Pawling School District Promulgates Misleading Tax Information — Again

On August 24, 2015, Pawling School District Assistant Superintendent for Finance Neysa Sensenig presented 2015-2016 Tax Rates to the school board, after which the Board approved a resolution to set the 2015-16 tax levy to the same amount as last year's tax levy. In other words, this year's tax levy increase is zero. This sounds like good news.  However, Sensenig's presentation omitted the bad news about this year's Pawling School District tax:

• The 2015 aggregate tax rate is $26.77 per thousand dollars of market value, the highest for the District in this century.
• This tax rate will most likely be the second highest 2015 tax rate of any school district in Dutchess County (after Spackenkill).
• The 2015 tax rate increase is 12.17 percent, the second highest tax rate increase for the District in the last decade. (The 2010 tax rate increase was 19.0 percent.)  

In my view, the public is mislead by the omission of this crucial bad news. It's especially ironic that a presentation entitled 2015-2016 Tax Rates didn't actually include the aggregate tax rate or its increase. But it's worse than that. Sensenig's presentation also commits mistakes in representing changes in tax rates for municipal segments (towns), and it presents data that makes no sense. These mistakes indicate that Sensenig does not understand how to properly manipulate property tax data in the presence of fractional value assessing — even though the issue had already been explained in one of my recent blog posts. It would not surprise me if Pawling's Board of Education also does not understand this issue.

Aggregate Tax Rate — Missing

Let's start with the most basic of questions: How steeply is the Pawling School District taxing its tax base for the 2015-2016 year? That is, what is the District's aggregate tax rate — the District's tax levy divided by the District's taxable market value? (In case you don't know why this tax rate is so important, see The Tax Rate Is All That Matters.)

In fairness, the 2015-2016 Tax Rates presentation actually does contain the District's aggregate tax rate, but it is so obscured that, for all practical purposes, it's not accessible. You won't find the aggregate tax rate in the main PowerPoint part of the presentation (the first 9 pages of the PDF), where the most important information is expected. You'll only find the aggregate tax rate immersed in a tax calculation chart comprising 6 rows and 11 columns of numbers, on page 13 of the PDF. It's shown in the last row of column 9 as  26.76701, and rounded just below it as 26.77. The chart does not clearly identify what this number represents, nor does it clearly indicate the units of measure, but it's actually $26.77 dollars per thousand dollars of market value (what Sensenig calls “full value assessment”). A glance at the Pawling School District Tax History shows that this is the highest tax rate for the District in over a decade. In fact, it's actually the highest tax rate for the Pawling School District in this century.

Aggregate Tax Rate Increase — Missing

Next question: How does the Pawling School District's 2015 tax rate of $26.77 compare with that of last year? That is, what is the percent increase in the tax rate? The 2015-2016 Tax Rates presentation does not answer this question.

One could calculate the percent increase from the presentation if the presentation contained last year's tax rate. One might think that one could get last year's tax rate from the same tax calculation sheet (page 13 of the PDF). That's because Column 10 on that sheet — the very next column after the 2015 rates — claims to contain the 2014 rates. And indeed it does, except that the given 2014 aggregate tax rate (the TOTALS line of column 10) is the wrong value. It is given as 26.882174, and rounded just below it as 26.88. The correct value — the 2014 tax levy divided by the 2014 taxable market value — is $23.86, as can be seen from the Pawling School District Tax History. Comparing the correct tax rates shows that the Pawling School tax rate has increased a whopping 12.17 percent for the 2015-2016 year. This is the second greatest tax rate increase in the history of the Pawling School District since 2000. It is also a far greater increase than that of any school district in Dutchess County last year. (Spackenkill had the greatest tax rate increase last year, at “only” 6.9 percent.) See 2014 School District Tax Rate Rankings.

Wait a minute, you might say. How can the Pawling School District's tax rate increase 12.17 percent, when the tax levy increased zero percent? Well, the tax rate measures how steeply taxpayers' wealth is taxed, and taxpayers' wealth — measured by the taxable market value of property — decreased 10.85 percent in the last year. The biggest component of this market value decrease is in the Town of Pawling, where the taxable market value dropped 11.51 percent.

But how could it be that Pawling's taxable market value dropped 11.51 percent since last year? The Pawling municipal segment's taxable assessed value is $522 million, a value that has hardly budged at all in the last 5 years. Right, but the Town of Pawling's equalization rate has been steadily increasing since 2009, and it incurred a dramatic increase this year, from 44.86 percent to 50.69 percent. Market value is assessed value divided by equalization rate.

One must understand that property tax in New York State (and in most other states) is based on market value, not on assessed value, despite what many property owners — and apparently many government officials — seem to believe. Fractional value assessing, that is, assessing property at an equalization rate other than 100 percent, is a Really Bad Idea, exactly because of its confounding effect on the public, and even on public officials. For more on this, see Full Value versus Fractional Value Assessing — A Comparison. Unfortunately, the Town of Pawling is still one of the few remaining towns in Dutchess County which practices fractional value assessing.

The presentation's tax calculation chart's stated tax rate increase (last row of column 11 on page 13 of the PDF) of -0.43 percent — essentially a small decrease — makes no sense. When the tax levy remains constant and the taxable market value decreases, the tax rate must increase.

Pawling School officials may have intentionally avoided reporting the aggregate tax rate and its increase, since these parameters are the ones that show how bad the situation really is for taxpayers. The officials can get away with this because the public has such a poor understanding of property taxes. For more on this, see The Dirty Little Secret of Property Taxes.

Municipal Segment Tax Rate Increases Are Wrong

Under ordinary circumstances, the Pawling School District's aggregate tax rate is also the rate at which each taxpayer will be billed, and the aggregate tax rate increase is also the tax rate increase each taxpayer will see. This is how property taxes work under ordinary circumstances for a school district like Pawling which utilizes neither the homestead tax option nor the apportionment option. (For detailed discussion of these options, see page 4 of 2014 School District Tax Rate Rankings.)

However, the circumstances in the Pawling School District were not ordinary last year, and they aren't ordinary this year either. Last year, the District committed an apportionment mistake, underbilling taxpayers in the Town of Pawling and overbilling taxpayers in the four other municipal segments. Pawling taxpayers paid at a low-ball rate, while all other taxpayers paid at a high-ball rate. Thus, Pawling taxpayers saw a low-ball tax rate increase, while all other taxpayers saw a high-ball tax rate increase. All this is explained in detail here.

The good news is that the 2015-2016 Tax Rates presentation correctly compensates this year for last year's apportionment mistake. That is, the extra quarter million dollars mistakenly billed to municipal segments other than the Town of Pawling last year have been correctly apportioned back to Town of Pawling taxpayers this year, thus overbilling Town of Pawling taxpayers this year by the same amount they were underbilled last year. Because of last year's mistake and this year's compensation for last year's mistake, the aggregate tax rate and aggregate tax rate increase once again will not describe what any taxpayers will experience.

