Fairview Fire District Proposes 13.2 Percent Tax Rate Increase

The Fairview Fire District's proposed 2012 budget approved by Fairview's fire commissioners last evening calls for a true value tax rate of $5.79 per thousand dollars of market value, the highest in a decade.  Under this budget, property taxpayers will pay Fairview a greater portion of their wealth — as measured by the market value of their property — than at any time since 2001, when the tax rate was $6.07. 

Tax Rate Increase

Fairview's proposed tax rate increase is 13.2 percent, the highest tax rate increase in a decade, according to my analysis of the budget document from a taxpayer viewpoint.  The tax rate increase from a budget viewpoint is 14.6 percent.  The taxpayer viewpoint represents taxpayer experience, while the budget viewpoint represents the fire district government's experience.  For more details, see Tax Rate Viewpoints — Taxpayer Versus Budget.

It is a little-known fact that Fairview's true value tax rate has decreased for most years of this decade, as shown in the following chart:

Next year will be only the third year this decade that Fairview's tax rate has increased.

In my view, charts like the one above tell a much richer story about what has happened and what is happening with Fairview's taxes than I can tell in words.  If you agree, I strongly encourage you to view all six charts in my report Fairview Fire District Property Tax Data.  Detailed numerical data is also included.

Tax Levy

The proposed 2012 tax levy of about $2.9 million is the third highest in Fairview's history, exceeded only by the tax levies in 2008 and 2009.  The proposed tax levy increase is 9.3 percent, according to my analysis of the budget document from a taxpayer viewpoint.  The tax levy increase from a budget viewpoint is 10.7 percent. 

Market Value

Fairview's taxable market value for 2012 taxes has fallen for the forth straight year, reflecting the continuing real estate meltdown.  Fairview's taxable market value is now just under a half billion dollars, for the first time since 2006.  Fairview's taxable market value has dropped 15.3 percent since its high of $586 million in 2008, including 3.5 percent since last year.  The market value decreases in recent years have been a major factor in increasing Fairview's true value tax rates over what they would otherwise have been. 

Why did I write this post?

Why did I write this post describing Fairview's proposed tax rate increase and trends from previous years?  After all, anyone can just look at the proposed 2012 budget document itself and get the same information, right? ...  Right?

If you've tried this at home — or even at yesterday's budget workshop where the document was presented — you know the answer:  No, you can't.

Well, you can get a few of the numbers:  Fairview's proposed tax levy, and even the tax levy increase percent.  But the tax rate increase percent?  The document does contain a number for this, but the number is incorrect.  What about the tax rate itself?  And what about the market value of Fairview?  The document contains both correct numbers and incorrect numbers for each of these key parameters!  Can you tell which is which?  I couldn't, without out of band information.

So now you know why I wrote this post.  I'll have more to say about Fairview's proposed 2012 budget document in a subsequent post.

Tax Rate Viewpoints — Taxpayer Versus Budget

This post explains why  tax rates on property tax bills can be somewhat higher than tax rates in municipal budgets.  This topic is a little more geeky than my usual post.

Around this time of year, local government officials in taxing municipalities (towns, villages, cities, fire districts, other special districts, and, yes, even Dutchess County government) prepare budgets for the next year.  (School districts do the same thing in the spring.)  As part of the budget preparation process, they set the tax levy — the amount of money the municipality decides to collect from property taxes in the next year.  The tax levy divided by the municipality's taxable market value — which is set on the previous July 1 by the town assessor — is the true value tax rate.  The true value tax rate expresses how steeply property owners' wealth — as measured by the market value of their properties — will be taxed by the municipality.  As such, it is a key parameter for municipal governments, taxpayers, and all other stakeholders.

When tax bills are sent out in January (or in September for school taxes), it is exactly this tax rate which appears on tax bills, and is used to calculate the amount of taxes for the municipality ... in an ideal world.  But we don't live in an ideal world, do we?

The Tax Situation in the Real World

In the real world, its not quite that simple.  In the real world, property owners sometimes don't pay their taxes.  And then they go bankrupt or disappear, and the money is never collected.  In the real world, taxable property can be sold at any time to a tax exempt organization, taking it off the tax rolls.  In the real world, property owners sometimes take legal action to reduce their taxable assessed value — sometimes even retroactively.  All these situations mean that the municipality doesn't collect as much tax in February as it planned for in the budget process the previous fall.  Not only that, but sometimes court decisions require that property tax that had been collected from a property owner in previous years “in error” must be given back.

All these real world situations pose a dilemma for the municipality.  There is the prospect that the municipality will not receive the full tax levy in its budget, or that it will need to refund money it hasn't budgeted for.  So when there's a shortfall of any of these kinds, who do you think is left in the lurch?  Who do you think loses out?  Who do you think gets left holding the bag?

If you guessed “the municipality”, you've just became the laughing stock of the party.  If you're a taxable property owner in the municipality, the correct answer is, ”You!”

How Taxpayers Get To Pay For Budget Shortfalls

Here's how this works in Dutchess County:  In February when property taxes are collected, if a municipality has a shortfall, the government of Dutchess County fronts the money to the municipality to make it whole.  That way, municipalities don't need to go through any painful re-budgeting process in the middle of the year just because some taxpayer went bankrupt, or some court ordered a refund.

