Monday, September 24, 2012

Fairview Fire District Draft 2013 Budget Document Is Flawed

The Fairview Fire District has posted on its website a draft 2013 budget that breaks at least three records for high fire taxes, as I discuss here. The budget document also breaks some records for murkiness and confusion. That's saying a lot, considering the standard for inaccuracy, opaqueness, and just plain nonsense established by last year's budget, as I discuss here, here, and here.

Although I consider myself smarter than the average bear when it comes to following quantitative discussions, I had more than a little trouble understanding the thread of discussion on the first page of the draft budget. There's hardly a sentence on that first page that I can confidently explain to myself, let alone to someone else. One could begin anywhere, but let's start with the two tables on the first page. None of the entries in the four rows of these tables made any sense to me upon first reading. Even after an extensive analysis, only a few entries in these tables make sense.

First Row of Tables

The first row of each table is labeled “Tax Rate”, but all the entries are given as percents. That's more than a little odd, since tax rates are not ordinarily expressed in percents, but in dollars per thousand dollars of assessed (or market) value. Expressing tax rates as percents sounds a little like a cop stopping a motorist for speeding and saying, “I clocked you going 80 percent in a 55 percent zone.” Actually, it is possible in principle to express tax rates as percents ($10 per thousand dollars of market value is the same thing as 1 %), but I'm dead sure that's not what's intended here.

In attempting to understand the table entries, my first assumption was that the “Tax Rate” label was really intended to be “Tax Rate Increase”, since tax rate increase is commonly expressed as a percent. This assumption is confirmed by sentences in the second and third bullet items above the first table, both of which describe specific numbers in the first row as “Tax Rate increase”. With this repeated confirmation in prose, it hardly seems possible that “Tax Rate Increase” isn't the intended meaning.

Nevertheless, I doubt that “Tax Rate Increase” is the intended meaning. Here's why: My own calculation of taxes based on numbers given in the draft 2013 budget spreadsheets show a tax rate increase of 15.83 percent — not the 14.74 percent given in the last column of the second table. On the other hand, it just so happens that 14.74 percent is the tax levy increase corresponding to the draft budget. So most likely, the intended meaning of the first row of the tables is not “Tax Rate” but instead “Tax Levy Increase”. This implies that the two sentences above the first table which refer to “Tax Rate increase” should really read “tax levy increase”.

Not only are these numerical quantities called by their wrong name repeatedly, but the same numerical quantities are called by different wrong names in different places. They're never called by their right name. Readers of this document who have not done their own analysis can have no hope of understanding that the numbers in the first row of each table, labeled “Tax Rate”, are really “Tax Levy Increase”, nor that these same numbers, referred to in two sentences as “Tax Rate Increase” are really “Tax Levy Increase”.

Second Row of Tables

The second row of each table is labeled “Budget”. In this context, the term “budget” ordinarily refers to the total amount of revenue or the total amount to be spent by an agency. However, the $2,856,725 entry in the first column of the first table is neither of these. Instead, it is exactly equal to the 2012 tax levy portion of total 2012 revenue. Similarly, the $3,277,700 entry in the last column of the last table is the proposed 2013 tax levy. Both these numbers appear as  tax levies in the Excel spreadsheets on subsequent pages. Once again, readers of this document can have no way of knowing that the numbers in the second row, labeled “Budget” are really “Tax Levy”.

Third and Forth Rows of Tables

These rows are labeled with abbreviations for “Town of Poughkeepsie Tax” and “Hyde Park Tax”. The term “tax” is rather ambiguous, but one would expect it to relate to some dollar amount. No such luck: All the entries in these rows are percents. I found no clues in the text of this page, or in my own analysis, for the meaning of the numbers in these rows. I've thrown up my hands regarding the meaning of the entries in the third and forth rows.

First Page of Draft 2013 Budget Is Unintelligible

So let's summarize: On the first page, “tax rate” doesn't mean “tax rate”, “tax rate increase” doesn't mean “tax rate increase”, and “budget” doesn't mean “budget”. They all mean something else. And I have no idea what “TOP Tax” and “HP Tax” mean. Furthermore, I haven't even tried to unscramble the meaning of the first and second column headings, “2012 Budget with only Assessment change” and “2012 Budget with Assessment change +Salary/Benefits”. The accompanying prose only adds to the confusion. For example, the fifth bullet item reads, “The $40,000 "In Lieu of Taxes" from St Francis is now part of the TOP assessed value.” What? A payment in lieu of taxes can become part of an assessed value? That doesn't make any sense.

A Failed Attempt To Tell a Story

My sense is that this first page is attempting to tell a story about how the proposed 2013 budget has been developed, based on changes that have occurred in the past year. This is an admirable objective. Unfortunately, the attempt is a failure. The most polite way to say it is that the words used on the first page do not have their ordinary meanings. The sentences are at best ambiguous, and at worst nonsense. Most of the content of the first page of the draft 2013 budget is unintelligible gibberish.

Excel Spreadsheets Continue a Tradition of Tax Misinformation

Well, the first page of the Draft 2013 budget may be unintelligible, but at least everything in the accompanying Excel spreadsheets documenting the budget makes sense, right?

Well, no. Hopefully, the individual budget items make sense. I have no way of knowing one way or the other. But when it comes to tax parameters, the spreadsheets continue a tradition of misinformation going back at least to May 2011 and probably much further. All this misinformation derives from a failure by members of the Budget Committee to understand the full implications of the fact that property tax is fundamentally based on taxable market value — not on assessed value. Stated another way, assessed value and equalization rate do not relate in any essential way to budget or taxing considerations. They are nothing more than a legacy artifact of the way tax bills are generated.