The bad news is that the 2015-2016 Tax Rates presentation for municipal segments' tax rates (table on page 6) is misleading, and its tax rate increases are just plain wrong. (Same with the table on page 5.) The problem is that the tax rates in columns 2 and 3 of the presentation are the rates per thousand dollars of assessed value, which makes no sense in this context. Tax rates per thousand dollars of assessed value cannot be compared when they have different equalization rates, for the same reason that assessed values cannot be added when they have different equalization rates. Comparison can only be made when tax rates are equalized — converted to a market value basis — as in the following table:

Pawling School District Tax Rate Increases
Municipal Segment	Tax Rate per $K of Market Value		Percent Tax Rate Increase
	2014	2015	Correct Value	Presentation
Beekman	$26.88	$23.68	-11.93%	-11.93%
Dover	$26.88	$23.75	-11.66%	-11.27%
East Fishkill	$26.88	$23.66	-11.97%	-11.97%
Pawling	$23.65	$27.01	14.24%	1.10%
Patterson	$26.88	$23.67	-11.93%	-11.07%
Aggregate	$23.86	$26.77	12.17%	-0.43%

Notice that Sensenig's calculation of percent tax rate increase (last column) gives the correct value (green background) for Beekman and East Fishkill. That's because Beekman and East Fishkill have the same equalization rate (100%) for 2014 and 2015. Dover and Pawling's equalization rates changed from 2014 to 2015, which is why the presentation's results are incorrect (red background). The more the equalization rate changes, the more difference it makes. Pawling's equalization rate changed dramatically, as already noted, so the presentation's result is way off. Taxpayers in the Pawling municipal segment will see a 14.24 percent tax rate increase this year, not the 1.10 percent increase shown in the presentation. (Regarding Patterson, which has been at 100% equalization rate for many years, it's not clear why the presentation shows its 2014 tax rate as $26.62 rather than $26.88, thereby getting an incorrect tax rate increase.)

Overconfident Officials Unintentionally Mislead a Gullible Public

On August 21, 2015, I emailed Pawling School District Assistant Superintendent for Finance Neysa Sensenig, copying the Pawling School Board, saying that she, and possible the Board, misunderstands some property tax concepts. I included a link to my recent blog post, which provides evidence of this misunderstanding. Part of this evidence is that she added assessed values with different equalization rates, producing a garbage result. My email seems to have had no effect, since Ms. Sensenig repeated the same mistake on page 13 of the presentation PDF (bottom of first column). The mistake was compounded with the presentation's incorrect municipal segment tax rate increases. The public interest is not well served by the Pawling School District's 2015-2016 Tax Rates presentation, which omits the aggregate tax rate and its increase, which promulgates incorrect municipal segment tax rate increases, and which repeats easily-omitted calculations that produce garbage results.

I wish I could report that the Pawling School District is the only local taxing jurisdiction in Dutchess County to misunderstand fractional value assessing, resulting in the promulgation of misleading tax information. Unfortunately, the Hyde Park School District, the Town of Hyde Park, the Town of Pleasant Valley, the Fairview Fire District, and even the Poughkeepsie Journal have made similar mistakes. The officials responsible for these mistakes include at least three CPAs, none of whom seemed able to grasp that they had made a mistake even when confronted with the evidence. The officials responsible for these past mistakes have generally been so confident of their basic numeracy skills that they saw no need to check their work — or my critique of their work — with an authoritative third party, such as the good folks at the Dutchess County Real Property Tax Service Agency or the New York State Department of Taxation and Finance. Now overconfident officials at the Pawling School District have joined this list of errant number crunchers.

Pawling School District's 2014 Tax Apportionment Mistake — Taxpayer Viewpoint

This second of three posts on the Pawling School District (I'd originally hoped to complete this topic in two posts) describes how the 2014 tax apportionment mistake by the Pawling School District affects taxpayers. Briefly, this mistake caused property tax bills to overstate or understate the amount of tax due, depending upon the town in which the property lies. The first post presented the recent history of the Pawling School District's property taxes. A forthcoming post will discuss the apportionment mistake from the school district's viewpoint.

When Pawling School District taxpayers examined their tax bills in September, 2014, a few of them were surprised to find that their true value tax rates had increased a whopping 18.6 percent since 2013. But most others found that their true value tax rates had only increased a more modest 4.4 percent. Both these increases were mistakes. Although the District's total tax levy of $29,799,211 is as intended by the school board, the distribution of this tax among taxpayers was incorrect for all taxpayers. All taxpayers should have seen a true value tax rate increase of 5.3 percent. This post describes in detail the effect of this mistake on taxpayers.

Municipal Segments

The first thing to understand is that, like most school districts in Dutchess County, the Pawling School District comprises portions of more than one town. In addition to most of the Town of Pawling, the Pawling School District includes small portions of the Towns of Beekman, Dover, East Fishkill, and even the Town of Patterson in Putnam County. One might think that all of the Town of Pawling is included in the Pawling School District, but even that isn't true. Fully $6.3 million of taxable market value in the Town of Pawling (as of the July 1, 2014 assessments) is in the Arlington School District — not the Pawling School District. For taxing purposes, the various portions of Towns within a school district are sometimes referred to as municipal segments.

Tax Levy Should Be Proportional to Taxable Market Value

The second thing to understand is that New York State Real Property Tax Law requires the Pawling School District to distribute or apportion its tax levy (the amount it bills property taxpayers) among its municipal segments in such a way that all taxpayers are billed at the same true value tax rate. True value tax rate is simply the tax levy divided by the taxable market value of the property (not the taxable assessed value). Another way of saying this is that all taxpayers are to be billed in proportion to the value of their property on the open market (after accounting for STAR and other similar exemptions), with the same proportion being used everywhere in the District.

Town of Pawling Versus Other Towns

The following table shows what happened in 2014 with apportionment in the Pawling School District. Most of the data for Columns 2,  3, and 5 was derived from the tax rate pamphlets provided by Dutchess County's Real Property Tax Service Agency. However, data for the Patterson municipal segment is not available from this source. Pawling School District Assistant Superintendent for Finance Neysa Sensenig graciously provided me with the Patterson assessed value and tax levy data needed for these columns.

2014 Pawling School District Tax Levy Apportionment
Municipal Segments	Percent Taxable Market Value	Percent Tax Levy	Tax Rate Per $K of Market Value	Percent Tax Rate Increase	Excess Tax Rate Per $K of Market Value	Excess Tax Levy	Percent Excess Tax
Pawling	93.3%	92.4%	$23.65	4.4%	-$0.22	-$253,697	-0.9%
all others	6.7%	7.6%	$26.88	18.6%	$3.02	$253,697	12.6%
All	100%	100%	$23.86	5.3%	$0	$0	0%

As might be expected, most of the Pawling School District's tax base — in fact 93.3 percent — is in the Town of Pawling, with the remainder — 6.7 percent — divided among the 4 other municipal segments, as shown in Column 2 of the above table. If the Pawling School District's apportionment had been figured correctly, the percentages of tax levy billed to the Town of Pawling versus the other municipal segments (Column 3) would have been the same as in Column 2, namely 93.3 percent and 6.7 percent, respectively.