But Dutchess County government doesn't eat these extra costs.  After all, it doesn't have any extra money to throw around either.  Instead, it remembers its generosity to the municipality, and demands full payback the next year.  Payback does not occur through the municipality's budget process.  Instead, the town which collects the municipality's tax adds an increment to the municipality's tax rate of just the right size to pay back Dutchess County.  By the way, Dutchess County, in its beneficence, declines to charge interest on the money it fronts.  It just eats those costs, which are small potatoes.  Well, I guess you get to pay even the interest, through county taxes.  See?  There's no escaping death and ...

This Is a Reasonable System

One advantage of this system is that the municipality is insulated from all these real world situations.  It can do its budgeting just once a year, rather than being whipped around by every court decision or bankrupt taxpayer.  But it means that taxpayers pay each year for all the extra costs incurred the previous year.  In other words, taxpayers pay at a slightly higher tax rate than what the municipality's budget says it's charging them.  This is why there's a taxpayer viewpoint and a budget viewpoint for tax rates. 

This Blog Focuses on Taxpayer Viewpoint

In my property tax investigations, I prefer the taxpayer viewpoint, because the taxpayer rates are the rates at which taxpayers actually pay taxes.  The taxpayer rates are readily available in tax rate pamphlets published each year by the Dutchess County Real Property Tax Service Agency.  But the thing is, the taxpayer rates for 2012 aren't available until, well, January 2012.   In the fall of 2011, the only 2012 tax rates available are those in municipal budgets.  I take these budget tax rates as the best available estimates of the (yet unknown) 2012 taxpayer tax rates.  Such tax rates will tend to underestimate the tax rates on tax bills, but generally not by much.

Tax Rate Increases

When the latest tax rate is only a budget tax rate, and not a taxpayer tax rate, the tax rate increase compared with the previous year will be reasonably close to the (yet unknown) taxpayer-view tax rate increase, but will tend to underestimate it.  Budget documents, if they show tax rate increases at all, will ordinarily use only budget tax rates, in keeping with the municipality's viewpoint.  The result is that these budget tax rate increases will tend to not reflect taxpayer experience as well as my approach.  The budget tax rate increases reflect municipality experience. 

Example — Arlington Fire District

An example of what I'm talking about can be seen in the Arlington Fire District's proposed 2012 budget.  I state here that this budget proposes a 10.1 percent tax rate increase over 2011.  The 10.1 percent is figured by comparing Arlington's proposed budget 2012 tax rate of $4.87 with the 2011 taxpayer-view tax rate of $4.43.  (Calculations carried to many significant figures, of course.)  On the other hand, if the tax rate increase percent is calculated using only budget tax rates, the budget tax rate increase would be 10.4 percent, as I describe here.  Both the 10.1 and the 10.4 figures are reasonable, depending on one's point of view.  From the taxpayer's viewpoint, the 10.1 figure is the more appropriate.

School Tax Rate Comparisons — Two Viewpoints

Long-time readers of this blog may wonder how the two tax rate viewpoints discussed above relate to the two tax rate viewpoints discussed in School Tax Rate Comparisons — Two Viewpoints.  The short answer is that they're unrelated.  The viewpoints in that previous post apply only to school districts, not to other municipalities.  Both kinds of tax rates discussed in that previous post are taxpayer viewpoint tax rates in the sense of this post.  On the other hand, the taxpayer and budget viewpoints of this post can certainly be applied to school districts, further complicating what starts out as a very simple idea.

Arlington Fire District Treasurer Misleads About Tax Rate Increases

I recently reported that the Arlington Fire District's 2012 proposed budget calls for a 10.1 percent tax rate increase, and that this fact is not mentioned anywhere in the proposed budget.  The tax rate expresses how steeply property owners' wealth — as measured by the market value of their properties — is taxed.  The tax rate increase expresses how much steeper the taxation is becoming.  The omission of the tax rate increase from Arlington's proposed budget makes it difficult for all stakeholders — taxpayers, residents, and even the fire commissioners themselves — to understand how the tax rate is changing.

It's bad enough that the proposed budget document does not contain any tax rate increases, but this document does something worse:  It contains percent increase numbers that many people would assume are tax rate increases, but that are not.  Stakeholders reviewing this document will therefore be misled, thinking they know what Arlington's tax rate increases are, when they really don't.  In my view, thinking you know — but being wrong — is worse than not knowing at all.

Examining Arlington's 2012 Proposed Budget Document

The last three rows on the last page of Arlington's 2012 proposed budget document are labeled as follows:

1. Rate per Thousand of Assessed valuation for Tax Bills going out Jan 1 (sic)
2. Increase Per Thousand Over last year (sic)
3. Percentage increase of Tax Bills going out Jan 1 (sic)

The first of these rows contains the tax rates for each year from 2008 to 2012 (proposed), as one would expect.  The second of these rows contains the amount of tax rate increase over the previous year, as one would expect.  So far, so good.

