Thursday, June 21, 2012

Pace Study's Analysis of Fairview Fire Tax Rate is Flawed

Pace University's Michaelian Institute for Public Policy and Management released its 189 page Fairview Fire District Consolidation and Efficiency Study final report on June 12. This work, known locally as the Pace Study, examines the feasibility of Fairview consolidating with one or more neighboring fire districts. Pace Study Principal Investigator Michael Genito will present this work at a public meeting this evening, according to the Pace Study website.

In spite of the central importance of tax rates to fiscal analysis, the final report devotes only three sentences and one chart to Fairview's past and future tax rates. Unfortunately, these three sentences, which pertain to average yearly tax rate increase and projection to 2017, are incorrect. Also, the chart contains some incorrect data and an incorrect linear approximation. When I presented my analysis to Genito, he readily concurred that all these statements and the chart are flawed.

Flawed Final Report Passage

The flawed information, on page 175 of the final report PDF (labeled page 167), is as follows:
The Fairview Fire District tax rate has increased on average 4.4% each year from 2008 through 2012. A linear regression of the past five years going forward indicates that by 2017 the tax rate would approximate $6.50 per $1,000 taxable assessed valuation. As such, and all things being equal, the median home would expect to see their fire service property tax to rise from $1,321 per year to $1,502 in 2017.

The above chart, copied from the final report, is confusingly labeled “Tax Rate per $1,000 Assessed Value”, but it is clear from context that this data is really tax rate per thousand dollars of market value, otherwise known as true value tax rate. This is the appropriate kind of tax rate for this analysis.

2008 Fairview Fire Tax Rate Is Incorrect

The key flaw is that the 2008 tax rate in the above chart is incorrect. Fairview's effective 2008 tax rate is $5.16, whereas the above chart shows it to be approximately $4.83. The final report's error in Fairview's 2008 tax rate leads to all the other errors in this passage, as will be explained below.

Genito's Blunder

How did Genito come to make this error? He apparently took an unwarranted shortcut. Instead of dividing Fairview's tax levy by Fairview's market value (the correct method, and the definition of true value tax rate), he took the Poughkeepsie portion of Fairview's tax levy and divided it by the Poughkeepsie portion of Fairview's market value. Under ordinary circumstances, such as between 2009 and 2012, Genito's method would give the same — or nearly the same — result as the correct method. Unfortunately, Fairview's circumstances in 2008 were far from ordinary.

Inequitable Apportionment

Long-time followers of my work know that for every year from 2001 to 2008, apportionment of Fairview's fire tax levy between Poughkeepsie and Hyde Park has been inequitable, resulting in different true value tax rates for the Poughkeepsie and Hyde  Park segments, in violation of New York State Real Property Tax Law. In 2008, the Poughkeepsie segment had a true value tax rate of $4.83 — the number on Genito's chart — but the Hyde Park segment had a whopping true value tax rate of $5.96. All these facts were documented in detail four years ago here, and especially here.

Corrected Chart

In order to fairly graph tax rates, the Y-axis should ordinarily begin at zero dollars. Genito's chart begins the Y-axis at $2, presumably to better visualize small changes in tax rate. The following chart, using the corrected 2008 value, takes this decision further, beginning the Y-axis at $5. This way, small changes in tax rate can be seen even better.

Although the final report's chart includes a straight line approximation to the data and an extrapolation to 2017, such analyses are not appropriate to the corrected data. That's because the corrected data simply does not fit a straight line well enough to justify such an approximation. The corrected data cannot meaningfully be used to linearly extrapolate Fairview fire tax rate out even one year — let alone five years. Once again, Genito concurs with this judgement, which is supported by generally accepted criteria for goodness of fit to a straight line. What this means is that there is simply no basis to support the second and third sentences in the final report's passage, which project 2017 values.

Fairview's Tax Rate Has Been Trending Down Until 2012

We know that taxes are always going up, right? Well, not in Fairview. Examination of the corrected chart between 2008 and 2011 shows that Fairview's yearly tax rate change has been downward twice and upward only once. Even the single upward change from 2010 to 2011 leaves Fairview's tax rate lower than it was in 2008. A standard linear approximation to Fairview's 2008—2011 tax rate would show a decreasing tax rate, not an increasing one.

Fairview's Tax Rate Has Been Approximately Constant — Until 2012

Fairview's downward trend in the 2008—2011 time period is actually quite small. It would probably make more sense to approximate Fairview's tax rate during this time period as a constant value. With such an approximation, Fairview's 2008—2011 tax rate is $5.10 plus or minus 1.2 percent for every year in this interval. The 2011 tax rate is equal to this constant value to within 0.2 percent.

