Sunday, October 14, 2012

Hyde Park School District Promulgates Misleading Tax Information

When it comes to understanding how property taxes work, it is amazing how many government officials who should know better get it wrong. The problem is always the same: The errant officials erroneously believe that assessed values have intrinsic meaning, when in reality assessed values mean nothing with respect to property tax until converted to market values using the appropriate equalization rates. At least three local municipalities have made this mistake, as documented herehere, and here. Now the Hyde Park School District can be added to this list of notoriety.

On August 23, 2012, Hyde Park School District Assistant Superintendent for Business Wayne Kurlander presented Tax Levy Calculations, Rates to the Board of Education. Unfortunately, this presentation gives a misleading picture of changes in the school district's property values and tax rate. Even more unfortunately, the Poughkeepsie Journal has uncritically reported the claims in Kurlander's presentation, leading to a sense of unfairness where no unfairness actually exists.

Tax Rate Change Calculation Mistake

Kurlander's “Tax Rate Changes” table on page 5 of his presentation calculates a year-to-year difference of $0.78 (column 4) between Hyde Park's tax rates per thousand dollars of assessed value. This calculation makes no sense, because Hyde Park's equalization rates are different (54% versus 56%) for the two years being compared. It would be like subtracting 50 miles per hour from 100 kilometers per hour, and getting 50 “something” per hour. A meaningful calculation requires that the two tax rates first be converted to comparable units before subtraction. An obvious way to do this is to multiply each tax rate by its corresponding equalization rate, thus yielding true value tax rates.

Since the $0.78 difference makes no sense, neither does the 2.21% rate change (column 5). When the correct calculation is performed, Hyde Park's true value tax rate change is of course 6.00% — the same as for all the other towns!

The Poughkeepsie Journal took Kurlander's flawed calculation to formulate a misleading headline, Some in Hyde Park face 6% tax hike (August 30, page 1 of Mid-Hudson section). In reality, it's not “some”, it's “all”. The story's subtitle is also misleading: Assessed value drop forces school board to hike 4 towns' rates. In reality, it's not “4 towns'” but “all 5 towns'” in the Hyde Park School District. The story's lead sentence is unambiguous: “School tax rates for most town homeowners will increase by 2.2 percent this school year.” This statement is flat out false. A correct statement would read, “School tax rates for all homeowners will increase by 6 percent this school year.” Of course, none of the corrected statements sound as sensational as the incorrect and misleading ones. But in the newspaper's defense, Journal reporter John Davis did nothing more than uncritically elaborate Kurlander's presentation.

Superintendent's Statement is Incorrect

Kurlander is not the only Hyde Park School District official who misunderstands how tax rates work. Hyde Park School Superintendent Greer Fischer is quoted in the Poughkeepsie Journal story as saying, “That it's been 16 years since the Town of Hyde Park has gone through an assessment does make for a disparity in the rate changes.”

No, it does not. There is no disparity in the rate changes this year, and there hasn't been a disparity in the rate changes in the last ten years. Each year, all five towns in the Hyde Park School District have paid the same true value tax rate. In other words, every property owner in the District pays the same proportion of his property’s taxable market value, regardless of Town. This simple fact is a basic principle of New York State Real Property Tax Law. Another way to state this basic principle is as follows: Two properties in different Towns with the same taxable market value will pay the same Hyde Park school tax. This statement is true this year, it was true last year, and it's been true for each of the last 10 years. Since the tax rates are the same in all the Towns, so are the tax rate changes. That's why my recent post Hyde Park School District Tax Rate Is Highest in Millennium lists only one tax rate and only one tax rate change for each year.

Assessed Value Change Calculation Mistake

Kurlander's “Comparison of Taxable Assessed Values” table on page 12 of his presentation makes a similar conceptual error: The Hyde Park entry (second row) compares assessed values from two different years with different equalization rates. The listed percent change of -0.48% for Hyde Park makes no sense, for the same reason that comparing pounds to kilograms makes no sense. A meaningful calculation requires that the assessed values first be converted to comparable units. An obvious way to do this is to divide each assessed value by its corresponding equalization rate, thus yielding taxable market value. When the correct calculation is performed, Hyde Park's percent change is -4.04%, not -0.48%.

Meaningful Tax Information is Essential

My purpose in all property tax investigations is not to embarrass government officials, but to assure that property owners, residents, government officials, and other stakeholders have meaningful, accurate information about taxes. So I was glad when Kurlander granted me the opportunity to meet with him and Hyde Park School District Treasurer Linda Steinberg on September 7. Although we had a lengthy and cordial interchange, I was not able to convince Kurlander that he had made any mistake. At Kurlander's request, I promptly emailed them all my backup calculations. Unfortunately, I've heard nothing from him since then, despite numerous contact attempts. I will update this post to reflect any meaningful Hyde Park School District feedback.

UPDATE 11/5/2012 - District May Change Tax Message

I'm pleased to report that a prominent member of the Hyde Park School District Board of Education has come to understand that the District's current way of explaining school tax is problematic, and that a more consistent, coherent, and technically accurate approach is needed. I'm hopeful that I won't need to write a post such as this on the Hyde Park School District next year.

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