The third row is the point of issue.  Since the second row is the amount of tax rate increase, the third row should be the percent of tax rate increase.  It is not.  To calculate the percent of tax rate increase, one would divide the amount of tax rate increase by the tax rate of the previous year.  Instead, the numbers in the third row are the amount of tax rate increase divided by the tax rate of the current year.  The numbers in the last row represent nothing of much interest, and they certainly don't represent tax rate increases.  When tax rates are rising, as they have been for Arlington in recent years, these numbers understate the actual tax rate increases.

Numbers Deliberately Differ From Tax Rate Increases

The percentage increase numbers in the last row of the proposed budget are not a mistake.  They were calculated that way on purpose.  I don't know what that purpose is, since these numbers have no use that I know of.  But the effect, in my view, is that many stakeholders reading the budget document will be misled.

The author of the budget document is James F. Passikoff, Treasurer of the Arlington Fire District.  As a certified public accountant, Passikoff knows the formula for percent increase that we all learned in eighth grade (or maybe fifth grade these days).  Passikoff confirmed to me that his percentage increase numbers were calculated by dividing by the tax rate of the current year, not the previous year, and he agreed that these numbers do not represent the tax rate increase percent.  I expressed concern that many readers would be misled into thinking that these numbers represent the tax rate increase percent.  Passikoff responded that nobody understands these numbers anyway.

I have to admit, based on my three years of property tax investigations in Dutchess County, that I have considerable sympathy with Passikoff's skeptical view of his readers.  On the other hand, stakeholders can hardly expect to understand tax matters when they are given numbers which look, feel, and smell like tax rate increase percentages — but aren't.  Seemingly unconcerned with this outcome, Passikoff told me he is satisfied with what he did, and does not consider these calculations a mistake.  I have no reason to think that Passikoff is intentionally trying to mislead stakeholders.  On the other hand, his responses seemed to show an indifference to whether stakeholders might be misled.

Correcting the Record

Using the values for tax levy and assessed value in Arlington's 2012 proposed budget, the 2012 proposed tax rate increase is 10.4 percent — not the 9.4 percent number calculated by Passikoff.  Alert readers will notice that the 10.4 percent increase is different from the 10.1 percent increase I claimed in my last blog post.  The difference is because the 10.1 percent increase is from the taxpayer's view — my preferred viewpoint — but the 10.4 percent increase is from the municipality's view, an appropriate view for a budget document.  Each viewpoint is suitable to its own domain.  For more detail on this point, see my forthcoming post Tax Rate Viewpoints — Taxpayer Versus Budget.

Recommendation

I recommend that the Arlington Fire District's 2012 budget document be revised prior to the October 18, 2011, public hearing, to include tax rate increase percentages in place of the misleading numbers in “Percentage increase of Tax Bills going out Jan 1”.  That way, stakeholders will not be needlessly misled about Arlington's tax rate increases.

Arlington Fire District Proposes 10.1 Percent Tax Rate Increase

The Arlington Fire District's 2012 tax rate will be $4.87 per thousand dollars of market (or assessed ) value, up 10.1 percent from 2011, according to Arlington's proposed budget, which was finalized September 19.  But you won't find the 10.1 percent tax rate increase mentioned anywhere in Arlington's proposed budget, making it difficult for taxpayers, residents, and even Arlington Fire District officials to understand what's going on.  I'll have more to say about this omission in a subsequent post.  Meanwhile, this post is just about Arlington's proposed 2012 fire taxes in historical perspective, and in relation to the Fairview Fire District.

The proposed $4.87 tax rate would be the highest for Arlington in this millennium.  Arlington's proposed 2012 tax levy of $15.4 million would be the highest in its history.  The corresponding tax levy increase of 3.1 percent exceeds New York's “two percent tax cap” by 1.1 percent.  (The tax cap doesn't really affect fire districts, as I note here.)  Arlington's tax situation can be seen in historical perspective as follows:

Another useful way to see the big picture is by displaying columns of the above table as bar charts, such as this one for tax rate:

The true value tax rates shown in this chart express how steeply a property owner's wealth, as measured by the market value of his property, is taxed.  For this reason, the true value tax rate is the most important property tax parameter, in my view.  The above chart clearly shows the effect of the 2008 economic meltdown:  From 2003 to 2008, Arlington's true value tax rate held fairly steady in the approximate range $3.15 to $3.45.  But beginning in 2009, Arlington's tax rate reached a new historical high every year.  The 2012 data is in yellow, because it is only proposed.  You can find charts of the other five columns of the above table, and more commentary, in my report Arlington Fire District Property Tax Data.

Comparison with Fairview

The Fairview Fire District is famous for having the highest true value fire tax rate in Dutchess County, and one of the highest in New York State.  Until recently, Arlington has been a not-very-close second in Dutchess County.  Fairview's tax rate has hovered in the neighborhood of $5.00 per thousand dollars of market value for nearly a decade, while Arlington's has been well below $4.00 until as recently as 2010.  But with Arlington's double-digit tax rate increases in 2009, 2010, and now 2012 (proposed), it might appear that Arlington will soon pass Fairview for the “honor” of highest fire tax rate in Dutchess County.

