Arlington School District Superintendent Continues Tax Levy Misstatement

Arlington School District update:  Superintendent's tax levy data is more correct now, but his key summary statement is still wrong.

Recent Post Highlights Data Errors and Key Misprint

My recent post Arlington School District Proposes Lowest Tax Levy Increase in Decade — NOT exposed the fact that Arlington School Superintendent Geoffrey Hicks used incorrect tax levy data to reach an incorrect conclusion in his 2011-2012 Budget Draft 2 presentation of February 15, 2011.  This incorrect conclusion was that the 2011-2012 budget proposal represented the lowest tax levy increase in 10 years.  In reality, it represents the second lowest tax levy increase.

As an aside to my main point, I made light of a ridiculous misprint on a key summary page, which unintentionally stated  

Lowest proposed tax levy in 10 years 

instead of  

Lowest proposed tax levy increase in 10 years

The proposal actually represents the highest proposed tax levy in 10 years, and almost certainly the highest in the history of the Arlington School District, not the lowest. 

My Contacts with Arlington Officials

Before posting, I worked closely with a senior Arlington official to correct some of Arlington's past tax levy data, though we were not able to resolve disparities from 2000 to 2004.  After posting, I emailed Hicks, to be sure he would have direct access to my post.

Revised Presentations Continue Misstatement

Hicks has now presented two revisions of the February budget draft, Arlington Central School District:  Community Budget Forum on March 12, and Arlington Central School District:  Budget Study Session on March 15.  Happily, both these revisions provide the partial correction to Hicks' chart of tax levy increase history.  This partial correction is enough to establish the correct conclusion that the proposal represents only the second lowest tax levy increase in a decade, not the lowest.  This correct conclusion is hinted at by the fact that the word “second” has been prepended to the main summary page bullet item, which in both of this week's drafts reads

Second lowest proposed tax levy in 13 years

So “second” was inserted, and “10” was changed to “13”, but the key term “increase” didn't make it into either revised draft.  So this twice-revised summary statement is still as wrong as it ever was.

Stakeholders May Be Mislead

I'm sure that Arlington's Board of Education and readers of this blog will easily understand the intended meaning of Hicks' key summary statement, despite the misprint.  But in my view, many of Arlington's less sophisticated stakeholders who read only Hicks' summary page will not catch the blunder, especially since it's now been repeated in three successive presentations.  It's unfortunate that Hicks has been unable to correctly communicate a key feature of the proposed 2011-12 budget — even after three tries.

Town of Pleasant Valley Revaluation Will Challenge Supervisor's Miscalculation

In November I wrote in this space that the Town of Pleasant Valley has been calculating its town tax rate increases in a meaningless way, that this incorrect calculation has been a systematic part of the Town's fiscal methodology for at least the last three years, and that therefore both the town government and its stakeholders are being mislead about the true tax rate increases.  For example, Pleasant Valley's 2011 Adopted Budget claims that the Town tax rate increased 9.1 percent from 2010.  My analysis showed the tax rate increase to be 23.3 percent, based on information available at the time.  (My analysis of final tax information released 6 weeks ago by Dutchess County's RPTSA shows Pleasant Valley's 2011 tax rate increase to be 24.4 percent.)

On November 24, I emailed Pleasant Valley Town Supervisor John McNair — who is also the Town Budget Officer — as well as three of the four Town Board members, alerting them to my blog posts.  (I did not attempt to contact board member Steve Albrecht.  In this second decade of the third millennium, officials without an email address cannot expect to play a serious role in public affairs.)  I've received no response from any of these officials.

Revaluation Implies 100 Percent Equalization Rate

That's the background.  Update to today:  A story in the Poughkeepsie Journal on February 25 announced that the Town of Pleasant Valley has completed a revaluation of all properties, and that tentative taxable assessed values are available.  The revaluation is a significant step forward for Pleasant Valley for many reasons.  The most important reason for our purposes is that Pleasant Valley's equalization rate will be 100 percent for this year, and for every year from now on. This means that assessed values will be equal to market values, and that tax rates expressed in dollars per thousand dollars of assessed value will be equal to tax rates expressed in dollars per thousand dollars of market value.  This further implies that changes in the tax rate can be calculated in the future without first converting from assessed value to market value, since the two are the same.  It is the need for this conversion that is at the core of McNair's mistake.

