The Big Three Tax Exempt Institutions of Fairview

This is the third in a recent series of posts about the crisis in the Fairview Fire District.  Fairview's long-term crisis is that it has not set aside sufficient funds to pay for future obligations.  If Fairview cannot increase its income, it will be forced to take the drastic step of reducing service.  Reducing service would increase risk to life and property in measurable ways, and it would also increase insurance rates for all property owners in Fairview.

Approximately 95 percent of Fairview's income comes from the fire tax levy.  But simply increasing the tax levy is problematic for two reasons:

1. Fairview's fire tax rate is already the highest in Dutchess County, and one of the highest in New York State.  With the continuing drop in property values, Fairview's 2012 fire tax rate is projected to increase 2.8 percent even if the tax levy is held constant.  The resulting true value fire tax rate will be $5.25 per thousand dollars of market value — the highest in a decade.  Fairview property owners have argued that the fire tax is already too high.
2.  If Gov. Cuomo's 2 percent tax cap becomes law, it may be difficult or impossible for Fairview to substantially increase the fire tax levy.

Payments In Lieu Of Taxes (PILOTs)

For these reasons, it makes sense for Fairview to look beyond the tax levy to other sources of income.  A longstanding proposal is to ask Fairview's tax exempt institutions for Payments In Lieu Of Taxes (PILOTs).  Tax exempt institutions represent 48 percent of Fairview's total market value.  Indeed, these exempt properties represent a major reason for Fairview's high tax rate.  Accordingly, this post focuses on Fairview's tax exempt institutions.

The Big Three

The following pie chart shows the components of Fairview's tax exempt market value, which I compiled from the tentative assessment rolls applicable to the 2012 tax bill:

Note that this chart differs only slightly from the 2010 chart published on page 11 of The Big Three Fire Districts of Dutchess County.  Marist College, St. Francis Hospital, and Dutchess Community College can be called the big three tax exempt institutions of Fairview.  Together, they comprise more than three quarters of Fairview's exempt market value:

Institution	Market Value	Percent
Marist College	$218,248,000	42.1%
St. Francis Hospital	$120,114,500	23.2%
Dutchess Community College	$56,007,500	10.8%
all others	$123,527,889	23.9%
Total:	$517,897,889	100%

In the last few years, the general trend of property values in Dutchess County has been downward, and this trend has continued for 2012. Thus, St. Francis Hospital's tax exempt market value is down 9 percent from 2010, and Dutchess Community College's is down 4 percent. Most parcels of Marist College are down 4 to 8 percent; however, one of Marist's parcels increased in value from $274,000 to $17.8 million due to the construction of residence halls.  The net effect is that Marist College's exempt market value has increased by 3 percent from 2010.

Hudson River Psychiatric Center

The fourth largest tax exempt institution in Fairview is the Hudson River Psychiatric Center (HRPC).  However, this is destined to change soon.  The New York State Office of Mental Health has recently announced that it will close Hudson River Psychiatric Center by October 1, 2011.  Once HRPC is gone, the big three tax exempt institutions will dominate Fairview's tax exempt landscape even further.

PILOTs From the Big Three

Marist College has been contributing PILOTs to the Fairview Fire District every year for a number of years.  The yearly contribution amount has been trending upward, with the most recent yearly contribution being $125,000.  But to put this number into perspective, if Marist College were entirely taxable (instead of almost entirely tax exempt), its annual Fairview fire tax would exceed one million dollars.  To the best of my knowledge, St. Francis Hospital has not contributed PILOTs in recent years.  However, it has contributed some services to the fire district with monetary value per year in the low 5-figure range.  I believe Dutchess Community College has occasionally contributed one-time PILOTs to Fairview in the low 5-figure range.

Can the Big Three Save Fairview?

The Fairview Fire District faces a long-term financial crisis which, if not resolved, could result in reduced services to all Fairview property owners and residents.  These reduced services have quantifiable costs:  All property owners would see increased insurance rates.  There are also unquantifiable costs in reduced safety, resulting in greater risk of injuries and deaths.  The Big Three Tax Exempt Institutions of Fairview may feel these costs more than some other stakeholders.  It may be in their self-interest to avoid these costs by bailing out the fire district with new or increased PILOTs.

Fairview Fire District Is in Crisis

On Thursday, May 26, 2011, the Fairview Fire District Board of Fire Commissioners combined Budget and Long Range Planning Committees held a remarkable public workshop meeting at the Fairview Fire House.  The picture of Fairview's status painted at this meeting is nothing short of dire.  This meeting marks a major turning point in Fairview's history.  To put this turning point into perspective, it helps to know Fairview's previous turning point:

Fairview's Previous Turning Point

On April 24, 2008, over 400 residents of the Fairview Fire District attended a meeting of Fairview's Board of Fire Commissioners to express their outrage at the exorbitant Fairview fire tax.  Fairview's fire tax rate had for years been the highest by far of any fire district in Dutchess County, and one of the highest in New York State.  That meeting marked the beginning of increased involvement by Fairview's residents (including me) in Fire District matters.  In the following three years, voters turned out in extraordinary numbers to elect three newcomers to the Board of Fire Commissioners, Jill Line, Bob Gephard, and Joe Petito.  These newcomers replaced veterans who had run Fairview for years, if not decades.  In my view, this is an inspirational story of democracy in action, a counterexample to the common lament that politicians who displease us are entrenched, and that there's nothing we can do about it.  The fact is that a surprisingly small group of dedicated Fairview taxpayers and residents was able to replace the veterans with newcomers who were believed to better represent the interests of Fairview's residents.

Public Workshop Meeting

This week's public workshop meeting was billed as an attempt to “discuss with the residents the status of the District”.  I had commended Mr. Gephard beforehand for initiating and leading the long range planning committee, and for arranging for this public workshop meeting.  As I saw it, openness about long range planning helps all stakeholders see what possible futures may look like, and allows the public to influence decisions before things get really bad.  At worst, this exercise does no harm.  I did not realize beforehand the critical situation that would be revealed at the meeting. That fact, in my view, makes Bob's contributions even more important than I'd originally thought.

Advance publicity for the meeting was minimal, and it gave no clue that two bombshells would be dropped at the meeting.  This is probably why less than a dozen residents attended, mostly the regulars at monthly commissioners meetings.  However, many other stakeholders were present, including career and volunteer firefighters, Fairview Board Chairperson Jill Line, Fairview Treasurer Jim Passikoff, and various other officials.  In the end, perhaps 30 people were there, including about half a dozen presenters.

Commissioner Gephard, Firefighter Mark Bendel, and others presented two hours of detail on the financial and operational status of the district, followed by an hour of questions and comments from the floor.  A serious difficulty, in my view, was that there was precious little in the way of summary of the main points by the presenters, particularly in the financial area.  I have frankly struggled to divine what the main issues are.  What follows is my best understanding of the main points.  I likely haven't got everything right here, and I welcome corrections and clarifications.

So What's the Crisis?

There are actually two crises, an immediate one, and a long-term one:

1. The immediate crisis is that the fire station has become understaffed, and that the firefighters are greatly overstressed.
2. The long-term crisis is that the fire district has not been setting aside sufficient funds for future obligations.  When these costs come due, the District will not have the funds to pay them.

The problem is that it may not be wise to attempt to solve the immediate crisis without knowing how the long-term crisis will be solved.

Short Term Staffing Crisis

Mr. Bendel's presentation on the immediate crisis was particularly effective.  Bendel explained that the fire station must be staffed by 4 career firefighters at all times (24x7) in order to maintain Fairview's level of service in the District.  This staffing level requires at least 16 career firefighters.  Unfortunately, in recent months 3 firefighters have left the District (retirement and transfer), and one more is unavailable because of injury.  To continue Fairview's level of service, the remaining firefighters have been working overtime (mostly at straight-time pay) for a number of months.  Although the financial cost of this arrangement is minimal, the stress on firefighters is extreme, and unsustainable.

The District cannot simply reduce the fire station staffing from 4 per shift to 3, even temporarily, without major repercussions.  Mr. Bendel explained that having only 3 firefighters available to fight a structure fire would dramatically reduce the level of service, resulting in significant increases in risk to both life and property.  Not only that, but the reduced level of service would cause all property insurance rates in the fire district to increase considerably.  All stakeholders would be substantially affected by a reduced level of service.   

