes.  To determine the effective tax rate increase for Beekman's taxpayers, we need to add the $319,800 back into the Town's tax levy.  The result is an effective tax rate increase for the Town of Beekman of 14.6 percent, as shown in orange in the above chart.

      If I were analyzing tax rate increases for fire districts (which I should probably do, considering the name of this blog), I'd observe that technically, the Beekman Fire District's tax rate has increased by 42.0 percent.  However, this figure is misleading from a taxpayer's viewpoint, because the same taxpayers who paid the “extra” $319,800 fire taxes in 2010 paid a similar cost in 2009 through their Town taxes.  So to be fair to the Beekman Fire District, the effective fire tax rate change is actually a small (0.7 percent) decrease.

      Town of Red Hook's Cost Shifting 

      Technically, the Town of Red Hook's tax rate has decreased by 10.5 percent, as shown here.  However, this figure is misleading from a taxpayer's viewpoint, because beginning in 2010, Red Hook has shifted the $145,000 cost of the Red Hook Library and the $125,00 cost of the Tivoli Library from the Town to two new library line items on the tax bill.  All property taxpayers in the Town of Red Hook pay both of these new library line items in addition to the Town line item, regardless of where in the Town they live.  You read that right.  (Just to confuse things further, these two new library line items are in addition to yet another Red Hook Library line item associated with the Rhinebeck School District. The Rhinebeck school district library line item has been paid by all Red Hook property taxpayers since 2005, along with their school taxes.)

      This cost shifting means that the same taxpayers who paid for the Red Hook and Tivoli libraries through Town taxes in 2009 now pay this cost through separate line items on their tax bills.  To determine the effective tax rate increase for Town of Red Hook taxpayers, we need to add the two new library tax levies back into the Town's tax levy (after prorating to account for the villages).  The result is an effective tax rate increase for the Town of Red Hook of 2.4 percent, as shown in orange in the above chart.

      Other Misleading Tax Rate Increases?

      It's entirely possible that towns other than Beekman and Red Hook have their own cost shifting stories which make their nominal tax rate increases misleading.  I have not examined the situations in most towns.  Readers are encouraged to bring such situations to my attention.

      Poughkeepsie Journal's Tax Rate Increase Table Is Flawed

      To the Poughkeepsie Journal's credit, it published a feature story on January 11-th tabulating the tax rate increases of all Dutchess County towns.  Unfortunately, numerous mistakes in this tabulation, documented here, here, and here, make the Journal's tabulation unreliable.  This post attempts to correct the record.

      Why are property taxes going up?

      Thoughtful observers will probably not even be asking this question.  The 2008 economic meltdown was global and comprehensive.  It has worsened economic life in 97 different ways for taxpayers, workers, businesses, and, yes, local governments.  As I see it, local governments are just additional victims of the 2008 economic meltdown.