Wednesday, March 16, 2011

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.


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.

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