A decision to reduce the level of service amounts to a game-changing dismantling of part of Fairview's mission.  The Fairview Fire Commissioners would presumably ask for input from all major stakeholders before authorizing a reduced level of service.  This public meeting appears to be the beginning of such an inquiry.

Long Term Financial Crisis

In recent years, Fairview's budgets have not set aside sufficient funds for future maintenance and replacement of apparatus and equipment and other future obligations.  The money that should have been set aside was used instead to decrease the fire tax burden.  The result is that Fairview's fire tax rate has remained remarkably steady at just over $5.00 per thousand dollars of market value since the economic meltdown of 2008, despite falling property values.  See the chart on page 7 of Fairview Fire District Property Tax Data.  Fairview's steady tax rate on that chart is in sharp contrast to that of the other of the big three fire districts of Dutchess County — Arlington and LaGrange.  The tax rates of both these fire districts have been climbing steadily since 2008.  I had seen Fairview's constant tax rate in recent years as the result of prudent management.  In reality, it has been just the opposite.  Fairview has essentially been “robbing Peter to pay Paul” by not setting aside money for future needs. 

What are Fairview's choices at this point to solving its financial crisis?

1. Decrease the budget.  However, this cannot be done without reducing staffing, because staffing is the primary cost in the budget.  Reducing staffing cannot be done without major safety and insurance repercussions, as described above.
2. Increase the fire tax levy significantly.  However, a strong case can be made that the fire taxes are already as high as can be tolerated.  Many would argue that the tax rate is higher than can be tolerated, although it's been at about the same $5.00 rate for nearly a decade.  On the other hand, Fairview's tax rate was $6.07 in 2001 and $5.73 in 2002.  See Fairview Fire District Property Tax Data. So a painful argument could still be made that there's room to increase the tax rate by almost $1.00.  Even so, would that be enough?  On the third hand, if Gov. Cuomo's two percent tax cap applies to fire districts, this choice is entirely off the table.
3. Obtain significant and sustained funding from sources other than property tax. 

The most obvious place to turn for funding is Marist College, St. Frances Hospital, Dutchess Community College, and the other not-for-profit institutions in Fairview which are exempt from fire tax.  Tax exempt properties make up 48 percent of Fairview's market value.  In the past, these institutions have provided only very limited support.  But the circumstances may be different now.  If these institutions do not contribute substantial payments in lieu of taxes (PILOTs), they may be faced with a substantial degradation in services from Fairview, resulting in increased risk to their property (and the lives of their students, patients, and employees) and increased insurance premiums at the same time.  These considerations may persuade these institutions that it is in their interest to increase their support to Fairview.

Tying the Two Crises Together

How much time does Fairview have to resolve these crises?  The staffing crisis is clearly urgent, and cannot be allowed to continue any longer than necessary.  However, simply adding staff now to solve the immediate crisis would only make sense if the financial crisis can be solved by finding more income, a strategy which is not certain of success at this point.  If Fairview replaces staff now, and then fails to secure more income, Fairview will need to decrease staffing after all.  It might not be prudent for Fairview to bring on more staff now without some assurance that it can be paid for. 

Fairview is indeed in a very difficult position.  It is by no means certain that Fairview can continue to provide the level of service that it has in the past.  Resolving this crisis will require continued openness by the new Board of Fire Commissioners, as well as the cooperation of all other stakeholders.  Even then, it will require skill, creativity, and perhaps even some good luck.

Fairview Fire District Tax Base Projected to Drop 2.7 Percent

The taxable market value of the Fairview Fire District, assessed at $514.3 million for 2011 tax bills, is projected to drop 2.7 percent to $500.5 million for 2012 tax bills, according to my calculations from tentative assessment rolls published in recent weeks by the Dutchess County Real Property Tax Service Agency.  This is the fourth year in a row that Fairview's tax base has decreased, and it is the second largest decrease in that time.  This drop in the tax base will aggravate the difficulty of holding down Fairview's tax rate.

Fairview has had the highest true value tax rate of any fire district in Dutchess County for many years, and one of the highest fire tax rates in New York State, with recent rates hovering just over $5.00 per thousand dollars of market value.  If Fairview's final assessment is unchanged from the tentative assessment, and if Fairview’s 2012 tax levy is unchanged from 2011 (just as a point of reference), then Fairview’s true value tax rate will increase 2.8 percent to $5.25 per thousand dollars of market value, making it Fairview's highest tax rate in a decade, and its second highest tax rate increase in a decade.

For further details, including a history of Fairview's market value, tax levy, and tax rates from 2001 to 2012 (projected) in table and chart form, see Fairview Fire District Property Tax Data.

Upcoming Fairview Public Meeting

In past years, the Fairview Fire District, like many local taxing jurisdictions, has done budgeting and planning mainly year-to-year.  However, the Fairview Board of Fire Commissioners, to its credit, has recently established a long range planning committee to look further into the future than just one year ahead.  This committee, headed by Commissioner Bob Gephard, has scheduled a public workshop meeting for Thursday, May 26, at 6:00 pm at the Fairview Fire House.  The agenda includes discussing goals such as public protection versus risk versus cost, early review of next year's budget, and long range costs.  In looking at the big picture — both short and long term — the tax rate and the change in the tax rate is, in my view, one important measure of the status of the District.  Perhaps the long range planning committee will find my analysis of previous and projected tax information useful.  I plan to attend this meeting, and to report here on what transpires.

BOCES Is Indifferent to the Accuracy of its Property Tax Data

Every year, the Dutchess County Board of Cooperative Educational Services (BOCES) publishes two comprehensive documents, a Contract Analysis book and a Fact Book, both for assisting school district administrators in their budgeting processes and in negotiating with labor unions.  Each document consists almost exclusively of tabulations comparing numerous parameters for the 13 school districts in Dutchess County. 

• Contract Analysis 2010-2011, published January 2011, is a 157-page document, most of whose tables relate to salaries and benefits of school district employees.  However, a 35-page section called Financial contains district-wide tables related to budgets, costs per student, costs per expense category, and, yes, property tax information, including assessed values, tax levies, and tax rates.  Naturally, that's the part I've focused on.
• Dutchess County Fact Book 2005-2006 through 2009-2010, published January 2011, is a 69-page document containing additional financial information, including more extensive property tax tables than appear in the Contract Analysis book.

In examining the above documents, I looked first at the current school district true value tax rates for the 13 school districts in Dutchess County, listed on page 144 of the Contract Analysis PDF (page 32 of the Financial section).  Comparing with my own analysis, I noticed significant discrepancies in 4 districts:  Beacon, Millbrook, Poughkeepsie, and Spackenkill.  The BOCES rates are lower than mine by 5 percent or more in most cases.  My report BOCES Tax Rate Variances documents these discrepancies in detail.  I sent this report to BOCES Assistant Superintendent for Business Services Linda Poleski, with the hope that she would review my analysis and determine whether the issues I raised about the accuracy of BOCES current true value tax rates could be substantiated.  Ms. Poleski graciously accepted my report, and within a few days informed me that BOCES has confirmed that all my tax rates are correct, and has adjusted its records accordingly.

OK, so far so good.  Encouraged by this initial interaction, I examined additional BOCES property tax tables, and found a significant number of additional discrepancies:

• True Tax Rates – Historical table on page 147 (page 35 of the Financial section) of the Contract Analysis book contains tax rates for every school district going back a decade.  Although most of the tax rates in this table agree with my analysis, a significant number did not agree.  I found at least one disagreement in every year, and at least one disagreement in each of 8 school districts.  For the Poughkeepsie school district, there was no agreement in any year.  For the 2000-2001 school year, there was no agreement in any school district.  A number of disagreements exceeded 5 percent.
• Total Property Value on page 19 of the Fact Book PDF (numbered page 13) contains true value taxable assessments for each school district in 2009 and 2010.  Of the 26 assessments, 12 agree with my analysis and 14 do not — more than half.  Most BOCES assessments are a few percent greater than mine, but 4 assessments are over 10 percent greater than mine.  The disagreements are especially puzzling since these numbers are used to compute the true value tax rates, for which we have much more agreement.
• Comparison of Property taxes for 2005-06 to 2009-10 on page 15 of the Fact Book PDF (numbered page 9) contains the tax levies for these years for each school district.  The 2009 tax levies also appear on page 116 of the Contract Analysis PDF (page 4 of the Financial section).  I found no agreement at all between any of this data and my analysis.  Typically, BOCES data was on the order of 10 percent lower than mine, a very large variance.  Once again, this disagreement is especially puzzling since these numbers are used to compute the true value tax rates, for which we have substantial agreement.