McNair's Approach Is Flawed For One More Year

As I explained at length in my previous posts, McNair's way of calculating tax rate increase is flawed because it doesn't account for changes in the equalization rate.  But in the future, the equalization rate won't change — it will stay fixed at 100 percent.  This means that McNair's way of calculating tax rate increases will give the right answer in the future.

You did notice that I wrote “in the future”, right?  “In the future” refers to the 2013 property tax rate increase, the 2014 property tax rate increase, and so on.  It does not refer to the 2012 property tax rate increase, which will be determined next November.  That's because the equalization rate will change dramatically from the 2011 tax to the 2012 tax — from 59 percent to 100 percent.  If McNair continues to use the flawed calculation of tax rate increase that has been used for the last three years, the resulting tax rate increase will be absurd.

Possible 2012 Tax Rate Increase

Consider this thought experiment:  Suppose for the moment that Pleasant Valley's 2012 taxable market value is unchanged from 2011.  Suppose also that Governor Cuomo's 2 percent property tax cap proposal is enacted, and that Pleasant Valley raises its tax levy for 2012 by exactly 2 percent.  Then Pleasant Valley's tax rate, measured in dollars per thousand dollars of market value, will increase exactly 2 percent, from the current $2.45 to $2.50.  Couldn't be simpler, right?

McNair's Absurd Tax Rate Increase

If  McNair continues to use the calculation method of the last three years, what tax rate increase would he get?  Well, Pleasant Valley's 2011 tax rate is shown in the Dutchess County Real Property Tax Service Agency's latest tax rate pamphlet as $4.15 per thousand dollars of assessed value.  Pleasant Valley's 2012 tax rate would be $2.50 per thousand dollars of assessed value, as noted above, since assessed value is equal to market value for the 2012 tax.  Therefore, Pleasant Valley's tax rate “increase” would be figured from these two rates as -40 percent.  Yes, folks, that's minus 40 percent!  McNair would need to claim that by increasing the tax levy 2 percent, he has somehow decreased Pleasant Valley's tax rate by 40 percent.  Such a ludicrous statement is entirely meaningless, and corresponds to nothing in the real world.

A More Precise Tax Rate Increase Projection

For simplicity, the above analysis assumed that Pleasant Valley's 2012 taxable market value is unchanged from 2011.  In reality, the revaluation has uncovered a significant amount of taxable market value that had been unaccounted for in past years.  That's one of the main reasons for doing the revaluation.  This newly-discovered value more than compensates for the continuing downward trend of market values in recent years.  It turns out that Pleasant Valley's taxable market value for the 2012 tax year is actually up 8.1 percent from 2011 to $1,068,553,959.  (This tentative figure will probably decrease slightly before the final assessment roll appears on July 1, 2011.)

Using this tentative market value in our thought experiment, Pleasant Valley's 2012 tax rate becomes $2.31 per thousand dollars of market (or assessed) value, instead of the $2.50 from the oversimplified example.  Comparing this with the 2011 tax rate of $2.45 shows that in 2012, Pleasant Valley will have a tax rate decrease of 5.6 percent.  Once again, this result assumes a tax levy increase at Cuomo's 2 percent level. 

What does this mean for the individual taxpayer in Pleasant Valley?  If your taxable market value for 2012 happens to be unchanged from 2011, you will see a 5.6 percent decrease in the Town portion of your 2012 tax bill.  However, quite a few properties will see a substantial increase in their 2012 taxable market value.  After all, that 8.1 percent market value increase for the Town must come from somewhere.  These property owners will obviously see increases in their tax amount in accordance with how much their property value has increased.

Supervisor's Miscalculation

OK, back to McNair's dilemma.  With the above more precise projection of market value, McNair's flawed method requires calculating the percent change of 2012's tax rate of $2.31 per thousand dollars of assessed value from 2011's $4.15.  McNair will be faced with needing to claim that an 8.1 percent increase in market value and a 2 percent increase in tax levy results in a tax rate decrease of 44.3 percent.