Tax Levy Mismatch With Taxable Market Value Shows Apportionment Mistake

But Column 3 is not the same as Column 2, indicating an apportionment mistake in violation of New York State Real Property Tax Law. Only 92.4 percent of the tax levy was distributed to the Pawling municipal segment, with the remaining 7.6 percent distributed to the other municipal segments. It turns out that within these other municipal segments, all taxpayers were billed at the same true value tax rate — they just weren't billed at the same tax rate as the Town of Pawling's taxpayers.

When a Dog Wags Its Tail ...

So instead of all taxpayers being billed at the aggregate $23.86 rate (last row of Column 4), the Pawling taxpayers were billed at only $23.65, while all others were billed at $26.88 (Column 4). Column 5 shows that instead of all taxpayers seeing a 5.3 percent tax rate increase, Pawling taxpayers saw only a 4.4 percent tax rate increase, while all others saw a whopping 18.6 percent increase. Why this disproportionate effect? When a dog wags its tail, the dog shakes a little bit, but the tail shakes a whole lot. The Town of Pawling is the dog; the other municipal segments are the tail.

Excess Tax Rate

Another way to look at the disproportionate effect of the apportionment mistake is to compare the true value tax rates of the municipal segments to what they should have been. Column 6 shows that Town of Pawling taxpayers got a small break of $0.22 off their tax rate, whereas all the other municipal segments saw an extra tax based on a rate of $3.02 per thousand dollars of market value. This extra tax can be compared with the 2014 $3.65 tax rate for the Dutchess County Government, which all these property taxpayers paid the previous spring. So it's as if these taxpayers had to pay the equivalent of 83 percent of a second Dutchess County Government tax in the same year.

Excess Tax Levy

Column 7 shows yet another way to measure the mistake: $253,697 — fully a quarter million dollars of tax — was mistakenly shifted from the many (Town of Pawling) to the few (other municipal segments). This shift represents only 0.9 percent of the tax in the Town of Pawling, but 12.6 percent of the tax in the other municipal segments, as shown in Column 8. Just more manifestations of the dog wagging its tail.

What would correct apportionment have looked like?

Had it not been for the apportionment mistake, that is, if Column 3 were equal to Column 2, then all the entries in Columns 4 through 8 for “Pawling” and “all others” would have been the same as in the last row (“All”) of those columns.

OK, so how did this mistake come about in the first place? That is the subject of a forthcoming post.

Pawling School District Tax History

This first of two posts on the Pawling School District presents the recent history of the District's property taxes. A subsequent post will describe the 2014 tax apportionment mistake committed by the Pawling School District, in violation of New York State Real Property Tax Law, which caused property tax bills to overstate or understate the amount of tax due, depending upon the town in which the property lies.

The following table summarizes the Pawling School District's recent tax history. Most of the data for this table was derived from the tax rate pamphlets provided by Dutchess County's Real Property Tax Service Agency. However, data for the portion of the Pawling School District in the Town of Patterson (Putnam County) is not available from this source. Pawling School District Assistant Superintendent for Finance Neysa Sensenig graciously provided me with the Patterson assessed value and tax levy data needed to complete this table.

Pawling School District
Year of Tax Bill	Taxable Market Value		Tax Levy		Tax Rate
	Market Value	Percent Increase	Tax Levy	Percent Increase	Tax Rate per $K of Market Value	Percent Increase
2004	$1,217,637,391		$19,689,971		$16.17
2005	$1,404,750,438	15.4%	$21,805,618	10.7%	$15.52	-4.0%
2006	$1,556,342,677	10.8%	$23,219,196	6.5%	$14.92	-3.9%
2007	$1,717,266,533	10.3%	$24,787,813	6.8%	$14.43	-3.2%
2008	$1,794,131,769	4.5%	$26,262,727	6.0%	$14.64	1.4%
2009	$1,708,746,526	-4.8%	$27,545,191	4.9%	$16.12	10.1%
2010	$1,457,903,591	-14.7%	$27,975,658	1.6%	$19.19	19.0%
2011	$1,399,836,368	-4.0%	$29,338,567	4.9%	$20.96	9.2%
2012	$1,381,982,151	-1.3%	$29,629,238	1.0%	$21.44	2.3%
2013	$1,289,459,789	-6.7%	$29,219,136	-1.4%	$22.66	5.7%
2014	$1,248,731,004	-3.2%	$29,799,211	2.0%	$23.86	5.3%

Taxable Market Value

It is helpful to visualize the Pawling School District's taxable market value (column 2 of the above table) as a chart. The chart below shows clearly the increase in property values through 2008, followed by the economic meltdown which has decreased property values every year since then. The Pawling School District's experience follows that of Dutchess County as a whole (see first chart in my recent post Dutchess County Gov't Tax Rate Keeps Climbing), and indeed that of most of New York State, and even most of the country. Note that the Pawling School District's taxable market value for the 2014 tax is only slightly (2.6%) greater than that for 2004.

This same data can be visualized in terms of the yearly increase in taxable market value (column 3 of the above table):

It should be noted that all these market values lag tax bills by a year and three months. For example, for tax bills to be paid on October 2, 2014, the corresponding market values are as of July 1, 2013.

Tax Levy

The Pawling School District's tax levy — the total amount billed to property taxpayers (column 4 in the above table) — can be visualized as follows:

Although the Pawling School District's tax base (taxable market value) increased only 2.6 percent in the last decade, the above chart shows the tax levy increasing 51.3 percent in the same time period. The tax levy has increased every year, except for a 1.4 percent decrease from 2012 to 2013, as shown in the following chart (column 5 of the above table):

Tax Rate

As I have written many times before in this space, tax rate, that is, true value tax rate expressed in dollars per thousand dollars of market value, is a useful way of comparing taxes among jurisdictions, among years, and even among different kinds of property taxes. For a given year, tax rate (column 6 of the above table) is simply tax levy divided by taxable market value. The following chart depicts Pawling School District tax rate for each of the last 11 years: 

True value tax rate measures how steeply your personal wealth, as measured by the taxable market value of your property, is being taxed. The above chart shows that your wealth has been taxed more steeply every year since 2007 — just before the economic meltdown. Tax rates for the years 2000 through 2003 (not displayed in this post) are mostly higher than for 2004, but never higher than $17.41. This means that in 2010, your wealth was taxed at a steeper rate than ever before in this millennium. Since then, the tax rate has increased every year. The following chart (column 7 of the above table) shows the tax rate changes in more detail:

All tax rates in this post describe both how steeply the Pawling School District taxes its tax base and how steeply property owners are taxed (after accounting for STAR and other similar exemptions). That's because the Pawling School District utilizes neither the homestead tax option nor the apportionment option (for explanation of these options, see my 2014 School District Tax Rate Rankings).