The Budget Committee's misunderstanding affects the 2013 budget spreadsheets in at least two places:
  1. On page 6 of the spreadsheet, the third line, called “Total Assessed Valuation” is garbage, as I have explained here. It is a meaningless concept, 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.”
  2. On page 7 of the spreadsheet, the last line purports to show the tax rate increase for Hyde Park as 11.6912 percent. This value is incorrect, as I have explained here. It is like saying “I accelerated from 50 miles per hour to 100 kilometers per hour, so my speed increased by 100 percent.” (The correct tax rate increase for Hyde Park is 15.8282 percent — the same as for Poughkeepsie.)
Once again, this tax misinformation is not new, and neither is my critique of it.

Embarrassment for Fairview

In my view, the Fairview Fire District is not well served by a 2013 budget process which displays an incoherent story of the changes since 2012, and which presents tax misinformation. Not only are the general public and other stakeholders prevented from seeing an accurate picture of Fairview's financial situation, but the Board of Fire Commissioners itself can hardly make effective fiscal decisions in an atmosphere of confusion. At the very least, the Budget Committee has brought embarrassment to the Fairview Fire District, just as it did last year. It's clear that a different approach to the budget process is needed. Given the standard set by current officials, it would not be difficult for a different team to do better.

Friday, September 21, 2012

Automatic Notifications for this Blog Were Temporarily Broken

Automatic notifications of new posts to this blog, including email subscriptions, became temporarily broken after I changed the primary URL of this blog from to Although automatic notifications are now restored, subscribers were not notified of my post yesterday, Fairview Fire District 2013 Budget Is a Record Breaker. My apologies for the inconvenience.

Thursday, September 20, 2012

Fairview Fire District 2013 Budget Is a Record Breaker

The Fairview Fire District, already known for having the highest fire tax rate in Dutchess County and possibly the highest fire tax rate in New York State, has posted on its website a draft 2013 budget that  breaks many of its own records for high fire taxes. Although this budget is still only preliminary, it is the starting point for a proposed 2013 budget which must be approved by Fairview's Board of Fire Commissioners at an open meeting on September 25. The tax effects of this budget can be described with three superlatives:
  1. The highest true value fire tax rate in this millennium, a whopping $6.63 per thousand dollars of market value.
  2. The highest tax rate increase in this millennium, a whopping 15.8 percent increase over last year's tax rate.
  3. The highest tax levy in this millennium, and almost certainly the highest tax levy in Fairview's history, at $3,277,000.
Tax Levy Increase

If there's any good news here, it's the fact that the budget does not call for the highest tax levy increase in this millennium. It only calls for the second highest tax levy increase in this millennium, at 14.7 percent. The highest was set in 2008, at 20.9 percent. This parameter is the one that New York State's new “tax cap” law tries to limit to two percent. Of course, the two percent tax cap doesn't really affect fire districts.

Fairview's Tax History

The following chart shows Fairview's tax rate history. The 2013 bar is yellow to indicate that it is only a preliminary value, not yet approved by the Board of Fire Commissioners.

If you find charts like this useful, you can find similar ones for Fairview's market value and tax levy, as well as the yearly increases in each, and the data they are derived from, in my document Fairview Fire District Property Tax Data.

Fairview's Tax Rate Is Nearly 1/3 the School Tax Rate

Most property taxpayers in the Fairview Fire District also pay Hyde Park school taxes — the largest single tax on property tax bills. The Fairview fire tax is the second largest tax on property tax bills. Fairview's fire tax rate is 32 percent as high as the 2012-2013 Hyde Park school tax rate, even though the Hyde Park School District has its own list of superlatives, including the highest tax rate in this millennium. But that's another story.

Reserve Funds Unfunded — Again

Regular readers of this blog are aware that the Fairview Fire District has not been setting aside sufficient funds for future obligations in recent years. Fairview's 2010 budget contributed $143,000 to the reserve funds, roughly half of what should be contributed each year to finance long-term obligations. In 2011 and 2012 nothing was contributed to the reserve funds. The draft 2013 budget continues this short-sighted practice of contributing nothing to the reserve funds. So even with the exceptionally large tax rate increases of 2012 and 2013 (proposed), Fairview is getting further and further away from a sound fiscal footing. As I see it, even as Fairview's tax rates go through the roof, Fairview's long term financial crisis is deepening.

It Gets Even Worse

Perhaps you're thinking you've now heard all the Bad News® about the draft 2013 budget. But you haven't. Last year, Fairview's treasurer presented and Fairview's board of fire commissioners approved a budget document containing many flaws, including two contradictory tax rates, both of which were wrong. Fairview's board was clearly indifferent to whether the budget numbers presented to the public — or to themselves — made any sense.

I figured that this year, with two new board members, consideration would be given to avoiding the same kinds of embarrassing mistakes that were made last year. But I've clearly underestimated the ability of commissioners to create even more confusion than before. My analysis of presentation flaws in the draft 2013 budget is the subject of a forthcoming post.

UPDATE 11/1/2012 — Budget for 2013 is Finalized

At yesterday's Fairview Fire Commissioners meeting, the Board approved a final 2013 budget, unaltered from the above-described draft budget. Commissioners Ginny Buechele and Bob Gephard expressed “regrets” about the tax increase, but the vote was unanimous.