But not to worry.  Fairview has kept its tax rate artificially low the last few years by failing to contribute to its reserve funds.  There's every reason to believe that Fairview's board will now begin to make up for these past lapses by increasing its tax rate well above $5.00 in 2012.  In fact, according to a preliminary estimate of Fairview's 2012 tax base, Fairview's 2012 tax rate will rise to $5.25 even in the unlikely event it doesn't increase its tax levy at all.  These considerations should keep Fairview safely in first place for the next few years.

It's worth noting here that if it weren't for the fact that nonprofit institutions escape fire taxes, Fairview would have had a lower fire tax rate than Arlington in recent years.  My report The Big Three Fire Districts of Dutchess County shows that Arlington's 2010 universal fire tax rate — the tax rate if exempt properties paid fire tax — is 30 percent greater than Fairview's.  As Arlington has been “catching up”with Fairview's tax rate since then, its cost for services is becoming even less favorable, compared with Fairview.  This is particularly surprising because economies of scale should have favored Arlington, which is four times larger than Fairview, both in total market value and number of fire stations.

Why Can't I Find Tax Rate Increase Percents in Arlington's Proposed Budget?

Have you actually looked at Arlington's proposed 2012 budget document?  If so, you might have noticed that its last row, labeled “Percentage increase of Tax Bills going out Jan 1”, contains percent values that one might reasonably think are tax rate increase amounts for each year.  If one thought that, one would be wrong.  There's a whole story behind this surprise, which I plan to tell in a forthcoming post.

Fairview Fire District's Staffing Crisis Continues

I reported in May that the Fairview Fire District is in crisis.  At a public workshop meeting on May 26, Fairview officials revealed that there is a short-term crisis in under-staffing, and a long-term crisis in financing.  If these crises cannot be resolved, the level of service in Fairview will need to be reduced.  Such a reduction would represent a game-changing dismantling of part of Fairview's mission, resulting in increased risk to life and property, as well as increases in insurance rates for all Fairview property owners.  This post is an update on the staffing crisis.

What is the staffing crisis?

The staffing crisis was explained at the May 26 meeting by Fairview Firefighter Mark Bendel as follows:  The fire station must be staffed by four career firefighters at all times (24x7) in order to maintain Fairview's level of service in the District.  This staffing level requires at least 16 career firefighters to fill all shifts, assuming a “normal” 42 hour work week.  Three firefighters have recently left the District (retirement and transfer), and one more is unavailable because of medical leave.  To continue Fairview's level of service, the remaining 12 firefighters have been working major amounts of overtime (mostly at straight-time pay) for many months.  Although the financial cost of this arrangement to the District is minimal, the stress on firefighters is extreme, and unsustainable.  Firefighters are overworked, morale is low, and additional firefighters are said to be considering leaving the District, which would further exacerbate the crisis.

The District cannot simply reduce the fire station staffing from four per shift to three, even temporarily, without major repercussions.  Bendel explained that having only three firefighters available to fight a structure fire would dramatically reduce the level of service, resulting in significant increases in risk to both life and property.  Not only that, but the reduced level of service would cause all property insurance rates in the fire district to increase considerably.  All stakeholders would be substantially affected by a reduced level of service.

Board of Fire Commissioners Eventually Hires Two Firefighters

The staffing crisis was well known to Fairview's board of fire commissioners even before the May 26 meeting.  At the April 5 commissioners meeting, firefighters union representatives pleaded with the commissioners to authorize the hiring of three additional firefighters, but the commissioners took no action at that time.  However, at the June 7 commissioners meeting, they passed a resolution authorizing the hiring of two firefighters.  Two firefighters were hired at the beginning of July.

So problem solved, or at least alleviated, right?  

Unfortunately, not.  For one thing, the District didn't really hire two firefighters.  It hired two EMTs, who must still be trained in firefighting, at District expense.  (If the District had just hired “off the street”, the employees would have had to be trained in EMT and firefighting, at much greater time and expense.  So hiring EMTs was a big advantage.)

The two EMTs are currently being trained at the New York State Academy of Fire Science in Montour Falls, and cannot be deployed in the department until November.  Meanwhile, Fairview's firefighters have continued to struggle under massive amounts of overtime, since only 12 out of a needed 16 firefighters are available.  On average, firefighters have been working 56 hours per week, every week.  But overtime cannot be distributed evenly, for a variety of reasons.  Some firefighters have been working 70 hours a week for many weeks in a row. 

OK, so in November, problem alleviated, right?

Unfortunately, not so much.  In November, when the two new firefighters are to be deployed in the station,  the staffing shortfall was expected to have been reduced from 4 to 2.  But in an ironic turn of events, it was announced during the September 6 commissioners meeting that yet another firefighter has submitted his resignation, and will be leaving the District by the end of this month.  So the staffing shortfall in October will be an outrageous 5 firefighters out of 16, meaning that the average firefighter will work 61 hours during that month.  Beginning in November when the two new firefighters will be deployed, the staffing shortage will still be 3 out of 16 — almost as bad as it's been since last spring.