My Message to Pleasant Valley Town Officials

As I stated in my emails to Pleasant Valley Town Supervisor McNair and Town Board members, my purpose is not to embarrass the Supervisor or other Town officials.  My purpose is to help correct what I believe to be an honest mistake, in order that property taxpayers, other stakeholders, and not least the Pleasant Valley town government itself can have a correct picture of how the town's property tax rate is changing.

Acknowledgement

I'm grateful to Pleasant Valley Town Assessor Teresa Stegner for graciously providing me with the Town's tentative taxable assessed value and other helpful information.

Pleasant Valley Table and Charts Are Available

The format of this blog is not really suitable for presenting the large table and charts of Pleasant Valley's tax rate history that I would have liked to show as part of this post.  Interested readers can find this supplementary information in my report Town of Pleasant Valley Property Tax Rate History.

Arlington School District Proposes Lowest Tax Levy Increase in Decade — NOT

In the dry, geeky world of tax statistics, it's not often one encounters a humorous misstatement, especially when dealing with the effects of the economic meltdown of 2008.  I say “dealing with” rather than the more optimistic “recovering from” because the budget situation in the Arlington School District, many other school districts, and indeed many local taxing authorities is nothing short of dire.  As I see it, many institutions are not so much being squeezed as they are being partially dismantled.  But that's another story.
 
Anyway, Arlington School Superintendent Geoffrey Hicks provided some unintentional humor — gallows humor, perhaps — in his 65 page 2011-2012 Budget Draft 2 presentation of February 15, 2011.  In a key foil on page 50 summarizing dozens of pages of detailed budget issues, Hicks presents three main points, the second of which is inadvertently written as

Lowest proposed tax levy in 10 years

Oh, how we wish it were true!  In reality, the proposed tax levy is the highest in 10 years, and almost certainly the highest in the history of the School District, as Hicks undoubtedly knows.  But of course, Hicks didn't mean to write Highest either.  It is clear from context that what he meant to write was

 Lowest proposed tax levy increase in 10 years

Indeed, the corrected statement already appears in a February 22 Poughkeepsie Journal story about Arlington's budget.

Faulty Tax Levy Increase Data

The problem is, even after fixing the typo, this statement is still wrong!  That's because Hicks' statement is based on faulty data about Arlington's tax levy increases.  His data is presented in a chart on page 51, in the form of a graph of Arlington's tax levy increase for each year beginning in 2003.  Most of this data is wrong.  Wrong enough to make Hicks' summary statement wrong.

My analysis of Arlington's tax levy increase history, based on data from Dutchess County's Real Property Tax Service Agency (which maintains the data for preparing property tax bills), looks like this:

 
The above chart shows that Hicks' proposed tax levy increase of 4.47 percent noticeably exceeds 2007's tax levy increase of 3.98 percent.  One way Hicks can correct his statement is to write

Second lowest proposed tax levy increase in 10 years

This would harmonize well with Hicks' third main point on the same summary foil, “Second lowest spending increase in 10 years”.

Hicks' tax levy data isn't all wrong.  It is actually correct for 2008 and later years.  But for 2003 to 2007, it bears no relation to the historical record.

Kudos to Hicks, despite mistake

Hicks' mistake isn't a really big deal, especially in the context of the total budget proposal.  I'm quite impressed with the breadth and depth of his total presentation, which considers a very wide variety of factors I can't begin to summarize here.  This is already Hicks' second major version of this year's budget proposal.  The first one, presented in January, begins with the following candid foil:

Hard Facts

• 2011-12 will be the most difficult budget construction cycle in memory.
• There will be additional staff reductions and budget cuts in Arlington for 2011-12. There is no way to avoid it.
• There is a potential “perfect storm” of factors that threaten to place extreme stress on the existing system.
• Starting the process early and being completely transparent are the best means for making critical decisions.

I find Hicks' approach of summarizing the Bad News and his openness about presenting the issues to be an admirable approach, well worth emulating by other districts in this difficult time.

Acknowledgement

I'm grateful to Arlington School District Assistant Superintendent for Business Robin Zimmerman for confirming the correctness of my 2005-2010 tax levy data, and for many helpful discussions.

Arlington School District Table and Charts Are Available

The format of this blog is not really suitable for presenting the large table and charts of Arlington's tax rate history that I would have liked to show as part of this post.  Interested readers can find this supplementary information in my report Arlington School District Aggregate Property Tax.