Well, actually, this isn't quite true for 2014. The 2014 tax rate only describes how  steeply the Pawling School District taxes its tax base. It does not describe how steeply property owners were taxed in 2014. That's because in 2014, the Pawling School District made a mistake in apportioning the tax levy, which caused property tax bills to overstate or understate the amount of tax due, depending upon the town in which the property lies. This mistake, which violates New York State Real Property Tax Law, will be described in detail in a forthcoming post.

Careful readers will notice a slight discrepancy between the Pawling School District's aggregate tax rate of $23.86 reported here and the $23.82 rate reported last month in my 2014 School District Tax Rate Rankings). That's because last month's tax rates did not take into account the Town of Patterson segment of the Pawling School District. Ordinarily, the Town of Patterson's taxes should make no difference in the tax rate. It's only because of Pawling's 2014 apportionment error that the difference appears. This post's aggregate tax rate of $23.86 is correct. Similarly, this post's 2014 tax rate increase of 5.3 percent is correct, not the 5.1 percent reported last month. These small corrections do not affect last month's school district rankings.

The author is grateful to Pawling School District Assistant Superintendent for Finance Neysa Sensenig for her kindnesses in accommodating my requests for data and other information.

School District Tax Rate Rankings

In April of 2011, I posted a series of articles comparing the tax rates of all school districts in Dutchess County. On April 28, 2011, I consolidated these articles into an 18-page report called School District Tax Rate Comparisons.

In 2012, the New York State property tax cap went into effect. The tax cap, which was intended to limit the increases in property taxes by local governments, was supported by taxpayers, but opposed by local governments, especially by school districts.

My new 19-page report, 2014 School District Tax Rate Rankings, updates the tax rate comparisons of four years ago with the most recent school tax information. Main results:

• School tax rates have dramatically increased since four years ago, due to both tax levy increases and property value decreases.
• Relative rankings of school tax rates have hardly changed since four years ago.
• Year-to-year school tax rate increases are dramatically lower than four years ago. This slowed growth may be due to the property tax cap.

Like the earlier report, the 2014 report provides detailed tax rate information for every school district in Dutchess County in both tabular and chart form, in a format allowing easy comparisons to be made. The report explains how the homestead tax option, the apportionment option, and STAR exemptions complicate school district tax rate comparisons. Separate comparisons are provided from the viewpoint of school districts and taxpayers — both homes and businesses.

Dutchess County Gov't Tax Rate Keeps Climbing

On October 4, 2012, I predicted in this space that the 2013 Dutchess County Government property tax rate would probably be the highest it had ever been in this millennium. This prediction turned out to be correct. Furthermore, it turns out that Dutchess County's 2014 tax rate is higher that its 2013 rate, and its 2015 tax rate is even higher than that. This post examines the history of Dutchess County Government's tax rate.

Since true value tax rate is simply the tax levy divided by the taxable market value, let's start by looking at taxable market value, then tax levy, and finally the true value tax rate. Dutchess County's taxable market value and tax levy for each year from 2001 through 2015 (yellow columns in the table below) are derived from the tax rate pamphlets published by the Dutchess County Real Property Tax Service Agency (RPTSA).

Dutchess County
Year of Tax Bill	Taxable Market Value		Tax Levy		Tax Rate
	Market Value	Percent Increase	Tax Levy	Percent Increase	Tax Rate per $K of Market Value	Percent Increase
2001	$15,147,440,406		$50,863,720		$3.36
2002	$16,854,441,164	11.3%	$50,880,267	0.0%	$3.02	-10.1%
2003	$20,230,555,948	20.0%	$53,280,192	4.7%	$2.63	-12.8%
2004	$22,867,185,642	13.0%	$59,627,595	11.9%	$2.61	-1.0%
2005	$24,880,843,137	8.8%	$70,935,416	19.0%	$2.85	9.3%
2006	$29,588,132,874	18.9%	$75,959,089	7.1%	$2.57	-10.0%
2007	$33,964,774,405	14.8%	$87,276,185	14.9%	$2.57	0.1%
2008	$38,431,929,924	13.2%	$88,057,802	0.9%	$2.29	-10.8%
2009	$37,215,425,247	-3.2%	$94,565,391	7.4%	$2.54	10.9%
2010	$35,565,853,486	-4.4%	$100,781,716	6.6%	$2.83	11.5%
2011	$32,811,057,769	-7.7%	$100,535,544	-0.2%	$3.06	8.1%
2012	$31,895,759,238	-2.8%	$103,754,080	3.2%	$3.25	6.2%
2013	$30,653,742,121	-3.9%	$105,853,037	2.0%	$3.45	6.2%
2014	$29,575,302,089	-3.5%	$107,939,386	2.0%	$3.65	5.7%
2015	$29,224,529,259	-1.2%	$107,577,696	-0.3%	$3.68	0.9%

I've calculated the Percent Increase and Tax Rate columns from the Market Value and Tax Levy columns in the obvious way.

Taxable Market Value

It is helpful to visualize each column as a chart. Here is a chart for the second column:

Note that taxable market value is a net value, including both the value of new construction and improvements, and the current value of existing construction. Dutchess County's taxable market value surged in the first part of the last decade. In 2008 it was 2.5 times larger than in 2001. But in 2008 the economic meltdown hit. From 2008 to 2015 Dutchess County's taxable market value fell steadily a total of 24 percent. Once again, this 24 percent includes the effects of both the value of new construction and the current value of existing construction. Since there has been some new construction, the value of existing construction must have dropped more than 24 percent since 2008. This loss of value has had a profound effect on tax rates, as we will see.

The above chart is consistent with the chart on page 8 of County Executive Marc Molinaro's 2015 Tentative Budget Overview. Since Molinaro's chart does not begin with zero dollars on the Y-axis, his chart tends to visually exaggerate the effect of the meltdown.

Year to year increases in the taxable market value (third column in above table) are shown  below:

The above chart is qualitatively similar to the chart on page 9 of Molinaro's report, except that Molinaro's scale uses dollar decreases rather than percentage decreases.

It should be noted that all these market values lag tax bills by a year and a half. For example, for tax bills to be paid in February 2015, the corresponding market values are as of July 1, 2013.

Tax Levy

Dutchess County's tax levy — the amount billed to property taxpayers (fourth column in above table) — can be visualized as follows:

At first glance, the above chart seems to show the tax levy increasing every year of the millennium. But actually, there were small decreases in 2011 and 2015 (less than half a percent), as shown below (fifth column of above table):

Molinaro's report does not show any charts related to tax levy or tax rate.

Tax Rate

As I have written many times before in this space, tax rate, that is, true value tax rate expressed in dollars per thousand dollars of market value, is a useful way of comparing taxes among jurisdictions, among years, and even among different kinds of property taxes. For a given year, tax rate is simply tax levy (third chart) divided by taxable market value (first chart). The following chart (column 6 of the above table) compares Dutchess County Government property taxes for all years of this millennium. 