It Gets Worse

The irony is increased further by the fact that the resigning firefighter is none other than Mark Bendel, the eloquent spokesman for the firefighters at the May 26 meeting.  Bendel has been a major asset to the District.  His loss will be deeply felt.

And It Could Get Even Worse

As things now stand, Fairview is faced with the need to hire two more firefighters, just to bring staffing up to the minimum of 16 firefighters on staff.  And even then, one of those firefighters is on medical leave, so overtime will still be necessary until he returns.  But the staffing situation could easily get worse.  Four firefighters are eligible to retire, and could do so at any time.  And considering the low morale, other firefighters may transfer to other districts, where they can expect to work only 42 hours a week instead of up to 70.  During the public comment session of the September 6 commissioners meeting, former Fairview Fire Commissioner and Board Chairman (and current volunteer safety officer for the District) John Anspach reprimanded the current board of fire commissioners for not authorizing full staffing, pointing out that the sustained excessive overtime decreases safety for all the firefighters.  At the same meeting, Fairview firefighters union president Tim Gilnack announced that the union was considering filing a formal grievance against the District.  Regardless of the outcome of a grievance filing, it would take time, energy, and money away from solving Fairview's problems.

Fairview's Fundamental Problem

If staffing were Fairview's only problem, it could easily be solved:  Just hire more firefighters.  But as I see it, under-staffing is only a symptom of Fairview's fundamental problem, a shortage of money in the long term.  Most of Fairview's budget pays for firefighters' hourly wages and benefits, and most of Fairview's income comes from the fire tax levy to property owners.  In other words, unless Fairview can acquire a significant new source of income, the number of firefighters per shift that Fairview can support is roughly proportional to Fairview's fire tax levy.

Fairview's fire tax levy is already high compared with Fairview's tax base.  The ratio of the two, which measures how steeply taxpayers' wealth is taxed by the fire district, is called the true value tax rate.  Fairview already has the highest true value fire tax rate in Dutchess County, and one of the highest in New York State.  Significantly increasing this tax rate may not be politically tenable.  Unfortunately, Fairview's tax base is shrinking.  This means that even without increasing Fairview's 2012 tax levy at all, Fairview's 2012 tax rate is projected to increase 2.8 percent to $5.25 per thousand dollars of market value, making it Fairview's highest tax rate in a decade.

What Were the Fire Commissioners Thinking?

My understanding is that Fairview's long-term financial crisis is the reason why some commissioners have been hesitant to increase staffing.  The commissioners say they authorized two new firefighters in June only because of  new concessions by the firefighters union, worth $80,000 over two years.   By taking this action, the commissioners may have allowed the District to limp along a little while longer before the day of reckoning arrives.  But as the staffing situation continues to be unstable, it's difficult to say how much time this action will buy.  If firefighters continue to leave the district, the morale of Fairview's overworked firefighters will continue to deteriorate, accelerating a downward spiral that has already begun.

My thanks to Fairview Fire Chief Chris Maeder and other members of the department for graciously providing me with information about staffing.

Two Percent Tax Cap Does Not Affect Fire Districts

A key part of Andrew Cuomo's successful campaign for Governor of New York was his five-point plan to build a “new NY”.  His second point — controlling government spending — included a local property tax cap. Cuomo signed into law a two percent cap on local property tax levy increases on June 30, 2011.  Since then, all local governments in New York, including fire districts, have been wringing their collective hands, trying to determine how the new law affects them.  I have just learned that as far as fire districts are concerned, it doesn't.

As always, the devil is in the details.  Here they are:  The property tax cap law states that the two percent limit on tax levy increases can be overridden by a vote of “sixty percent of the governing body” of the local government.  In the case of a fire district, the governing body is a board of up to five commissioners.  Sixty percent of that is three commissioners.  OK, so three commissioners are needed to override the tax cap.  But here's the thing:  Three commissioners are needed anyway to pass any budget, regardless of the budget's size.  So a board of fire commissioners needs no more support to exceed the two percent cap than to not exceed it.

Technicalities

To conform with the mechanics of the tax cap law, the board must take two votes instead of one:  The first to override the tax cap law (if needed), and the second to pass the budget.  But this technicality has no practical effect on what boards of fire commissioners can do.  As a political matter, however, boards may be reluctant to be seen as thwarting the intent of Cuomo's pledge to control government spending.  Or maybe not.

Says Who?

The fact that the two percent tax cap does not affect fire districts isn't just my opinion.  It is also the opinion of David B. Garwood, attorney with Scicchitano & Pinsky, PLLC, a law firm marketing itself as “an authority on fire protection and EMS law in New York State”.  Garwood stated his opinion to Fairview's board of fire commissioners at a public meeting last evening.

Fire District Spending Out of Control, or Dodging a Bullet?

So is the inefficacy of the two percent tax cap for fire districts bad news or good news?  It depends who you ask.  For many local property owners hoping for property tax relief, it's bad news.  For boards of fire commissioners, it's good news.  Most local government officials in New York State have fought bitterly against the passage of this law, warning of dire consequences if it is enacted.  Now it seems that fire districts are effectively free from any spending restrictions in the property tax cap law.

