Tuesday, January 12, 2010

Poughkeepsie Journal's Incorrect Tax Rate Analysis

I hoped last month that my series of posts on Truth-in-Taxing was finished.  However, yesterday's front page feature story in the Poughkeepsie Journal, Most cities, towns cut spending, raise taxes to balance the books, by reporter John Davis, grabbed my attention for two opposing reasons:

First, the positive reason:  This story clearly shows that property taxes in most Dutchess County communities are going up significantly, even as spending is decreasing.  A table on the page 2 continuation lists every city and town in Dutchess County (and even three towns in Ulster County), and shows that most 2010 budgets are going down compared with 2009, while most tax rates are going up.  The “At a glance” sidebar scorecard on page 1 states that only 4 communities in Dutchess will have decreasing tax rates, 16 will increase, and 2 will be unchanged.  It’s great to see this comprehensive town-by-town listing, and to show the dire trend that I predicted months ago.  (Note to web surfers:  Unfortunately, the table and sidebar appear only in the story’s print edition – not on the Journal’s website.)

Now the negative reason:  The story is marred by a series of mistakes in collecting and analyzing the tax data.  The most serious of these mistakes causes the tax rate increases in seven towns to be substantially understated.  In other words, the situation for taxpayers is even worse than the Poughkeepsie Journal claims.

Mistakes?  What Mistakes?

There are three steps to compiling a table such as the one in this story:
  1. Get accurate data.
  2. Determine the correct way to analyze the data.
  3. Do the arithmetic correctly.
Unfortunately, the Poughkeepsie Journal seems to have made mistakes in all three of these steps.  This post will limit itself to discussing the most serious of these mistakes – Item 2 – Determining the correct way to analyze the data.  In a subsequent post I’ll discuss mistakes in Items 1 and 3.

The Analytical Mistake

In order to compare two tax rates, such as for example the Town of Clinton’s 2009 and 2010 tax rates, the two tax rates must first be expressed in comparable units.  When tax rates are expressed in dollars per thousand dollars of assessed value, as they are in the story’s table, the units are comparable only if the equalization rates corresponding to the two tax years are the same.  For the Town of Clinton, and for six other towns in Dutchess County, the equalization rates changed (in fact, all went up) from 2009 to 2010.  For these seven towns, the tax rates first need to be converted to comparable units (typically, dollars per thousand dollars of market value) by multiplying them by their respective equalization rates.  Only then does it make sense to calculate the percent change between the two tax rates.  The Poughkeepsie Journal failed to make this necessary conversion.  Therefore, the table's tax rate changes for these towns are too small, by an amount proportional to the equalization rate change.

Tax Rate Increases

The following table lists the seven Dutchess County towns for which the equalization rate changed from 2009 to 2010, together with the tax rate increases calculated by the Poughkeepsie Journal, and by my analysis:

 Pok. Journal
 My Analysis
Hyde Park
Pawling (Out)
Pine Plains
Pleasant Valley

In the most extreme case, the Poughkeepsie Journal reported a very unlikely 37 percent tax rate decrease for the Town of Clinton, whereas the actual change was an almost 4 percent tax rate increase.   Similarly, the actual tax rate increase in the Town of Pleasant Valley is more than twice what the Poughkeepsie Journal reported.  More generally, two tax rate changes reported as negative, and one as zero, are all actually positive.  Thus, the scorecard for Dutchess County is that only 2 communities in Dutchess have decreasing tax rates, 19 have increases, and 1 remains unchanged.

Poughkeepsie Journal's Response

In preparing this post, I attempted to check first with the Poughkeepsie Journal regarding my findings.  My hope was to be able to report here that the Poughkeepsie Journal acknowledged their mistake, and will presumably avoid it in the future.  Unfortunately, Poughkeepsie Journal management stands by their figures, and has denied my request to speak with whoever prepared the story's tax table.

Many thanks to the excellent staff at the Dutchess County Real Property Tax Service Agency for assistance in this investigation.

1 comment:

  1. Mr. Rubin

    I have been following the reporting of Taxes in Dutchess for many years. The PJ has improved greatly in it's reporting. They are heading in the right direction, and let's hope the 2011 coverage is even better.


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