Fairview's 2012 Tax Rate Breaks the Pattern

This pattern of constant tax rate is broken in 2012, where the tax rate soars 12 percent from its historical value of $5.10. It is this break from the pattern that makes it infeasible to predict future tax rates. Another way to look at it is that there is no way one could have predicted Fairview's 2012 tax rate by extrapolation from the previous 4 years.

Average Yearly Tax Rate Increase Is Misleading

What about the first sentence in the final report's passage (average tax rate increase of 4.4 percent per year)? This statistic depends crucially on the 2008 value. With the corrected value, the average tax rate increase is only 2.6 percent per year, not 4.4 percent. Thus the passage's first sentence is incorrect.

Of course, even the corrected sentence is of dubious value. Averages can be deceiving. Why mention a formally correct “average increase” when the tax rate actually decreases as often as it increases. A man drowned in a river whose “average” depth was 6 inches. But he was in the 10-foot part. For the average yearly tax rate increase, essentially all of the tax rate increase during the 5-year period occurred in the last year.

Flawed Passage Is Best Removed

According to Genito, the report's inclusion of the above-quoted passage stemmed from a request by Fairview officials (the “Study Committee”) for a projection based on a 5-year history. Now that Genito has accepted my correction, he and I seem to agree that no future projection can be justified by the data. As I see it, the average tax rate increase is misleading as well, and is best omitted. The only part of the flawed passage that could be of positive value is the corrected chart. This chart is certainly useful for understanding Fairview's fiscal situation, but such an understanding appears to be outside the scope of this report.


  1. Flawed Terminology Here

    Nothings been "Passed" or ever will be.

    This is not a "bill" or a "resolution" requiring a "vote".

    It is a Study!


  2. Give Mr. Genito a break! His chart is more realistic than the one you portray, at least his shows that the rise would be somewhat incremental. Your playing with the base and making it start at $5 makes it look like the tax rate is going through the roof! In my opinion, the vast majority of the study presents good facts without any bias towards one option or the other.

  3. We shouldn't lose sight of the big picture here and get lost in the Tax rate tunnell. The Big Picture is that none of the other districts were willing to come under the independent microscope but Fairview was and that's Big. Fairview "the Bigger District".

  4. @Anonymous June 22: As I mentioned in the blog post, fairness in visualizing the tax rate requires the Y-axis to begin at zero dollars. Genito did not do this. I simply followed Genito's example, taking it to the logical extreme. My purpose was not to visualize the tax rate, but to show that a straight line is a poor approximation to the data.

  5. @Bill Rubin: I have to agree with Anonymous June 22. Visualizing the tax rate does not require the Y-axis to begin at zero, and your doing so shows that an almost vertical line is just a poor (if not worse) approximation of the data. BTW, I downloaded the final version of the report Genito (or Pace University) posted and it seems that they were very accomodating to your comments and criticism. Perhaps you good be a bit more congenial and soften your comments. I wouldn't have used the word "blunder".

  6. @Anonymous June 24: I agree completely. Fairview had the guts and the leadership to move forward with the study, despite how unpopular it may be to some. We should consolidate all emergency services at a county level using strategically-placed precincts or stations, and get the benefits of volume purchasing and deployment of personnel for police, fire and EMS. There would also be a lot of efficiencies at the administrative level. We also should get the tax exempts to kick in something.

  7. @anonymous August 3: I agree completely with the sentiments of Anonymous June 24 and your second comment. The Fairview Fire District has admirably taken the initiative for the Pace Study, which provides an objective, third party look at Fairview and neighboring fire districts. On the whole, the Pace Study is a fine piece of work, which will be useful to taxpayers and public officials for years to come. The fact that other districts did not support the Pace Study, and in some cases even expressed hostility to the Study, is a real shame on those districts, in my view. I’ve publicly supported fire district consolidation to improve efficiency and effectiveness since 2009. For example see my report Fire District Consolidation in Dutchess County – A Taxpayer’s Perspective at

    I don’t see what your first comment intends to say. My chart is not a “poor (if not worse) approximation of the data”. The square dots ARE the data, and the straight lines are literally just connecting the dots. The 2012 tax rate can reasonably be interpreted as “going through the roof”, if one wants to look at it that way.

    I very much respect Michael Genito’s expertise in his work on the Pace Study. Nevertheless, Genito made a number of mistakes during the course of the Study, most of which I’ve pointed out to him privately. To his credit, Genito has graciously corrected every mistake I’ve called to his attention, including, as you point out, the ones in this blog post. Because I know he basically understands what he’s doing, I used the term “blunder” in the primary dictionary sense of “a careless mistake”, rather than using a harsher term. As I see it, “blunder” is a charitable description under the circumstances. Genito could easily have avoided this mistake simply by reviewing the Unfair Apportionment section of my Fairview Fire Tax website at, a fact I chose not to mention in the blog post.


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