Suggestions to Improve Fairview's Fire Tax Projections

As part of my continuing coverage of the crisis in the Fairview Fire District, this post is the third in a series stemming from my attempt to analyze the Budget Projections Spreadsheet presented at Fairview's May 26 meeting.

 As I reported recently, Fairview Fire District Treasurer James Passikoff developed a Budget Projections Spreadsheet which is flawed by some tax data that is incorrect, and some tax data that is meaningless garbage.  These flaws make it more difficult for the general public and even the Board of Fire Commissioners to understand what may happen to Fairview fire taxes in the next few years.  Unfortunately, even if these flaws are corrected, stakeholders will still have a difficult time understanding Fairview's financial status.  That's because the spreadsheet format contains a great deal of extraneous detail, so that it's very difficult to see the big picture.  What's needed is a simpler and cleaner presentation of the financial facts.  This post suggests some specific ways to improve this presentation.

The first order of business, in my view, is to get rid of the single spreadsheet form of presentation, and replace it with multiple tables and charts, each dealing with a major aspect of budgeting, such as income, expenses, reserve funds, taxes.  For now, here are my suggestions for tax-related projections:

• Do not display any data involving assessed values or equalization rates.  This means not only assessed values directly, but also tax rates measured in dollars per thousand dollars of assessed value.  Assessed values and equalization rates are simply artifacts of the legacy way of collecting property taxes, and are not meaningful for planning purposes.  Replace these parameters with market values (also known as home values, true values, full values, etc.) and tax rates measured in dollars per thousand dollars of market value (also known as true value tax rates).  Once this is done, separate tax rates for Poughkeepsie and Hyde Park become redundant (because they're the same).  Replace these separate tax rates by a Fairview Fire District tax rate.
• Do not display any parameters for the Hyde Park and Poughkeepsie portions of Fairview.  None of these parameters affect tax projections.
• Display the year-to-year percent changes in taxable market value and tax levy, just as is done for tax rate.  These parameters are important for seeing trends.
• Transpose the table of projections.  That way, long-term planning can be carried out for any number of years into the future — or past — while keeping a constant table width.

If all the above suggestions are accepted, the resulting table will appear something like this:

but with years extending more into the future and less into the past.  The above table is from page 1 of my May 23, 2011, report Fairview Fire District Property Tax Data.  The last 6 pages of this report display each column of the table in convenient chart form, showing trends at a glance.  For example, Fairview's tax rate trend (page 7) is as follows:

This report was published in conjunction with my blog post Fairview Fire District Tax Base Projected to Drop 2.7 Percent.

Teamwork?

I would be happy to contribute my Microsoft® Excel workbook, used to generate the table and charts, for use by Fairview officials.  It can be modified easily to add future years and remove past years.  I would also be happy to work with Fairview officials to facilitate this.  In my view, the above style of presentation will be easier for may stakeholders to understand than that in the current budget projections spreadsheet.

Fairview Fire District Board Chairperson Withholds Tax Calculations

As part of my continuing coverage of the crisis in the Fairview Fire District, this post is the second in a series stemming from my attempt to analyze the Budget Projections Spreadsheet presented at Fairview's May 26 meeting.

As I reported yesterday, Fairview Fire District Treasurer James Passikoff developed a Budget Projections Spreadsheet which is flawed by some tax data that is incorrect, and some tax data that is meaningless garbage.  These flaws make it more difficult for the general public and even the Board of Fire Commissioners to understand what may happen to Fairview fire taxes in the next few years.  Some stakeholders may have decreased confidence in Fairview officials who develop and present such flawed data.

In attempting to analyze these flaws, I naturally wanted access not just to the tabular data appearing on the Fairview Fire District website, but also to the underlying Microsoft Excel workbook file it was derived from.  That way, I'd be able to see the formulas used to calculate the various entries, and to verify how the calculations were performed.  Accordingly, I asked Fairview Fire District Secretary Cathy Gallinger for this file.

Access Denied

Gallinger informed me that under Fairview's new Freedom of Information Law Policy (FOIL Policy), I can't just ask for this file, but I must submit a written FOIL request to Fairview Fire District Records Officer and Fire Chief Chris Maeder.  No problem.  I emailed my FOIL request to Maeder on 7/8/2011.  Maeder responded that he was on a week's vacation, and was delegating his response to Galllinger.  Still no problem.  Next, Gallinger denied my request, saying, “The requested sheets are not public documents as they are draft worksheets and possibly personal notes.”

Now it's starting to be a problem.  But I wasn't foiled — yet.  I knew that under New York State's FOIL act, an initial denial can be appealed.  In the case of Fairview, the appeals officer is Fairview Board of Fire Commissioners Chairperson Jill Line, who has made openness and avoidance of secrecy a hallmark of her chairpersonship.  Thus, I had some reason to expect a favorable outcome.

Still, in my emailed FOIL appeal to Line, I was careful to state my case as forcefully as I could.  I emphasized that the Fairview Fire District owns the Excel workbook file, that New York's FOIL act provides for the presumption of access, with certain exceptions based on potential for harm.  In the present case, not only is there no potential for harm, but there are benefits of public scrutiny of tax calculations.  But my strongest argument, as I see it, was that the FOIL act is only intended to require government to grant access in most cases.  There is nothing in the FOIL act which prohibits government from granting access to records, if the government chooses to do so.