I documented these discrepancies in Other BOCES Property Tax Variances, which I sent to Ms. Poleski on April 11.  I had some confidence that these new issues would be taken seriously, since BOCES had already accepted my previous discussion as being both responsible and accurate.  Unfortunately, after a number of conversations with Ms. Poleski it became clear that BOCES will not attempt to determine whether the new issues I raised regarding BOCES property tax tables are valid.  Ms. Poleski also stated that BOCES “will not go back and correct previous years”.  My conclusion from these interactions is that BOCES is indifferent to whether the property tax data in their two publications is accurate.

In summary, BOCES property tax data has been brought into serious question, and these questions have not been answered.  School district administrators may want to avoid relying on this data for their budget processes and union negotiations.

School District Tax Rate Comparisons

I've consolidated my recent posts on Dutchess County's 2010 school district tax rates into an 18-page PDF document, School District Tax Rate Comparisons.  This document includes not only all the information in my last three posts, but it also contains the tax rate information in tabular form.  In addition, it includes information on tax rate increases since 2009, in both chart and tabular form.

School Tax Rate Rankings — Taxpayer Viewpoint

Which property taxpayers in Dutchess County pay the highest school tax rate?  The lowest?  Where does your property stand in the school district rankings?  Here are the answers.

The first thing to understand is that the answers are different for homes (homestead properties) than they are for businesses (non-homestead properties).  That's because 5 of Dutchess County's 13 school districts — Arlington, Beacon, Poughkeepsie, Spackenkill, and Wappingers — tax their home properties at lower true value rates than their business properties.  The second thing to understand is that in the Arlington, Beacon, and Wappingers School Districts, properties are taxed at different rates depending not only upon whether they are homestead properties, but also upon which town the property lies in.  For more details on these points, see School Tax Rate Comparisons — Two Viewpoints.

School Tax Rankings for Homes

The following chart shows the 2010 true value school tax rates for homes in Dutchess County.  For the 5 school districts using the homestead tax option, the homestead tax rates are shown.  The primary data source is the Dutchess County Real Property Tax Service Agency's 2011 Tax Rate Pamphlet.  To improve clarity, I've grouped Arlington's municipal segments (Towns) with nearly the same true value tax rate into a single bar.

As the chart shows, first place for homesteads goes to the Hyde Park segment of the Arlington School District.  Homesteads in this segment pay the highest true value tax rate of any homes in Dutchess County — by far.  Arlington's Hyde Park rate of $22.02 is 15 percent higher than for second place Pawling, and almost double that of “last place” Poughkeepsie.  The reason for the exceptionally high tax rate in the Hyde Park segment of Arlington is that this segment contains a large number of farms with partial tax exemptions.  It turns out that the Hyde Park segment of Arlington contains only a few dozen homestead properties.  Thus, only a few taxpayers are affected, presumably not enough taxpayers to mount an effective complaint.

Apart from the anomalous Hyde Park segment of Arlington, with its exorbitant $22 tax rate, school tax rates for homes in Dutchess County can be seen to be split between high-rate districts (Arlington, Pawling, Hyde Park, Red Hook, Dover, and Spackenkill, in the range of about $17 to $19), and low-rate districts (Rhinebeck, Beacon, Wappingers, Webutuck, Pine Plains, Millbrook, and Poughkeepsie, in the range $11 to $14).

Although Poughkeepsie has the lowest homestead school tax rate in Dutchess County, Poughkeepsie gets a greater proportion of its funding from sources other than school taxes of any school district in Dutchess County.

School Tax Rankings for Businesses

The following chart shows the 2010 true value school tax rates for businesses in Dutchess County.  For the 5 school districts using the homestead tax option, the non-homestead tax rates are shown.  Once again, I've grouped segments with nearly the same true value tax rate into a single bar for clarity:

The chart shows first place for non-homestead tax rates going to Spackenkill by a landslide, with a bank-breaking $38.02 tax rate.  To put Spackenkill's sky-high tax rate in perspective, it is more than double Hyde Park's 4-th place rate of $18.60, and more than triple Webutuck's $11.92.  The primary business properties in the Spackenkill school district have historically belonged to IBM Corp., which has been willing in the past to pay exorbitant school taxes into a district where many of its professional employees lived.

Way “behind” Spackenkill, but still easily capturing second place is Arlington, in the $23.50 to $27 range, depending upon segment.  Trailing considerably after Arlington is a large pack of school districts in the $16.50 to $19 range.  The remaining five school districts — Millbrook, Pine Plains, Webutuck, Poughkeepsie, and Rhinebeck — managed to keep their commercial school tax rates at the low end, between $11 and $14.  Of these five, all except Poughkeepsie have the same tax rate for homes and businesses.

How should these rankings be interpreted?

The rankings in this post compare how steeply homes and businesses are taxed by school districts in Dutchess County.  The first chart can be used to determine the relative school tax bills for homes in Dutchess County in 2010.  For example, if you own a home in the Hyde Park segment of the Arlington School District, your 2010 school tax bill was almost double that of a home with the same taxable market value in the City of Poughkeepsie.  Similarly, the second chart shows that if you own a commercial property in the Spackenkill School District, your 2010 school tax bill was more than triple that of a commercial property with the same taxable market value in the Webutuck, Pine Plains, or Millbrook School Districts.

In summary, these charts show how steeply school districts tax their properties — from the taxpayer's point of view.  These charts are not appropriate for comparing how steeply the various school districts tax their tax base on average, because many school districts tax different properties at different rates.  For this latter comparison, see School Tax Rate Rankings — School District Viewpoint.

Out of County School Districts

A small number of Dutchess County property owners do not pay school taxes to any of the Dutchess County school districts listed above.  Instead, they pay to so-called “out-of-county” school districts Carmel, Haldane, or Taconic Hills.  The 2010 true value tax rate for the Taconic Hills School District is only $10.07, making it the lowest school tax rate for Dutchess County home or business property taxpayers.  At the other extreme, the 2010 true value tax rate for the Carmel School District is $20.34, placing it second only to the Hyde Park segment of Arlington for homes, and third only to Spackenkill and Arlington for businesses.  Finally, the Haldane School District's $14.75 tax rate places it between the low-rate and high-rate districts for both homes and businesses.

School Tax Rate Rankings — School District Viewpoint

Which school district in Dutchess County has the highest tax rate? The lowest? Where does your school district stand in the rankings?  You're about to find out.

The winner by a landslide is the Spackenkill School District, whose 2010 aggregate tax rate of $24.75 per thousand dollars of market value is way “ahead” of second-place Arlington. Before we go any further, it's crucial to understand the meaning of the rankings in this post.  The most important thing to know is that these rankings are from the school district point of view.  The aggregate tax rates in this post measure how steeply each school district taxes its tax base.  These rates are useful to understand how school districts compare with each other, tax-wise.  They are generally not appropriate for comparing the taxes paid by individual taxpayers, because in some school districts, different taxpayers pay at different rates.  Subsequent posts will present rankings from the taxpayer viewpoint.  For more on school district versus taxpayer tax rates, see School Tax Rate Comparisons — Two Viewpoints.

Here are the aggregate tax rates for the 13 school districts in Dutchess County, which I compiled primarily from data in Dutchess County Real Property Tax Service Agency's 2011 Tax Rate Pamphlet.

The school districts' aggregate tax rates fall roughly into 4 groups:  low, medium, high, and almost-off-the-chart.  The low ranking districts include Millbrook — lowest of all in Dutchess County — Pine Plains, Webutuck, and Poughkeepsie.  The medium group include Wappingers, Rhinebeck, and Beacon.  The high group — the largest group — includes Dover, Red Hook, Hyde Park, Pawling, and Arlington.  Spackenkill comprises it's own almost-off-the-chart group.

