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.

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