True value tax rate measures how steeply your personal wealth, as measured by the taxable market value of your property, is being taxed. The above chart shows that your wealth has been taxed more steeply every year since 2008 — the year of the economic meltdown. In 2013, your wealth was taxed at a steeper rate than ever before in this millennium. Since then, the tax rate has just become steeper. The following chart (column 7 of the above table) shows the tax rate changes in more detail:

Admittedly, the tax rate increase for 2015 is just under 1 percent, the smallest increase by far since the meltdown. This small increase can be attributed to the small (0.3 percent) decrease in tax levy for 2015, which almost, but not quite, compensates for the 1.2 percent decrease in taxable market value. 

If the current trend continues, it seems within the realm of possibility that Dutchess County Government tax rate could start to decrease beginning next year. That would be some long-awaited good news. High tax rates are burdensome to taxpayers.

Dutchess County Gov't 2013 Tax Rate Likely To Be Highest in Millennium

Newly elected County Executive Marcus Molinaro is many weeks away from announcing a proposed 2013 budget. After that, the county legislature must deliberate on adjustments before approving a final budget in December. Nevertheless, I can already predict with some confidence that the final 2013 county budget will result in the highest tax rate in this millennium, and the highest tax levy in the history of Dutchess County. In other words, properties will be taxed more steeply by Dutchess County Government than ever before in this millennium. These predictions are based on two tax trends:

1. Dutchess County's taxable market value continues to fall — for the fifth year in a row.
2. Dutchess County Government's tax levy has never significantly fallen, year-to-year.

Taxable Market Value

Dutchess County's taxable market value and tax levy for each year from 2001 through 2012 are derived from the tax rate pamphlets published by the Dutchess County Real Property Tax Service Agency (RPTSA).

For the 2013 tax bill, only an initial estimate of Dutchess County's taxable market value is available (shown in yellow), based on the July 1, 2012, assessment rolls. This value is shown as $30.7 billion on page 23 of a fiscal presentation by the Dutchess County Budget Office. The downward trend in property values since the beginning of the economic meltdown in 2008 is evident in the following chart:

The 2013 taxable market value is shown in yellow to indicate that it is only a preliminary value. The final value, which will not be available until late January 2013, is most likely to be somewhat lower than this value for a variety of reasons explained in detail here.

Note that taxable market value is a net value, including both the value of new construction and improvements, and the current value of existing construction. Dutchess County's taxable market value surged in the first part of the last decade. In 2008 it was 2.5 times larger than in 2001. But from 2008 to 2013 it fell 20 percent. Once again, this 20 percent includes the effects of both the value of new construction and the current value of existing construction. Since there has been some new construction, the value of existing construction must have dropped more than 20 percent since 2008. 

Year to year increases in the taxable market value are shown  below:

When I performed this analysis last year, it appeared as if the property value free-fall was nearly over, since the 2012 taxable market value decrease was the smallest since the meltdown. But the 2013 estimate clearly contradicts that conclusion. Although the 2013 decrease is only an initial estimate, the final decrease will most likely be somewhat greater. Note that all these market values lag tax bills by a year and a half. For example, for tax bills to be paid in February 2013, the corresponding market values are as of July 1, 2011.

Tax Levy

To reason about the 2013 tax levy, let's consider Dutchess County's tax levy history:

The above charts show that Dutchess County's tax levy has increased by a significant amount almost every year. Only in 2002 and 2011 has the tax levy been essentially unchanged from the previous year. Accordingly, I've made the most conservative assumption, that Dutchess County's 2013 tax levy increase will be zero. Based on history, it's unlikely that Dutchess County's 2013 tax levy will be lower than the 2012 levy. The yellow bar indicates that this data point is speculative.

Tax Rate

The 2013 true value tax rate, which is calculated by dividing the assumed 2013 tax levy by the 2013 taxable market value, is $3.38 per thousand dollars of market value: 

The above chart shows that this projected 2013 tax rate for Dutchess County (in yellow) is higher than in any previous year. This projection is almost certainly a low estimate. That's because the final 2013 taxable market value and the 2013 tax levy are both likely to move in a direction to increase this tax rate even further. The tax rate increase chart gives a third reason to conclude that the $3.38 estimate is conservative:

If Dutchess County's 2013 tax rate turns out to be “only” $3.38 — the highest in this millennium — it will still represent the lowest tax rate increase since the meltdown.

Will My Predictions Stand the Test of Time?

What would it take for my tax rate prediction of at least $3.38 or my prediction of the largest tax levy in Dutchess County's history to be wrong? Well, perhaps Molinaro will propose an especially frugal budget with a lower tax levy than last year's. But this won't be easy to do. Former County Executive William Steinhaus was known for shrinking county government and implementing other austerity measures in the years since the meltdown. It's unlikely there's a lot of fat to cut. Meanwhile, the costs of everything are continuing to increase. The effects of the 2008 economic meltdown are still being felt all over, despite allegations of a “recovery”.

How Will We Know Whether My Predictions Are Correct?

The first and most significant indication of whether my predictions are correct will occur next month, when Molinero announces his proposed budget. The second and probably less significant indication will be when the County Legislature approves the budget, possibly with modifications, in December. But the final word will not be out until January, when the 2013 tax rate pamphlet is released by the RPTSA, possibly with slight adjustments as described here. It is these tax rates that are used to generate property tax bills. Ultimately, it is the property tax bills that define how steeply taxpayers are being taxed.

I Hope I'm Wrong

It would be great if my predictions turn out to be wrong. Property taxpayers have been suffering more every year since the meltdown, and of course not just from Dutchess County Government taxes. Only time will tell whether my prediction of Dutchess County's 2013 tax rate of $3.38 turns out to be low-ball.

UPDATE 10/6/2012 — Budget May Exceed 2% Tax Cap

Just a day after publication of this post, it already looks like my caution that my predictions might be wrong may be unwarranted. A front page story in yesterday's Poughkeepsie Journal describes Molinaro's intent to replenish  the County's rainy-day fund. The story quotes Dutchess County Legislative Chairman Robert Rolison as saying that Molinaro's plan would probably require exceeding the State's 2 percent tax cap. Nevertheless, Rolison signaled his intent to support such an increase. As I see it, the stage is already being set to increase the County's 2013 tax levy by at least 2 percent over 2012. Even at just 2 percent, the 2013 tax rate would be $3.45, a 6.1 percent increase over 2012. Such a result would easily confirm my predictions.

Joel Miller's Flawed Legislation for Fire District Budget Empowerment

New York State Assemblyman Joel Miller has introduced legislation to provide for public vote on fire district budgets in the November general election. Under current New York State law, fire district budgets are controlled by the district's board of fire commissioners. Miller's legislation A9762A, called the Fire District Budget Empowerment Act, shifts the approval of fire district budgets from the fire commissioners to the general public. Miller announced his popular vote initiative in an April 22, 2012, Valley Views article in the Poughkeepsie Journal.

Popular Vote on Budget Is Inconsistent With Other Local Governments

As I see it, popular vote on fire district budgets is a risky departure from most governance in this country. There is no public vote on the federal budget, there is no public vote on the New York State budget, there is no public vote on the Dutchess County budget, or on city or village budgets. Instead, the general public votes for representatives (government officials such as legislators, councilmen, etc.) who in turn decide on agency budgets. This is the principle of representative democracy, one of the foundations of this country. In the case of fire districts, the people vote for fire commissioners, who in turn control the budget.