How should these rankings be interpreted?

Probably narrowly.  It is fair to say that these rankings compare how steeply each school district taxes its tax base.  But aggregate tax rate is only one of a number of objective metrics for evaluating school district financial performance.  Although most school districts in Dutchess County get the bulk of their funding from the tax levy, the proportion of other funding varies considerably from one district to another.  A few districts — such as Poughkeepsie, in the low group — get less than a third of their funding from the tax levy.

Even if aggregate tax rate were a reliable measure of a school district's financial performance, does a low tax rate mean that the school district is short-changing its students and staff, or does it mean that the district is using its funds more efficiently than other districts?  Does a high tax rate mean the school is superior, or that it is more wasteful?  There's really no end to such imponderable questions.  Depending upon how one wants to look at it, there are many additional useful ways of measuring school district financial performance.  (Examples:  cost per student, market value per student, etc.)

BOCES Corrects Its Tax Rates

School officials and others who are familiar with the Dutchess County Board of Cooperative Educational Services (BOCES) publication Contract Analysis 2010-2011 may notice some discrepancies between that publication's table, True Value Tax Rates for 2010-11 on page 32 of the Financial section, and my ranking chart above.  The data should be the same, because both are measuring the same thing.  Although most of the data in the BOCES table agrees with mine to the penny, I found 4 school districts with substantial disagreement:  The BOCES table's tax rates for Beacon, Millbrook, Poughkeepsie, and Spackenkill are lower than mine by 5 percent or more in most cases.  After consulting with a senior BOCES official about these discrepancies, I'm happy to report that BOCES has accepted all my tax rates as correct, and has adjusted its records accordingly.  BOCES has earned my thanks for its gracious and prompt handling of my inquiries.

School Tax Rate Comparisons — Two Viewpoints

I'm beginning a series of posts on school district tax rates in Dutchess County.  School taxes are by far the largest single property tax for most taxpayers.  In fact, property owners often pay more in school taxes than in all other property taxes combined.  Another way of saying this is that the school tax rate is greater than the sum of all the other tax rates (town, county, fire, library, etc.) for a typical taxpayer. 

Comparison Requires True Value Tax Rates

In order to properly compare tax rates — any tax rates — the tax rates must be expressed in dollars per thousand dollars of market value, as I have explained countless times in this blog (for example, here, here, and here).  Tax rates expressed in terms of market value rather than assessed value are sometimes called true value tax rates.

True value tax rates are useful for comparing school tax rates with town, county, fire, and library tax rates, as above, and they are also useful for our main focus here, which is comparing various school tax rates with each other.  Comparison of school tax rates arises in a number of useful contexts, including comparisons among school districts, comparisons in the same district among years, and comparisons within the same district (or even different districts) among taxpayers.  We will investigate all of these contexts in this series of posts.

School District Viewpoint versus Taxpayer Viewpoint

It is important to understand that in Dutchess County, school tax rate comparisons should be conducted in two different ways, depending upon the purpose or viewpoint of the comparison.  These two viewpoints are the taxing authority viewpoint (in this case, the school district viewpoint) and the taxpayer viewpoint.  These seemingly similar viewpoints can be described by the following two sets of questions:

Q1 (School District Viewpoint):  How steeply does each school district tax its tax base?  Which school district in Dutchess County has the highest tax rate?  The lowest?  Where does your school district stand in the ratings?

Q2 (Taxpayer Viewpoint):  How steeply are property owners taxed by their school district?  Which property owners in Dutchess County pay school taxes at the highest rate?  The lowest?  Where does your property stand in the ratings?

If every school district taxed all their property owners at the same true value tax rate within the district, the above two sets of questions would have the same answers.  Unfortunately, this is not quite the case.  Of the 13 school districts in Dutchess County, 8 school districts tax all their property owners at the same true value tax rate within the district.  The remaining 5 school districts have a more complex taxing structure, taxing different property owners at different rates.  These different rates occur for two different reasons, homestead tax option and apportionment option.

School District	Tax Rate Structure
Dover Hyde Park Millbrook Pawling Pine Plains Red Hook Rhinebeck Webutuck	Single tax rate
Poughkeepsie Spackenkill	Homestead tax option
Arlington Beacon Wappingers	Homestead tax option Apportionment option

(I've chosen to ignore for the most part the small regions in Dutchess County lying in the out-of-county Carmel, Haldane, and Taconic Hills school districts.)

Homestead Tax Option

Under New York State Real Property Tax Law, school districts and certain other taxing authorities can opt to classify the taxable properties in their jurisdiction into two separate classes.  Properties in the homestead class (essentially homes) are taxed at a relatively low rate, while properties in the non-homestead class (essentially businesses and commercial properties) are taxed at a higher rate.  The Poughkeepsie, Spackenkill, Arlington, Beacon, and Wappingers school districts utilize the homestead tax option, as shown in the above table.  In these five school districts, a property's true value tax rate depends upon whether the property is classified as a homestead or a non-homestead property.

Apportionment Option

Nearly all school districts in Dutchess County comprise portions of more than one town.  (The only exceptions are Poughkeepsie and Spackenkill.)  The portion of a school district lying in a particular town is called a municipal segment.  Ordinarily, property taxing authorities in New York State are required to apportion their tax levy among municipal segments in such a way that all properties (or all properties of a given property class, if the homestead tax option is used) are taxed at the same true value tax rate.

However, for school districts, New York State Real Property Tax Law provides an optional exception to this common-sense rule.  The exception permits school districts to apportion their tax levy among their municipal segments based on a different criterion than uniform true value tax rates.  Essentially, the tax levy is apportioned based on total market value, rather than on total taxable market value.  Only the Arlington, Beacon, and Wappingers school districts utilize this special apportionment option, as shown in the above table.  The important point here is that in these three school districts, a property's true value tax rate depends not only upon the property's class (homestead or non-homestead), but also upon which town (municipal segment) the property lies in.

School District	Number of Towns
Arlington	9
Beacon	3
Wappingers	5

OK, enough about real property tax law.  Here's how the two sets of comparison questions can be answered using various kinds of tax rates:

Aggregate Tax Rate

I define the aggregate tax rate for a school district to be simply its total tax levy divided by its total taxable market value.  The aggregate tax rate is a true value tax rate which measures how steeply a school district taxes its tax base.  Thus, the aggregate tax rate is appropriate for comparing school districts with each other (Q1).  If a school district taxes all its taxpayers at the same true value tax rate, as do 8 of the school districts in Dutchess County, then the aggregate tax rate is this rate.  If a school district taxes different taxpayers at different true value tax rates (5 school districts with homestead and/or apportionment options), then the aggregate tax rate is the average of those rates, weighted by the proportion of taxable market value in each taxing class and/or municipal jurisdiction.

Homestead and Non-Homestead Tax Rates

For a school district using the homestead tax option, the homestead tax rate is simply the portion of its total tax levy assigned to the homestead class, divided by the total taxable market value of its homestead class.  Thus the homestead tax rate is a true value tax rate.  The non-homestead tax rate is defined similarly.  For property owners in the Poughkeepsie and Spackenkill school districts, these rates are appropriate for measuring the steepness of their taxes, and comparing them with those of property owners elsewhere (Q2).

Segment Tax Rates

In the Arlington, Beacon, and Wappingers school districts, a property's school tax rate depends not only upon the property's class (homestead or non-homestead), but also upon which town (municipal segment) the property lies in.  I define the homestead segment tax rate for homestead properties in a municipal segment to be the portion of the homestead tax levy apportioned to homesteads in the municipal segment, divided by the taxable market value of homesteads in that municipal segment.  Thus the segment tax rate is a true value tax rate.  Non-homestead segment tax rate is defined similarly.   For property owners in the Arlington, Beacon, and Wappingers school districts, the segment tax rates are appropriate for measuring the steepness of their taxes, and comparing them with those of property owners elsewhere (Q2).