No matter.  Line's short denial letter, obviously written in the voice of Fairview Fire District Attorney Brad Pinsky, gives two reasons for denial:

1. The spreadsheet formulas I requested are embedded metadata, which is in a grey area of possible FOIL access exceptions.  Line/Pinsky have determined that these formulas “should not” be disclosed.
2. “We further opine that the formulas utilized may constitute a ‘trade secret’ of the accounting firm used to produce the spreadsheets.”

Deconstructing the Line/Pinsky Denial

Reason #1:  It's true that the spreadsheet formulas I requested are embedded metadata.  I don't know whether embedded metadata is in a grey area of possible FOIL access exceptions.  But assuming it is, as Line/Pinsky claim, the letter gives no justification for denying access.  It's just an arbitrary decision.

Reason #2:  The “trade secret of the accounting firm” argument is in my view completely absurd.  In the first place, the spreadsheet was not produced by an accounting firm.  It was produced by James Passikoff acting as a paid officer (Treasurer) of the Fairview Fire District. The fact that Passikoff is also a principal in a CPA firm is irrelevant to his work for the District.  Fire district treasurers are not even required to be CPAs, and most fire district treasurers in New York State are not.  The Fairview Fire District has no contract with Passikoff's accounting firm, as far as I know.  And even if it has, the standard for government contractors regarding FOIL requests is the same as for the government itself.  In other words, a government cannot conceal records from the public just by contracting out the development of these records.  In the second place, the trivial formulas used for calculating property taxes in New York State can be trade secrets?  You gotta be kidding me!

In summary, the denial developed by Pinsky is a contrived legalistic argument of questionable merit.  What I suspect happened is that Passikoff didn't want the Excel workbook released, and Pinsky, as a good lawyer should, found a way to justify not releasing it.

Where was Line in all of this?

In the normal course of human affairs, people in power generally attempt to do what they want, within the various constraints of their office.  That's what it means to have power:  You get to decide.  An outside observer with this understanding of power might reasonably assume that Line wanted to withhold access to the spreadsheet formulas, and she found a way, through Pinsky's contrived legalisms, to do so.

I don't think that's what happened.  I think that, to the contrary, Line wanted to grant access to the spreadsheet formulas.  She just didn't understand how to exercise the power of her office.  Line delegated to Pinsky the task of responding to my FOIL appeal.  That in itself is not a problem.  The problem is that in doing so, Line did not direct Pinsky to attempt to satisfy her wishes.  Instead of saying to Pinsky, “Is there a reasonable way I can grant Rubin's FOIL request?”, she more likely said something passive like, “Please write a response for my signature.”  In the absence of direction from Line, Pinsky did the most reasonable thing under the circumstances:  He executed his task to conform with the wishes of the most manifest source of power:  James Passikoff.

My Appeal Could Have Been Granted

Had Line asserted her authority and directed Pinsky to try to find the outcome she wanted, the dynamics would have been completely different.  Since Passikoff is appointed by the Board, Line's power overrides Passikoff's.  Pinsky, recognizing this, would have tried to execute his task to conform with Line's wishes over Passikoff's.  This would have been easy for him to do in any number of ways.  One way would have been to throw out the ridiculous reason #2, and reverse the arbitrary decision on reason #1.  But even easier would have been to simply throw out the entire FOIL legal question, and just grant access because she can.  To quote from my FOIL appeal to Line, “... if you choose to do so, you can can grant me access to this file, even if FOIL doesn't force you to do so.”

Well, these last two sections are all just speculation on my part, since I don't really know what transpired among the parties.  If the above scenario is incorrect, I'm happy to be corrected.

Fairview Fire District Treasurer Bungles Tax Calculations — Again

As part of my continuing coverage of the crisis in the Fairview Fire District, this post is the first in a series stemming from my attempt to analysis the Budget Projections Spreadsheet presented at Fairview's May 26 meeting.

As I reported in May, Fairview Fire District Commissioner Bob Gephard revealed the dire state of the District's long-term finances at a public workshop meeting on May 26.  Gephard's presentation centered around a spreadsheet of budget projections prepared by Fairview Fire District Treasurer James C. Passikoff and posted on the District's website here.  Although the general thrust of Gephard's presentation — that Fairview has a long-term financial crisis — is undoubtedly correct, the spreadsheet is flawed by some tax data that is incorrect, and some tax data that is meaningless garbage.  These flaws make it more difficult for the general public and even the Board of Fire Commissioners to understand what may happen to Fairview fire taxes in the next few years.  Some stakeholders may have decreased confidence in Fairview officials who develop and present such flawed data.

Garbage Data 

Almost halfway down page 2 of the Budget Projections Spreadsheet is a row labeled “Total Assessed Valuation”.  For each column, the entries in this row can be seen to be the sum of the assessed valuations of the Poughkeepsie and Hyde Park portions of the Fairview Fire District.  These sums are garbage.  There's no polite way to say it. 