Direct Democracy Is Seldom Used But Often Problematic

Miller's initiative is an example of direct democracy, in which policy decisions are made by popular vote, bypassing or overriding government officials. Direct democracy for economic decisions is used only sparingly in the United States. In California, many major economic decisions beginning with the infamous Proposition 13 have been made by popular vote, with disastrous results.

The founding fathers were very much opposed to direct democracy (also called “pure democracy”), according to Wikipedia. John Witherspoon, a signer of the Declaration of Independence, said, “Pure democracy cannot subsist long nor be carried far into the departments of state – it is very subject to caprice and the madness of popular rage.” The American colonists favored representative democracy — not direct democracy. That's why they said “No taxation without representation.” They didn't say “No taxation without popular vote.”

Why should fire districts be any different from other local governments?

Fire districts are just one more kind of local government taxing authority in New York State, along with Towns, cities, villages, and counties. I know of no reason why fire districts should be governed differently than any of these other taxing authorities. In my view, fire districts should continue to use the same budget approval process as most other local taxing authorities.

Incorrect and Misleading Statements in Valley View Article

Miller's Valley View article contains misleading statements, and at least one statement that is just plain wrong. In the context of the Fairview Fire District's high fire tax rate, Miller writes:

Fairview alone had fire district tax rates nearly 10 times higher than 27 other towns in Dutchess County in 2010.

This statement is absurd, since there are only 20 towns in Dutchess County. Well, perhaps Miller meant “fire districts” instead of “towns”, since there are about 31 fire districts in Dutchess County. I checked with Miller's office, and was assured that yes, that's what he meant. Well, wrong again! My tax rate analysis from 2009 shows (page 14) that Fairview's tax rate was 10 times higher than 13 other fire districts — not 27 other fire districts. Miller's research staffer has conceded that the Valley Views statement — even after changing “towns” to fire districts” — is incorrect.

Miller misleadingly writes, “This legislation will permit public participation in fire district budgets ...,” as if public participation in the fire district budget process doesn't already exist. But New York State law already requires a fire district to publicize its tentative budget and to hold a public hearing on the budget, during which public input is received. In this way again, state law provides for public participation in the fire district budget process just as it does in most other kinds of local government, including counties, cities, villages, and schools.

This Is My Opinion

Most of my previous posts have been nonpartisan, focusing on objective facts. This post (except for the last section) is clearly my own opinion. Therefore, it's marked with an “Opinion” label. As always, I welcome your reasoned comments.

Which Fire District Has the Highest Tax Rate in New York State?

It's been nearly three years since my first post to this blog, and a good time to update information in some of my initial posts. Originally named Fire Tax in Dutchess County, my blog expanded from “Fire” to “Property” after I began exploring wider issues.

True Value Tax Rates

A consistent theme of this blog is that true value tax rates, that is, tax rates expressed in dollars per thousand dollars of market value (not assessed value), are the appropriate way to compare the steepness of property taxes across different jurisdictions, as well as within the same jurisdiction across different years. The idea of taxes as a percent of home value is essentially the same idea. My second post to this blog explained true value tax rates (without using that handy name) in terms of fire taxes. Since then, I've explored variations on this theme many times, such as here, here, and here.

Which fire district in New York State has the highest fire taxes?

This question can be answered in principle by comparing the true value fire tax rates of every fire district in the state. Unfortunately, I don't have access to this information, so I can't really answer this question. However, there are a few contenders for highest fire taxes that I'll discuss here.

Regular readers of this blog know that the Fairview Fire District has the highest fire tax rate in Dutchess County, with a tax rate exceeding $5.00 per thousand dollars of market value for every year of this millennium. When I started this blog three years ago, no other fire district in Dutchess County came anywhere near to Fairview's $5.00 mark. None even reached $4.00. This has changed. The Arlington Fire District — one of the big three fire districts of Dutchess County — has dramatically increased its tax rate since I began this blog:

Arlington's tax rate has exceeded $4.00 in each of the last three years. For 2012, Arlington's rate of $4.89 is just 11 cents below the magic $5.00 mark.

Gordon Heights Fire District

But a stronger contender lives outside Dutchess County. The Gordon Heights Fire District in Suffolk County — the subject of my third post to this blog — has had a true value tax rate in the $4.00 and $5.00 range every year since at least 2004. The following chart comparing Fairview with Gordon Heights updates my chart of three years ago:

Gordon Heights beat out Fairview between 2004 and 2007, but Fairview has triumphed over Gordon Heights almost every year since then, with Gordon Heights just edging out Fairview last year. This year, Fairview is significantly “ahead”. In fact, Fairview's 2012 tax rate of $5.72 is higher than that of either district for any year since 2005. So, for now, Fairview is the prime contender for “highest fire tax rate in New York State”. If there's another fire district with higher tax rate, I'd like to know about it.

Differences between Fairview and Gordon Heights

Although Fairview and Gordon Heights have comparable tax rates, the two districts differ in a number of important ways. As I noted in my post three years ago, Fairview is staffed predominantly by career firefighters; Gordon Heights is a volunteer district for firefighting, although it has full-time paid staff for responding to medical emergencies. Paid staff accounts for most of the budget in both districts. I also noted that Gordon Heights has been cited for mismanagement of taxpayer dollars over a period of years.

A third difference between Fairview and Gordon Heights is that nearly half of Fairview's real property is tax exempt. To my knowledge, no significant part of Gordon Heights is exempt. This factor alone accounts for a substantial portion of Fairview's high tax rate.

Will Gordon Heights Drop Off the Radar?

The Gordon Heights Fire District may soon drop off the radar of high fire taxes. In the last three years, Gordon Heights has seen strong grass-roots political activity to dissolve the district, or otherwise bring an end to what advocates call the “killer fire taxes”. Two fire commissioners supporting this goal have been elected, and a third one was narrowly defeated two months ago. The Town of Brookhaven, which contains Gordon Heights, is conducting a feasibility study to determine how to remedy the Gordon Heights tax situation. In the future, it is possible that Gordon Heights Fire District will be “off the charts” in the sense that it will either no longer exist, or that it will have a more manageable fire tax rate.

Taxpayer Viewpoint

All tax rates in this post (and in most posts on my blog) are from the taxpayer's viewpoint. In other words, these tax rates derive from data used by the government offices which prepare tax bills, so they correspond to the taxes actually paid by taxpayers. Municipalities such as boards of fire commissioners generally find it more convenient to look at tax rates from the budget viewpoint instead of a taxpayer viewpoint. The two viewpoints usually give pretty much the same tax rates, but generally not exactly the same. For the technical differences, see my recent post Tax Rate Viewpoints — Taxpayer Versus Budget.