For example, in the Arlington School District, the 2010 homestead tax rate in the Town of LaGrange is $18.92 per thousand dollars of market value, while that in the Town of Poughkeepsie is $18.61.  This means that a homestead property in the Town of LaGrange paid 1.7 percent more Arlington school tax in 2010 than a homestead property with the same taxable market value in the Town of Poughkeepsie.

Ranking the School District Tax Rates

In subsequent posts, I'll present the rankings of Dutchess County school district tax rates, from both the school district and the taxpayer viewpoints.

Arlington School District Superintendent Continues Tax Levy Misstatement

Arlington School District update:  Superintendent's tax levy data is more correct now, but his key summary statement is still wrong.

Recent Post Highlights Data Errors and Key Misprint

My recent post Arlington School District Proposes Lowest Tax Levy Increase in Decade — NOT exposed the fact that Arlington School Superintendent Geoffrey Hicks used incorrect tax levy data to reach an incorrect conclusion in his 2011-2012 Budget Draft 2 presentation of February 15, 2011.  This incorrect conclusion was that the 2011-2012 budget proposal represented the lowest tax levy increase in 10 years.  In reality, it represents the second lowest tax levy increase.

As an aside to my main point, I made light of a ridiculous misprint on a key summary page, which unintentionally stated  

Lowest proposed tax levy in 10 years 

instead of  

Lowest proposed tax levy increase in 10 years

The proposal actually represents the highest proposed tax levy in 10 years, and almost certainly the highest in the history of the Arlington School District, not the lowest. 

My Contacts with Arlington Officials

Before posting, I worked closely with a senior Arlington official to correct some of Arlington's past tax levy data, though we were not able to resolve disparities from 2000 to 2004.  After posting, I emailed Hicks, to be sure he would have direct access to my post.

Revised Presentations Continue Misstatement

Hicks has now presented two revisions of the February budget draft, Arlington Central School District:  Community Budget Forum on March 12, and Arlington Central School District:  Budget Study Session on March 15.  Happily, both these revisions provide the partial correction to Hicks' chart of tax levy increase history.  This partial correction is enough to establish the correct conclusion that the proposal represents only the second lowest tax levy increase in a decade, not the lowest.  This correct conclusion is hinted at by the fact that the word “second” has been prepended to the main summary page bullet item, which in both of this week's drafts reads

Second lowest proposed tax levy in 13 years

So “second” was inserted, and “10” was changed to “13”, but the key term “increase” didn't make it into either revised draft.  So this twice-revised summary statement is still as wrong as it ever was.

Stakeholders May Be Mislead

I'm sure that Arlington's Board of Education and readers of this blog will easily understand the intended meaning of Hicks' key summary statement, despite the misprint.  But in my view, many of Arlington's less sophisticated stakeholders who read only Hicks' summary page will not catch the blunder, especially since it's now been repeated in three successive presentations.  It's unfortunate that Hicks has been unable to correctly communicate a key feature of the proposed 2011-12 budget — even after three tries.

Town of Pleasant Valley Revaluation Will Challenge Supervisor's Miscalculation

In November I wrote in this space that the Town of Pleasant Valley has been calculating its town tax rate increases in a meaningless way, that this incorrect calculation has been a systematic part of the Town's fiscal methodology for at least the last three years, and that therefore both the town government and its stakeholders are being mislead about the true tax rate increases.  For example, Pleasant Valley's 2011 Adopted Budget claims that the Town tax rate increased 9.1 percent from 2010.  My analysis showed the tax rate increase to be 23.3 percent, based on information available at the time.  (My analysis of final tax information released 6 weeks ago by Dutchess County's RPTSA shows Pleasant Valley's 2011 tax rate increase to be 24.4 percent.)

On November 24, I emailed Pleasant Valley Town Supervisor John McNair — who is also the Town Budget Officer — as well as three of the four Town Board members, alerting them to my blog posts.  (I did not attempt to contact board member Steve Albrecht.  In this second decade of the third millennium, officials without an email address cannot expect to play a serious role in public affairs.)  I've received no response from any of these officials.

Revaluation Implies 100 Percent Equalization Rate

That's the background.  Update to today:  A story in the Poughkeepsie Journal on February 25 announced that the Town of Pleasant Valley has completed a revaluation of all properties, and that tentative taxable assessed values are available.  The revaluation is a significant step forward for Pleasant Valley for many reasons.  The most important reason for our purposes is that Pleasant Valley's equalization rate will be 100 percent for this year, and for every year from now on. This means that assessed values will be equal to market values, and that tax rates expressed in dollars per thousand dollars of assessed value will be equal to tax rates expressed in dollars per thousand dollars of market value.  This further implies that changes in the tax rate can be calculated in the future without first converting from assessed value to market value, since the two are the same.  It is the need for this conversion that is at the core of McNair's mistake.

McNair's Approach Is Flawed For One More Year

As I explained at length in my previous posts, McNair's way of calculating tax rate increase is flawed because it doesn't account for changes in the equalization rate.  But in the future, the equalization rate won't change — it will stay fixed at 100 percent.  This means that McNair's way of calculating tax rate increases will give the right answer in the future.

You did notice that I wrote “in the future”, right?  “In the future” refers to the 2013 property tax rate increase, the 2014 property tax rate increase, and so on.  It does not refer to the 2012 property tax rate increase, which will be determined next November.  That's because the equalization rate will change dramatically from the 2011 tax to the 2012 tax — from 59 percent to 100 percent.  If McNair continues to use the flawed calculation of tax rate increase that has been used for the last three years, the resulting tax rate increase will be absurd.

Possible 2012 Tax Rate Increase

Consider this thought experiment:  Suppose for the moment that Pleasant Valley's 2012 taxable market value is unchanged from 2011.  Suppose also that Governor Cuomo's 2 percent property tax cap proposal is enacted, and that Pleasant Valley raises its tax levy for 2012 by exactly 2 percent.  Then Pleasant Valley's tax rate, measured in dollars per thousand dollars of market value, will increase exactly 2 percent, from the current $2.45 to $2.50.  Couldn't be simpler, right?

McNair's Absurd Tax Rate Increase

If  McNair continues to use the calculation method of the last three years, what tax rate increase would he get?  Well, Pleasant Valley's 2011 tax rate is shown in the Dutchess County Real Property Tax Service Agency's latest tax rate pamphlet as $4.15 per thousand dollars of assessed value.  Pleasant Valley's 2012 tax rate would be $2.50 per thousand dollars of assessed value, as noted above, since assessed value is equal to market value for the 2012 tax.  Therefore, Pleasant Valley's tax rate “increase” would be figured from these two rates as -40 percent.  Yes, folks, that's minus 40 percent!  McNair would need to claim that by increasing the tax levy 2 percent, he has somehow decreased Pleasant Valley's tax rate by 40 percent.  Such a ludicrous statement is entirely meaningless, and corresponds to nothing in the real world.

A More Precise Tax Rate Increase Projection

For simplicity, the above analysis assumed that Pleasant Valley's 2012 taxable market value is unchanged from 2011.  In reality, the revaluation has uncovered a significant amount of taxable market value that had been unaccounted for in past years.  That's one of the main reasons for doing the revaluation.  This newly-discovered value more than compensates for the continuing downward trend of market values in recent years.  It turns out that Pleasant Valley's taxable market value for the 2012 tax year is actually up 8.1 percent from 2011 to $1,068,553,959.  (This tentative figure will probably decrease slightly before the final assessment roll appears on July 1, 2011.)

Using this tentative market value in our thought experiment, Pleasant Valley's 2012 tax rate becomes $2.31 per thousand dollars of market (or assessed) value, instead of the $2.50 from the oversimplified example.  Comparing this with the 2011 tax rate of $2.45 shows that in 2012, Pleasant Valley will have a tax rate decrease of 5.6 percent.  Once again, this result assumes a tax levy increase at Cuomo's 2 percent level. 

What does this mean for the individual taxpayer in Pleasant Valley?  If your taxable market value for 2012 happens to be unchanged from 2011, you will see a 5.6 percent decrease in the Town portion of your 2012 tax bill.  However, quite a few properties will see a substantial increase in their 2012 taxable market value.  After all, that 8.1 percent market value increase for the Town must come from somewhere.  These property owners will obviously see increases in their tax amount in accordance with how much their property value has increased.

