Saturday, April 14, 2012

Fairview Fire District's Exempt Percent Is Misstated — Again

Property taxes are not billed to all real properties, only to taxable properties. Some properties are exempt from taxes because they belong to the government or to not-for-profit institutions such as schools, hospitals, and churches. In most jurisdictions, exempt properties comprise only a small fraction of the total market value of the jurisdiction. Not so in the Fairview Fire District. Fairview is home to three large not-for-profit (NFP) institutions (Marist College, St. Frances Hospital, and Dutchess Community College) in addition to numerous smaller government and private institutions. For more details, see page 11 of The Big Three Fire Districts of Dutchess County. This might not be a problem for a large fire district, but Fairview is a very small district, comprising only 4.5 square miles. Therefore, the percent of Fairview's market value that is exempt from fire tax — Fairview's exempt percent — is large.

Although the NFPs pay no fire tax, they still account for about half of the fire and emergency service calls of the Fairview Fire District. Property taxpayers in Fairview pay not only their own share of fire tax, but they also pay the “NFP share”. Fairview's large exempt percent is a major factor in Fairview's high fire tax rate. Fairview has the highest fire tax rate in Dutchess County, and possibly the highest fire tax rate in New York State. Many property taxpayers in Fairview are understandably resentful of their high fire taxes, and they correctly attribute much of the cause to the fact that they are paying the NFP share. How large is the NFP share? That is, what percent of the Fairview Fire District's total market value is exempt from property tax? Briefly, how much is Fairview's exempt percent?

History of Exempt Percent Misstatement

Unfortunately, there has been a long history of misstatement of Fairview's exempt percent. I have traced these misstatements to two documents. The first document is a single-page undated anonymous sheet, probably from around 2005, claiming that Fairview is 77 percent exempt. All likely parties have disclaimed authorship of this document, and there seems no way to trace its conclusions to primary sources. Therefore, this document cannot be relied upon.

The second document is a 5-volume report, Land Use Analysis & Assessment Report, prepared for the Fairview Fire District by consultant company C. T. Male Associates in 2006. Only two sentences in this report refer to Fairview's exempt percent, and even these sentences discuss its value in quite a roundabout way. Unfortunately, Fairview officials incorrectly interpreted the circumlocutory language in the report to mean that Fairview is 73 percent exempt.

And so it was that by April of 2008, an urban legend had become established that 70 to 80 percent of Fairview's market value is tax exempt. Numbers in this range were widely quoted by Fairview officials, by residents, by the Poughkeepsie Journal, and even by state and county officials. By June of 2008, State Senator Stephen Saland, State Assemblyman Joel Miller, and Dutchess County legislator Jim Doxsey were all in the process of submitting legislation intended to alleviate the burden on property taxpayers in Fairview and any other fire districts with exempt percents of 50 or more. Fairview's exempt percent had clearly become a potent political weapon in attempts to obtain tax relief.

Busting the Urban Legend

It was at this time that I began my own investigation of Fairview's exempt percent. On June 18, 2008, I posted a 25-page report Tax Exempt Properties in Fairview to my newly-created website Fairview Fire Tax. This report showed that Fairview is 41.7 percent exempt. My result was independently confirmed in a memo issued by Dutchess County Real Property Tax Director Kathleen Myers. Thus, none of the state and county initiatives would have benefited Fairview as intended, because Fairview's exempt percent was not nearly so high.

Sen. Saland, Assemblyman Miller, and Legislator Doxsey were quick to recognize the legitimacy of my analysis and withdraw their bills. Although some local advocates initially responded to my report with skepticism and even hostility, my result eventually became generally accepted, and the urban legend gradually died away. But local officials were clearly embarrassed by their acceptance and promotion of wildly inaccurate exempt percents for Fairview, and they have become highly sensitive to any misstatements of Fairview's exempt percent.

Busting the Corrected Exempt Percent

Upon calculating Fairview's exempt percent for tax years 2009 and 2010, I found that the value had jumped up dramatically to 47.5 and 47.9 percent, respectively. Then in March 2010, I made a remarkable discovery: Fairview's exempt percent of 41.7 that I had calculated in 2008 is wrong! Well, 41.7 percent is still the “official” number since it is based on the official assessment roll for 2007. Therefore it is “right” by definition. However, it is still wrong by any reasonable judgment. That's because a blunder by the Town of Poughkeepsie Assessor's Office had caused $120 million in exempt property to be omitted from the official assessment roll for 2007! Correcting for this blunder causes Fairview's effective 2008 exempt percent to be 47.9.

Assuming this correction, Fairview's exempt percent has been about 47.7 percent plus or minus 0.2 percent for tax years 2008, 2009, and 2010. That's where things have stood ... until last month.

Pace Study Misstatement

The Fairview Fire District has contracted with Pace University's Michaelian Institute for Public Policy and Management to study the feasibility of Fairview consolidating with one or more neighboring fire districts. New York State awarded Fairview a $45,000 grant two years ago to pay for this study, known locally as “the Pace study”. On March 22, 2012, the study's Principal Investigator, Michael Genito, presented the Study's initial findings at a public meeting in the Town of Poughkeepsie's Town Hall. Page 9 of this presentation included the statement that in Fairview “55% of real property value is tax-exempt”. I was one of a number of people at the public meeting who thought the 55 percent figure seemed out of line with Fairview's recent history of exempt percents, which have all been close to 47.7 percent.

Still, my last calculation was two years old, and it was theoretically possible, though unlikely, that Genito's figure could be correct for 2012. However, it is not. After independently obtaining the latest tax assessment rolls from Dutchess County's Real Property Tax Service Agency, calculating Fairview's exempt percent, and comparing with Genito's calculations (which he generously provided me), I found that for the 2012 tax year, 51.7 percent of Fairview is tax exempt. I'm pleased to report that as of today, Genito concurs with this result, and plans to update the Pace study website accordingly.

Genito's primary mistake in calculating Fairview's exempt percent was that he simply added the assessed valuations of  Hyde Park with those of Poughkeepsie, without first converting Hyde Park's assessed valuations to market value using the equalization rate. This is the same blunder that I found committed in another context by the Poughkeepsie Journal. But unlike the Poughkeepsie Journal, Genito immediately recognized his error once it was pointed out. After correcting for this error, Genito's calculation yields an exempt percent of 51.6, almost the correct value. The remaining 0.1 percent is accounted for by a technicality: Genito failed to include $1.75 million of exempt market value from two properties in Hyde Park that are only partially in the Fairview Fire District.

Fairview's Exempt Percent Has Substantially Increased

Although Fairview's current exempt percent is not as great as claimed in the Pace study's initial findings, it is still nevertheless substantially greater than Fairview's historical value of 47.7 percent. The obvious question is, Why? This topic will be the subject of a forthcoming post.

1 comment:

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