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.