Supervisor's Miscalculation

OK, back to McNair's dilemma.  With the above more precise projection of market value, McNair's flawed method requires calculating the percent change of 2012's tax rate of $2.31 per thousand dollars of assessed value from 2011's $4.15.  McNair will be faced with needing to claim that an 8.1 percent increase in market value and a 2 percent increase in tax levy results in a tax rate decrease of 44.3 percent.

My Message to Pleasant Valley Town Officials

As I stated in my emails to Pleasant Valley Town Supervisor McNair and Town Board members, my purpose is not to embarrass the Supervisor or other Town officials.  My purpose is to help correct what I believe to be an honest mistake, in order that property taxpayers, other stakeholders, and not least the Pleasant Valley town government itself can have a correct picture of how the town's property tax rate is changing.

Acknowledgement

I'm grateful to Pleasant Valley Town Assessor Teresa Stegner for graciously providing me with the Town's tentative taxable assessed value and other helpful information.

Pleasant Valley Table and Charts Are Available

The format of this blog is not really suitable for presenting the large table and charts of Pleasant Valley's tax rate history that I would have liked to show as part of this post.  Interested readers can find this supplementary information in my report Town of Pleasant Valley Property Tax Rate History.

Arlington School District Proposes Lowest Tax Levy Increase in Decade — NOT

In the dry, geeky world of tax statistics, it's not often one encounters a humorous misstatement, especially when dealing with the effects of the economic meltdown of 2008.  I say “dealing with” rather than the more optimistic “recovering from” because the budget situation in the Arlington School District, many other school districts, and indeed many local taxing authorities is nothing short of dire.  As I see it, many institutions are not so much being squeezed as they are being partially dismantled.  But that's another story.
 
Anyway, Arlington School Superintendent Geoffrey Hicks provided some unintentional humor — gallows humor, perhaps — in his 65 page 2011-2012 Budget Draft 2 presentation of February 15, 2011.  In a key foil on page 50 summarizing dozens of pages of detailed budget issues, Hicks presents three main points, the second of which is inadvertently written as

Lowest proposed tax levy in 10 years

Oh, how we wish it were true!  In reality, the proposed tax levy is the highest in 10 years, and almost certainly the highest in the history of the School District, as Hicks undoubtedly knows.  But of course, Hicks didn't mean to write Highest either.  It is clear from context that what he meant to write was

 Lowest proposed tax levy increase in 10 years

Indeed, the corrected statement already appears in a February 22 Poughkeepsie Journal story about Arlington's budget.

Faulty Tax Levy Increase Data

The problem is, even after fixing the typo, this statement is still wrong!  That's because Hicks' statement is based on faulty data about Arlington's tax levy increases.  His data is presented in a chart on page 51, in the form of a graph of Arlington's tax levy increase for each year beginning in 2003.  Most of this data is wrong.  Wrong enough to make Hicks' summary statement wrong.

My analysis of Arlington's tax levy increase history, based on data from Dutchess County's Real Property Tax Service Agency (which maintains the data for preparing property tax bills), looks like this:

 
The above chart shows that Hicks' proposed tax levy increase of 4.47 percent noticeably exceeds 2007's tax levy increase of 3.98 percent.  One way Hicks can correct his statement is to write

Second lowest proposed tax levy increase in 10 years

This would harmonize well with Hicks' third main point on the same summary foil, “Second lowest spending increase in 10 years”.

Hicks' tax levy data isn't all wrong.  It is actually correct for 2008 and later years.  But for 2003 to 2007, it bears no relation to the historical record.

Kudos to Hicks, despite mistake

Hicks' mistake isn't a really big deal, especially in the context of the total budget proposal.  I'm quite impressed with the breadth and depth of his total presentation, which considers a very wide variety of factors I can't begin to summarize here.  This is already Hicks' second major version of this year's budget proposal.  The first one, presented in January, begins with the following candid foil:

Hard Facts

• 2011-12 will be the most difficult budget construction cycle in memory.
• There will be additional staff reductions and budget cuts in Arlington for 2011-12. There is no way to avoid it.
• There is a potential “perfect storm” of factors that threaten to place extreme stress on the existing system.
• Starting the process early and being completely transparent are the best means for making critical decisions.

I find Hicks' approach of summarizing the Bad News and his openness about presenting the issues to be an admirable approach, well worth emulating by other districts in this difficult time.

Acknowledgement

I'm grateful to Arlington School District Assistant Superintendent for Business Robin Zimmerman for confirming the correctness of my 2005-2010 tax levy data, and for many helpful discussions.

Arlington School District Table and Charts Are Available

The format of this blog is not really suitable for presenting the large table and charts of Arlington's tax rate history that I would have liked to show as part of this post.  Interested readers can find this supplementary information in my report Arlington School District Aggregate Property Tax.

Poughkeepsie Journal Misstates Property Value Data

The Poughkeepsie Journal has been remarkably consistent in its property tax analysis mistakes.  It keeps making the same mistake, but in different forms.  The mistake is to focus on assessed values when market values are the appropriate parameter.  For towns assessed at full market value, it makes no difference, because assessed values are market values.  But for towns not assessed at full market value, using assessed values can give garbage results.  On the good side, the Journal is reporting about important trends in property taxes, even if it gets the numbers wrong.

A front-page feature story in today's Poughkeepsie Journal by reporter John Davis is headlined, “Assessments lose $1.8 billion”.  The subtitle reads, “18 of 22 Dutchess County towns and cities have taxable real estate decrease from 2009 to 2010”.  (Headlines in print edition.)  As we will see, the $1.8 billion and the 18 towns are incorrect.  The story's first two sentences restate these numbers, and add two important facts:

1. Tax rates are going up.
2. Tax bills may not be going up.

I have to say, it's excellent that the Poughkeepsie Journal is calling attention to some of the important trends in property taxes in Dutchess County:  Property values down — check; tax rates up — check; tax bills flat — check.  Unfortunately, the story is marred by many misleading and incorrect numbers, including those in the headlines.  All the mistakes relate to the 7 Dutchess County towns not assessed at full market value. Most revealing of the Poughkeepsie Journal's misunderstanding about property values is the following story excerpt:

A reduction in taxable assessed values is most noticeable in the towns and cities that are committed to keeping them aligned with the current market values — qualifying them for a 100 percent equalization rate by the state. They range from a drop of 12.7 percent in the overall assessed values in the Town of Clinton to a 1.12 percent reduction in Amenia.  The towns that are not assessed at full market value will see either a slight increase or decline in their overall taxable values.  [emphasis added to original]

The reason a reduction in taxable assessed value is “noticeable” in towns assessed at full market value is that changes in assessed values are changes in market value.  That's the whole point of maintaining assessments at full market value.  It is market value (also known as “home value”, “full value”, “full market value”, and “property value”) that is meaningful in the real world — not assessed value.  The only people who need care about assessed value are assessors and other property tax geeks.

All Towns Have Dropped in Value

For towns not assessed at full market value, assessed values typically don't change year-to-year.  That's the whole point of not assessing at full market value!  For towns not assessed at full market value, the change in market values is reflected in the change in the equalization rate.   That's why it's not meaningful to compare assessed values.  To properly compare such a town's taxable value in 2009 and 2010, you must first convert the assessed values to market values by dividing them by the equalization rate for each year.  Once you do that, you find that in place of a “slight increase or decline” all towns had a decline, and for all but one town, the decline was double-digit.  The following table compares the Poughkeepsie Journal's numbers and those I obtained from the Dutchess County Real Property Tax Service Agency (RPTSA):

The Journal's mistake results in wildly optimistic market value increases for these towns.

Dutchess County's Property Values Are Down $2.7 Billion

Just as you can't compare assessed values across years for towns not assessed at full market value, you also can't just add together a bunch of assessed values of different towns not assessed at full market value.  It would be like adding together lengths measured in yards, meters, fathoms, rods, and cubits. You can't do that until you've converted them to a common unit of measure.  That's why the headline “Assessments lose $1.8 billion” is incorrect.  First of all, it makes no sense to talk about Dutchess County's “assessments” unless you mean that word as a loose term referring to market value.  Secondly, and more important, Dutchess County's market value declined $2.7 billion, not $1.8 billion.  Readers of my recent blog post Dutchess County 2011 Tax Rate Is Highest In Decade already know that Dutchess County's market value has declined 7.7 percent from last year (see table in that post).  That table also lets them calculate the $2.7 billion difference between Dutchess County's 2009 market value and its 2010 market value.  Once again, this data comes right from the RPTSA.