Dutchess County 2012 Tax Rate Is Highest In Decade

Just over a year ago, I posted Dutchess County 2011 Tax Rate Is Highest In Decade. For 2012, the property tax rate for Dutchess County government has increased an additional 6.2 percent, making it once again the highest tax rate in the last ten years. The rising tax rate means that property taxpayers are paying a larger and larger proportion of their wealth — measured by the market value of their property — in taxes. As I've written many times in this blog, the tax rate is the most meaningful way to compare taxes between different years, and between different jurisdictions.

Since the economic meltdown began in 2008, public officials, particularly County Executive William Steinhaus, have focused on the tax levy and changes in the tax levy, while downplaying the tax rate. That's because they know that in a declining real estate market, changes in the tax levy don't sound as bad as changes in the tax rate. But in my view, it's really the tax rate that describes how burdensome your taxes are — not the tax levy.

Let's look at the data:

Alert readers will notice very small differences between the above table and that in last year's post. That's because the above table comprises data from the taxpayer's viewpoint, while that in last year's post comprises data from  the budget viewpoint. The differences between these viewpoints are explained in Tax Rate Viewpoints — Taxpayer Versus Budget. All the data in the above table was derived from the tax rate pamphlets published by the Dutchess County Real Property Tax Service Agency. This data matches that on property tax bills.

We can look at this data more easily in graphical form. Dutchess County's taxable market value has continued to drop for the fourth straight year, since the meltdown began:

The above chart shows that Dutchess County's real estate market has been getting worse for each of the last four years. However, a three-year trend of ever-faster declines has reversed itself in 2012, as we can see clearly in the chart of changes in the market value:

This chart shows that Dutchess County's market value isn't falling as fast as it has been:  The 2012 decline is smaller than in any of the three previous years. If this new trend continues, 2013 may not be worse than 2012. In the years since the meltdown began, this is what passes for good news.

As real estate values decline, government officials focus on the tax levy, rather than on the tax rate. That way, the news won't sound as bad as it really is. Steinhaus has been a master at this.

Changes in the tax levy are more clearly seen below:

This year is the first for which New York State's famous two percent tax cap kicks in. This law has been widely touted as helping to reign in escalating property taxes. The law limits local government tax levy increases to 2 percent, with some exceptions. So naturally, Dutchess County's 2012 tax levy increase is only ... um ... 3.2 percent. Surprised? Well, I guess you didn't read the fine print — the part of the law about “some exceptions”. It turns out, according to Steinhaus' 2012 budget message, that the state's property tax cap formula includes exceptions which allow Dutchess County's tax levy to increase up to 3.3 percent. If you think the tax cap law is ineffectual, note that even at 3.2 percent, Dutchess County's 2012 tax levy increase is smaller than in all but three of the last 11 years.

The fact that Dutchess County's tax base has decreased, but its tax levy has not, means that Dutchess County's tax rate is bound to increase. Here it is:

For 2012, Dutchess County's tax rate is $3.25 per thousand dollars of market value, a 6.2 percent increase over last year's $3.06. This tax rate information is useful to property owners who want to understand how high their property taxes are compared with their personal wealth, as measured by the market value of their home. That’s exactly what this true value tax rate measures.

For what it's worth, Dutchess County's 2012 tax rate is not yet at an all-time high. In 2001, the first year for which coherent data is available, the County's tax rate was $3.36.

Changes in the tax rate again show increases every year since the 2008 meltdown:

As we begin 2012, we can compare our situation today with that in 2008, when the economic meltdown hit. Property values in Dutchess County (as measured by taxable market value) have now dropped 17.0 percent since 2008, despite any new construction. At the same time that property owners' wealth has been decreasing, Dutchess County government is billing 17.8 percent more dollars in tax levy than in 2008. These two detrimental effects combine to yield a whopping 42.0 percent increase in the true value tax rate since 2008. So 42 percent more of taxpayers' current wealth goes to Dutchess County than in 2008.

This Bad News is by no means unique to Dutchess County government. On the contrary, the story is qualitatively similar for all property taxes in Dutchess County — for towns, cities, villages, school districts, fire districts, etc.

Big Three Fire Districts Use Divergent Tax Strategies

Each of the Big Three Fire Districts of Dutchess County — Arlington, LaGrange, and Fairview — seems to have employed its own tax strategy for meeting the continuing fiscal challenges of the 2008 economic meltdown.  LaGrange's strategy seems a relatively moderate reflection of the economic meltdown, Arlington appears to be on a spending spree, while Fairview appears to be starving the District of resources.  This viewpoint about Fairview is consistent with the fact that Fairview has not been contributing adequately to its reserve funds in recent years, as described here.

The following chart gives one way to see the dramatic differences among the three strategies:

Each bar in the above chart shows the cumulative increase in tax levy, compared with the 2008 tax levy.  That is, each bar shows how much more money has been collected between 2008 and that year than would have been collected if every tax levy to that point were equal to the 2008 tax levy.  For example, a 2009 bar shows the difference between the 2009 tax levy and the corresponding 2008 tax levy, expressed as a percent of the 2008 tax levy; a 2010 bar shows the difference between the 2009 tax levy and the corresponding 2008 tax levy plus the difference between the 2010 tax levy and the 2008 tax levy, expressed as a percent of the 2008 tax levy. Another way to describe this chart is to say that it illustrates the effect over time of deviating from a strategy of holding the tax levy flat at the 2008 level.  Because all changes are normalized relative to each District's 2008 tax levy, this chart makes it possible to directly compare each of the Big Three fire districts with each other. 

Strategies of the Big Three — Tax Levy Viewpoint

The LaGrange Fire District has taken the moderate strategy of maintaining its tax levy relatively close to its 2008 level.  Thus, its bars are barely visible until 2012.  The amount of additional tax money LaGrange will have collected through 2012 is just 2.5 percent of LaGrange's 2008 tax levy, or $120,000.  That's the meaning of LaGrange's 2012 bar of 2.5 percent.

The Arlington Fire District has taken the strategy of significantly increasing the tax levy almost every year, so that the cumulative increase in Arlington's fire tax levy from 2008 until 2012 (proposed budget) is nearly 60 percent.  Thus, the amount of additional tax money Arlington will have collected through 2012 is 60 percent of Arlington's 2008 tax levy, or about $7.8 million.

Now we come to poor Fairview.  And I mean poor.  The Fairview Fire District has taken the opposite strategy from Arlington by decreasing its tax levy almost every year.  The cumulative decrease in Fairview's fire tax levy from 2008 until 2012 (proposed budget) is 26.5 percent.  This means that the amount of tax money Fairview has failed to collect through 2012 is 26.5 percent of Fairview's 2008 tax levy, or about $800,000.