For example, consider the 2011 column.  In round numbers, the assessed valuations are $375 million for Poughkeepsie and $75 million for Hyde Park.  Passikoff simply adds these numbers to get the bogus value of $450 million.  The problem is that although Hyde Park's assessed valuation of $75 million is conventionally written in units of dollars, it isn't really dollars as we normally think of dollars, and therefore cannot meaningfully be added to Poughkeepsie's $375 million.  That's because Hyde Park's equalization rate is not 100 percent.  One needs to divide Hyde Park's assessed valuation by its corresponding 2011 equalization rate of 54 percent, thus converting it to market value, before one can add it to Poughkeepsie's, whose equalization rate is 100 percent.  Assessed values corresponding to different equalization rates must be converted to market value (or some other convenient unit) before they can be added.

Passikoff's calculation is like saying, “I delivered 375 pounds of bricks to Poughkeepsie and 75 kilograms of bricks to Hyde Park, for a total of 450 weight of bricks.”  No.  The total is 540 pounds of bricks or 245 kilograms of bricks.  It's not 450 anything of bricks.  Passikoff actually performed the correct calculation in the “Total Full Valuation” row directly below, arriving at $514 million for 2011.  But including correct results doesn't change the fact that the spreadsheet contains garbage.

As it turns out, Passikoff's mistake — not understanding the true significance of assessed value and equalization rate — is unfortunately all too common in Dutchess County among people who should know better.  The most frequent offender is the Poughkeepsie Journal, which made exactly the same mistake last year, as I describe here.

Incorrect Data

The last few rows of the Budget Projection Spreadsheet, labeled “Rate per Thousand of Assessed Valuation” and “Percentage change from last year” for Poughkeepsie and Hyde Park are troubling because they contain data that is not especially relevant for the purposes of budget projection.  I will have more to say about this in a subsequent post.  But for now, the point is that the data in the last row, showing the percent change in Hyde Park's tax rate for each year from 2010 through 2014, appear to have been calculated incorrectly.  In any case, the result is that most of these values are incorrect.

Tax rates expressed in dollars per thousand dollars of assessed value, like those in Passikoff's spreadsheet, cannot be compared with each other (such as by calculating percent changes) unless they correspond to the same equalization rates.  Before comparing such tax rates, they must first be converted to the same equalization rate.  Typically, one would do this by choosing 100 percent equalization rate (so-called true value tax rate).  However, for 2012, Hyde Park's equalization rate happens to be the same as 2011's.  Therefore, the tax rate change for Hyde Park for 2012 (three revisions) is correct by accident.  For all the other years, it's incorrect.

Passikoff's calculation is like saying, “I accelerated from 50 miles per hour to 100 kilometers per hour, so my speed increased by 100 percent.”  No, my speed only increased by 24 percent, because 100 kilometers per hour is “really” 62 miles per hour.  (Or if you prefer, 50 miles per hour is really 80 kilometers per hour.)

Perceptive readers will recognize that the percent change mistake is simply another form of the total assessed valuation mistake.  It's all about not understanding the true significance of assessed value and equalization rate.  This form of the mistake is even more common than the first form among people who should know better.  I've already posted about how officials in the Towns of Hyde Park and Pleasant Valley have been making this form of the mistake for years.  The Poughkeepsie Journal is another chronic offender on this mistake.

If Fairview's Hyde Park percent changes are calculated correctly, they will be the same as the corresponding Poughkeepsie percent changes.  It is therefore pointless to display a separate row for Hyde Park in the Budget Projection Spreadsheet.  More on this in a subsequent post. 

Mistakes Are Part of a Pattern

This is not the first time Passikoff has made mistakes involving tax calculations with assessed values and equalization rates in the Fairview Fire District.  His mistakes in apportioning the fire tax levy between Hyde Park and Poughkeepsie between 2001 and 2008 cost Hyde Park taxpayers more than $200,000 in unfair tax over-billings, as is extensively documented here and especially here.

Feedback from Fairview Officials

The above analysis of the Budget Projections Spreadsheet may be news to many readers of this blog, but it is not news to Fairview's Treasurer James Passikoff or Fairview Commissioners Bob Gephard and Joe Petito.  I emailed the main points of the above analysis to all of them on May 24 — two days before their public meeting.  Both commissioners indicated to me that Passikoff is solely responsible for the spreadsheet.  Unfortunately, I never heard from Passikoff on this matter.  Gephard made a concerted effort to provide me with some material feedback, but ultimately he was not able to answer all my questions.

Many Questions Remain

As I see it, the above analysis of the budget projections spreadsheet only begs more questions:

1. Why do I hedge that the data in the last row “appear to have been calculated incorrectly” rather than just saying straight out that they have been?  (It turns out that there's a whole sad story behind this.)
2. Why couldn't I get a satisfactory response from Commissioner Gephard about the spreadsheet he presented?  Or from Treasurer Passikoff who developed it?
3. How can the budget projections spreadsheet be improved to present a more useful picture of Fairview's long term financial situation?

I plan additional posts to address these questions.