Poughkeepsie Journal's Record of Misunderstanding

It's been nearly a year since I wrote Poughkeepsie Journal's Incorrect Tax Rate Analysis.  That post outlined what is essentially the same misunderstanding as described above, but applied to tax rates, rather than to property values.  As I noted in that post, Poughkeepsie Journal management refused my request last year to speak with reporters, and it stood by its figures.  This year, the Journal has continued to publish a series of articles by different reporters, all with the same incorrect tax rate analysis.  My post last month describes four such stories.  So it's clear how today's story fits into the pattern.

I have two reasons to doubt that Poughkeepsie Journal reporters or management have vetted today's story or the previous ones with a third party knowledgeable about property tax matters:

1. In my conversation nearly a year ago with Poughkeepsie Journal management, it became clear that management was dead sure they were right and I was wrong.  If you're dead sure, there's no reason to check things out with someone else, right?
2. If they had consulted a knowledgeable third party, they presumably wouldn't keep making the same mistake.

I would like to think that a knowledgeable third party could be found just about anywhere.  I know I've found many.  On the other hand, I have to admit that I've also found many local officials — many more than I expected — who should know better, but who simply don't get it about property taxes.  On the third hand (yes, I have three hands), you can't go wrong talking with the good folks at Dutchess County RPTSA or the New York State Office of Real Property Tax Services.

Petito Elected Fairview Fire Commissioner

Local attorney Joseph Petito won reelection last evening as a commissioner in the Fairview Fire District. He received 58 out of 62 votes cast. (The other 4 votes went to various write-in candidates.) Petito began serving as commissioner last summer when he was appointed by Fairview's Board to fill out the term of Tom Ashline, who died on March 7, 2010.

This year's election was officially uncontested.  It also turned out to be uncontested in fact, unlike last year's “uncontested” election. Last year, 29 write-in votes — more than enough for victory in a normal election — went to Chairman of the Board John Anspach, but newcomer Bob Gephard won anyway because of a concerted effort to get out the vote.

Petito's reelection can be seen as completing the power shift, begun in 2008, from the old guard to the newcomers.  This year's election is the third in a row in which a newcomer has been elected to the board, thus establishing a solid majority over the old guard.  The lack of visible opposition to Petito may indicate an acceptance of newcomer Board Chairperson Jill Line by supporters of the old guard. 

Dutchess County 2011 Tax Rate Is Highest In Decade

In this second of two posts on property tax for Dutchess County government, I show how this tax has evolved over the last decade.  

In a previous post, I stated that market values in Dutchess County have doubled in a decade, but that the tax rate is about the same as a decade ago.  This does not mean that we've seen a steady increase in market value during the decade.  This also does not mean that the County's tax rate been constant during the decade.  In fact, as I show below, both of these assertions are false.  But why should we care about these details?  Isn't it enough to know where we stand now, and where we stood a decade ago?

I think not.  The trend in the past decade is not at all what one would expect from just looking at 2002 and 2011.  Therefore, the future cannot be extrapolated from just those two years of data. Unless you've just arrived here from Planet 10, you know that there was an economic meltdown two years ago.  Has this affected the County tax situation?  You betcha!  Let's see how.  Here's what's actually been happening to the Dutchess County government's property tax situation in the last decade:

I don't know about you, but looking at all these digits makes my eyes glaze over.  We can see better what's happening by charting each column.  The biggest part of the story is the trend in market value:
 

The above chart shows clearly that although market values have doubled from 2002 to 2011, they actually more-than-doubled from 2002 to 2008, and have dropped 15 percent in the last three years.  That's the economic meltdown right there.  Note that although real estate values began dropping in early 2008, the  effect is delayed from a tax viewpoint.  That's because the government figures market values a year and a half behind the property tax bill.  For example, your January 2011 tax bill is figured based on the market value of your property as of July 1, 2009.  The drop in market values since 2008 has actually been accelerating, as can be seen clearly from the following chart:

This decrease in the tax base is a major reason for the increase in the tax rate.  But there's another.  Since the tax base has been getting smaller, the cost of services from County government has been decreasing also, right?  Just kidding!  When does that ever happen?  Here's the trend in tax levy — the major source of income for Dutchess County government:

Notice that the tax levy has doubled in the past decade.  But unlike for market value, there is no dip in tax levy after 2008.  This fact is Bad News for the tax rate, as we'll see shortly.  Here's a closer look at how the tax levy has changed year-by-year:

The tax levy increase for 2011 isn't missing — it's zero!  The goal of zero tax levy increase for 2011 was proposed by County Executive William Steinhaus in his original budget message in October, and the County Legislature essentially concurred with this spending limit.  A year ago, Steinhaus also proposed a zero tax levy increase for 2010, but the legislature chose to increase the tax levy by 7 percent.  In both cases, Steinhaus and the legislature cynically focused on the change in the tax levy, rather than on the tax rate, which they knew (or at least Steinhaus knew) would tell a more sobering story.  And here is the story, which Steinhaus has gone out of his way to hide:

The tax rate is simply the tax levy divided by the taxable market value.  As you can see, the 2011 tax rate is the highest in 10 years, though admittedly by only a few cents.  Still, the trend of the last three years is ominous.  The tax rate increases can be seen more clearly in the following chart:

You did know that Dutchess County's tax rate is up 8.4 percent, right?  Although Steinhaus has made a major effort to hide this information, the Poughkeepsie Journal has been doing a good job to inform its readers of the 8.4 percent tax rate increase.  The Journal has reported this fact frequently this season, including in today's story, which announces the final budget outcome.  This is a big improvement for the Poughkeepsie Journal, compared with last year at this time.  As I've blogged here and here, Steinhaus was silent about the tax rate increase last year, and the Poughkeepsie Journal just went along with it.  Once again, a big improvement in reporting by the Poughkeepsie Journal.

So what does this all mean?  To start, the trend of the last three years is drastically different from what one would think looking just at 2002.  The county tax rate hit a low in 2008, and has been increasing at an average of more than 10 percent per year since then.  The 2011 tax rate is up 34 percent over that in 2008.  In other words, holding the tax levy constant, as Steinhaus has been proposing, isn't good enough to keep the tax rate from rising significantly.  That's because the economic meltdown has caused property values to fall dramatically in recent years.

The economic meltdown of 2008 is the worst economic event in the memory of most people alive today.  It doesn't just affect real estate values.  It affects us in 100 different ways.  The 8.4 percent increase in the Dutchess County property tax rate is just one more of these ways.

Acknowledgement:  Many thanks to the Dutchess County Real Property Tax Service Agency for providing most of the data used in this report.

Dutchess County Taxes in 2002 and 2011

In this first of two posts, I show how property taxes of Dutchess County government today (well, next month) compare with those of a decade ago.  Briefly, they're equally as steep as a decade ago, but the charges are twice as high because we're twice as wealthy.  In a subsequent post, I'll detail the path taken by Dutchess County property tax throughout the last decade.

In order to pay for the services it provides, Dutchess County government charges every taxable property in the county.  This charge appears on your January property tax bill, along with charges for other local governments (town, fire, etc.).  By New York State law, the county charge is a fraction of the current market value of your property, and is the same fraction for every taxable property in the county.  Every year, the fractional amount changes.  But every year, the market value of your property changes too.  So the amount you pay each year changes, because of changes in both the fractional amount set for that year and your market value for that year.

Fraction Is Tax Rate

Although the fraction charged could be expressed as a decimal value or as a percentage, it is traditionally measured as a tax rate in dollars per thousand dollars of market value.  For example the 2011 Dutchess County tax rate is $3.07 per thousand dollars of market value.  This is the same as the fraction 0.00307, or as 0.307 percent.  For a taxable property with market value of $100,000 for the 2011 tax year, the county tax is $3.07 x $100,000 / $1,000, or $307.  If you used the fraction or percent representation, you'd get the same result.  That's because $3.07 = 0.00307 x $1,000.