Strategies of the Big Three — Tax Rate Viewpoint

Taxable market values in the big three fire districts have fallen every year since 2008.  For the period 2008 to 2012, they will have fallen a total of about 22 percent in LaGrange and Arlington, but only 15 percent in Fairview.  Fairview's shallower decline means that Fairview's tax rate has taken less of a hit than LaGrange and Arlington have incurred.  Nevertheless, the differing strategies of the Big Three are starkly evident in this chart of cumulative tax rate increase since 2008:

The above chart is easier to explain than the previous one.  Each bar is simply the percent increase in the true value tax rate for the year, compared with the corresponding 2008 tax rate (rather than compared with the previous year's tax rate).  Because all tax rates are normalized relative to each District's 2008 tax rate, this chart makes it possible to directly compare the strategies of each of the Big Three fire districts.

The true value tax rate is a good measure of how steeply taxpayers' wealth — measured by the market value of their properties — is taxed.  Therefore, the above chart shows, for each fire district, how much more steeply taxpayers are being taxed compared with the meltdown year of 2008.  Looking at the proposed 2012 budgets, Arlington will tax 52 percent more steeply; LaGrange will tax 31 percent more steeply; poor Fairview will only tax 11.5 percent more steeply.

The Proposed 2012 Budgets Continue These Divergent Strategies

The proposed 2012 budgets for all three fire districts are not isolated decisions, but are continuations of strategies that have been followed by each district since the economic meltdown of 2008.  I plan to say more about Fairview's proposed 2012 budget in a subsequent post.

Tax Rate Viewpoints — Taxpayer Versus Budget

This post explains why  tax rates on property tax bills can be somewhat higher than tax rates in municipal budgets.  This topic is a little more geeky than my usual post.

Around this time of year, local government officials in taxing municipalities (towns, villages, cities, fire districts, other special districts, and, yes, even Dutchess County government) prepare budgets for the next year.  (School districts do the same thing in the spring.)  As part of the budget preparation process, they set the tax levy — the amount of money the municipality decides to collect from property taxes in the next year.  The tax levy divided by the municipality's taxable market value — which is set on the previous July 1 by the town assessor — is the true value tax rate.  The true value tax rate expresses how steeply property owners' wealth — as measured by the market value of their properties — will be taxed by the municipality.  As such, it is a key parameter for municipal governments, taxpayers, and all other stakeholders.

When tax bills are sent out in January (or in September for school taxes), it is exactly this tax rate which appears on tax bills, and is used to calculate the amount of taxes for the municipality ... in an ideal world.  But we don't live in an ideal world, do we?

The Tax Situation in the Real World

In the real world, its not quite that simple.  In the real world, property owners sometimes don't pay their taxes.  And then they go bankrupt or disappear, and the money is never collected.  In the real world, taxable property can be sold at any time to a tax exempt organization, taking it off the tax rolls.  In the real world, property owners sometimes take legal action to reduce their taxable assessed value — sometimes even retroactively.  All these situations mean that the municipality doesn't collect as much tax in February as it planned for in the budget process the previous fall.  Not only that, but sometimes court decisions require that property tax that had been collected from a property owner in previous years “in error” must be given back.

All these real world situations pose a dilemma for the municipality.  There is the prospect that the municipality will not receive the full tax levy in its budget, or that it will need to refund money it hasn't budgeted for.  So when there's a shortfall of any of these kinds, who do you think is left in the lurch?  Who do you think loses out?  Who do you think gets left holding the bag?

If you guessed “the municipality”, you've just became the laughing stock of the party.  If you're a taxable property owner in the municipality, the correct answer is, ”You!”

How Taxpayers Get To Pay For Budget Shortfalls

Here's how this works in Dutchess County:  In February when property taxes are collected, if a municipality has a shortfall, the government of Dutchess County fronts the money to the municipality to make it whole.  That way, municipalities don't need to go through any painful re-budgeting process in the middle of the year just because some taxpayer went bankrupt, or some court ordered a refund.

But Dutchess County government doesn't eat these extra costs.  After all, it doesn't have any extra money to throw around either.  Instead, it remembers its generosity to the municipality, and demands full payback the next year.  Payback does not occur through the municipality's budget process.  Instead, the town which collects the municipality's tax adds an increment to the municipality's tax rate of just the right size to pay back Dutchess County.  By the way, Dutchess County, in its beneficence, declines to charge interest on the money it fronts.  It just eats those costs, which are small potatoes.  Well, I guess you get to pay even the interest, through county taxes.  See?  There's no escaping death and ...

This Is a Reasonable System

One advantage of this system is that the municipality is insulated from all these real world situations.  It can do its budgeting just once a year, rather than being whipped around by every court decision or bankrupt taxpayer.  But it means that taxpayers pay each year for all the extra costs incurred the previous year.  In other words, taxpayers pay at a slightly higher tax rate than what the municipality's budget says it's charging them.  This is why there's a taxpayer viewpoint and a budget viewpoint for tax rates. 

This Blog Focuses on Taxpayer Viewpoint

In my property tax investigations, I prefer the taxpayer viewpoint, because the taxpayer rates are the rates at which taxpayers actually pay taxes.  The taxpayer rates are readily available in tax rate pamphlets published each year by the Dutchess County Real Property Tax Service Agency.  But the thing is, the taxpayer rates for 2012 aren't available until, well, January 2012.   In the fall of 2011, the only 2012 tax rates available are those in municipal budgets.  I take these budget tax rates as the best available estimates of the (yet unknown) 2012 taxpayer tax rates.  Such tax rates will tend to underestimate the tax rates on tax bills, but generally not by much.

Tax Rate Increases

When the latest tax rate is only a budget tax rate, and not a taxpayer tax rate, the tax rate increase compared with the previous year will be reasonably close to the (yet unknown) taxpayer-view tax rate increase, but will tend to underestimate it.  Budget documents, if they show tax rate increases at all, will ordinarily use only budget tax rates, in keeping with the municipality's viewpoint.  The result is that these budget tax rate increases will tend to not reflect taxpayer experience as well as my approach.  The budget tax rate increases reflect municipality experience. 

Example — Arlington Fire District

An example of what I'm talking about can be seen in the Arlington Fire District's proposed 2012 budget.  I state here that this budget proposes a 10.1 percent tax rate increase over 2011.  The 10.1 percent is figured by comparing Arlington's proposed budget 2012 tax rate of $4.87 with the 2011 taxpayer-view tax rate of $4.43.  (Calculations carried to many significant figures, of course.)  On the other hand, if the tax rate increase percent is calculated using only budget tax rates, the budget tax rate increase would be 10.4 percent, as I describe here.  Both the 10.1 and the 10.4 figures are reasonable, depending on one's point of view.  From the taxpayer's viewpoint, the 10.1 figure is the more appropriate.

School Tax Rate Comparisons — Two Viewpoints

Long-time readers of this blog may wonder how the two tax rate viewpoints discussed above relate to the two tax rate viewpoints discussed in School Tax Rate Comparisons — Two Viewpoints.  The short answer is that they're unrelated.  The viewpoints in that previous post apply only to school districts, not to other municipalities.  Both kinds of tax rates discussed in that previous post are taxpayer viewpoint tax rates in the sense of this post.  On the other hand, the taxpayer and budget viewpoints of this post can certainly be applied to school districts, further complicating what starts out as a very simple idea.