The Tax Rate Is What Matters

As I have argued elsewhere, the tax rate — not the amount of your tax — is the most meaningful measure of how steeply you're being taxed.  That's because the tax rate takes into account the fact that market values change.  Follow me here:  If your neighbor's property is worth $200,000, you'd expect her to pay twice as much tax as you at $100,000.  This is fair and reasonable because your neighbor is twice as wealthy as you, as measured by the market value of her property.  Now suppose your own property is worth $100,000 in 2002, but appreciates to $200,000 in 2011.  If nothing else changes, that is, if the tax rate is the same in 2011 as in 2002, then you'd expect to pay double the tax in 2011 as in 2002.  After all, you're twice as wealthy as you were then.

Market Appreciation Is Like Getting a Second  House

Think of it this way:  Suppose you owned a $100,000 house in 2002.  Somewhere along the way, somebody just gave you a second house of equal value.  For free.  No mortgage.  Now you own two $100,000 houses instead of just one.  Great deal, right?  Only problem is that you need to pay property taxes on both houses.  So your property taxes have doubled.  Of course, nobody actually gave you a second house; it's just that your current house is worth twice as much as before.  But you really are twice as wealthy, as you'd realize if you go to sell your $100,000 house and find that you can get $200,000 for it. 

Yes, I know, you might not be planning to sell, and you can't really afford the double taxes — the “free” house you were “given”.  Unfortunately, there's no way to decline your market appreciation.  And consider that you probably wouldn't “decline” to take the extra $100,000 you'd get for selling your house.

This Is Real

Folks, the above dynamic is not a hypothetical example.  It is pretty close to what's been happening.  Property values in Dutchess County have nearly doubled in the decade from 2002 to 2011.  And the tax rate in 2002 was $3.02, just a few pennies less than the 2011 tax rate of $3.07.  So the typical property owner in Dutchess County may be paying twice as much county tax as ten years ago.  But that's because the typical property owner is twice as wealthy, as measured by the market value of the property.

Well, this analysis is a little oversimplified.  It doesn't take into account the significant increase in Dutchess County market value caused by new development and property improvements.  So the typical property owner isn't quite twice as wealthy in 2011 as in 2002.  But close enough to establish the general idea.

What Has Been the Trend?

Since Dutchess County's market value for 2011 is double that of 2002, does that mean we've seen a steady increase in market value during the decade?  No, it does not.  Since Dutchess County's 2011 tax rate is about the same as in 2002, does that mean that the tax rate has been constant for the entire decade in between?  No, it does not. Both inferences are incorrect.  In a subsequent post, I'll show the trends in property tax for Dutchess County government in the last decade.

Why Should Property Taxes Fall When Market Values Do?

I was glad to receive the following thoughtful anonymous comment today on my post Town of Hyde Park Misunderstands Property Tax Rate Increases:

All of Mr. Rubin's charts and discussions are rather confusing and redundant. His point is that even if your tax bill stays the same from one year to the next, tax amount as a percentage of market value has increased since your property value has decreased. His gripe has nothing to do with budget methodology but instead is focused on the decline in market value of the property.

One's mortgage payment doesn't fall when the home price falls. One's heating bill doesn't fall when the home price falls. One's car payment doesn't fall when the home price falls. One's food price doesn't fall when the home price falls. Why exactly should property taxes be any different?

Using Mr. Rubin's rationale, property tax bills should have doubled from 2001 to 2009 simply because home prices doubled in that time period.

Municipalities have no control over the market value of property. They do have control over expenditures and assessments.

I welcome the above comment for a number of reasons:

1. The commenter appears to understand and accept my argument.
2. I agree with most of what the commenter says.
3. His/her comment gives me a great opportunity to clarify some things.  Here goes:

“The Charts and Discussions Are Confusing”

Hmmm.  I did my best.  Please say more specifically what needs clarification.

“The Charts and Discussions Are Redundant”

I couldn't agree more!!!  I feel like I've been writing the same thing over and over, in numerous posts spanning more than a year.  It's only recently that a few people have shown that they understand what I'm saying.  Hopefully, I'll not need to keep doing this much longer.

“Why Should Property Taxes Be Different From Mortgage, Heating Bill, etc.?”

Great question! The question can be rephrased as, “Since mortgage payment, heating bill, car payment, etc. do not fall when the home price falls, why should property taxes be any different?”

Unlike other household expenses, property taxes are directly coupled to your current home price.  The coupling is through the tax rate.  The ratio of your property tax to your home price is essentially your tax rate in dollars per thousand dollars of market value.  The tax rate measures how steeply your property is taxed.  If your tax amount does not fall in proportion to the drop in your home price, then your tax rate goes up, and you are being taxed more steeply than before.  In other words, your wealth, as measured by the market value of your property, is being taxed at a higher rate than before.  This is bad because you're paying more tax, in proportion to your wealth, than before.  Also, if you sell your house, your house will be less attractive to a buyer than a similarly valued house in a jurisdiction with a lower tax rate.  Tax rate is also a measure of how steeply your municipality is charging taxpayers for its services.  Perhaps the worst thing about increasing tax rates when property values fall is that it is tempting for municipalities to maintain the higher tax rate even after property values rise again.  When this happens, your tax bill will increase in proportion to the increase in your property value at the same time that the municipality is (correctly) saying, “We're not increasing the tax rate.”

“By Your Reasoning, Property Tax Bills Should Have Doubled From 2000 to 2009”

That's right! Or almost right.  It's really 2008 when home prices stopped increasing, so let's go with that.  And there are some technical issues with fairly comparing taxes before 2001, so let's look at the interval 2001 to 2008:

Doubling of property tax bills is exactly what has happened in some municipalities from 2001 to 2008.  For example, my report, The Big Three Fire Districts of Dutchess County, shows that in the Arlington Fire District, the LaGrange Fire District, and the Fairview Fire District, taxable market values more than doubled from 2001 to 2008, but the tax rates in each of these districts stayed very close to constant during this period.  This implies that the tax levy (roughly proportional to tax bills) has doubled during this period.  See my report for detailed charts of market value, tax levy, and tax rates for each of these fire districts for this decade.

Admittedly, the Town of Hyde Park has not followed this pattern.  Although property values have doubled there from 2001 to 2008, as they have in most jurisdictions in Dutchess County, the Hyde Park tax rate as shown here has actually decreased quite substantially during this period.  Therefore, Hyde Park's tax levy has only increased 31 percent from 2001 to 2008, rather than doubling.  In my view, this is actually a pretty good record.  (For what it's worth, the records for the Town of Pleasant Valley, the Town of Beekman, and the Beekman Fire District are similar to that of Hyde Park.)

In summary, doubling of tax bills has occurred in the high-priced fire districts, but not in the three towns I've looked at in detail.  Thus, the record is mixed. 

“Municipalities Control Expenditures and Assessments, Not Market Value”

A interesting observation, but only two-thirds right!  Obviously, municipalities control expenditures (to the extent they can be controlled, what with mandates, union agreements, and many other “locked in” costs).  And obviously, municipalities do not control market values.  But a municipality does not “control” assessments, not as long as the Town Assessor lives up to his/her oath of office.  According to New York State Real Property Tax Law, assessors are sworn to assess properties in such a way that every assessed value divided by the Town's equalization rate is equal to the market value of that property.  The assessor gets to set the equalization rate for the Town, but has precious little leeway in doing so.  In fact, if the State thinks the assessor's equalization rate is “wrong,” it will overrule the Town and set the equalization rate to what the State thinks it should be.  The rules for assessing individual properties are quite elaborate, and leave only a small amount of leeway to the assessor.  It is more accurate to say that the assessor administers the assessment process, rather than “controlling” assessments.

At least that's the theory.  Obviously, in the real world there are all kinds of inaccuracies, errors, delays, mistakes, and disputes, many of which are only settled in court.  But the basic principle of how assessments work is simple, fair, and fundamentally driven by market values.  In summary, the only way a municipality has for controlling the tax rate is by setting the tax levy, which is primarily controlled by expenditures.


I hope I've shed some light on the matters raised by the anonymous poster.  I encourage others (or the same poster!) to post comments that can further the discussion.