The

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The Property Tax
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The Property Taxis made up of two basic
components
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1) Budget needs (Taxes)
2) Estimates of Market Value (Assessed
Values)
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Lets look at budget needs (taxes) first...
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Budget Needs What do we use tax dollars for ?
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Taxes are used for

• Schools

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Taxes are used for

• Police Services

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Taxes are used for

• Parks Recreation

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Taxes are used for

• Fire Rescue

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Taxes are used for

• Library

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Taxes are used for

• Streets

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Taxes are used for
Administrative Services
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Budget NeedsWe see that each Department of
Government has a budget...
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• Department Budget
• Library
• Police
• Fire Rescue
• Parks Recreation
• Public Works
• Schools, Etc
  Total Budget

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• The total budget
• is called the
• tax levy

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• The tax levy
• The total budget dollars needed to run municipal
  services

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Duties of the Assessor
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Up until now we have talked about budget needs
(taxes)...
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Now lets talk about how these budget needs are
assigned...
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...to each residence and business in our
community...
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...so everyone pays their fair share of
taxes.
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Its done by relating to the Assessed Value.
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Lets see how thats done...
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The guiding principle behind the property tax
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The value of property owned is an indication
of ones ability to pay taxes.
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State Laws have been written to reflect this idea
and to guide the assessing process.
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• By State Law then
• each home and
• every business must
• be assessed based on
• an estimate of value.

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• Assessors use three
• approaches for estimating value for real
  property.

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• Cost
• Income
• Sales Comparison

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• Cost
• Value based on actual building costs depreciated
  for various factors.

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• Income
• Value based on income and expenses of rental
  property.

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• Sales Comparison
• Value based on
• sales of property.

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• We will look at the process for estimating
  market value based on sales of
• properties
• Sales Comparison.

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Market Value An estimate of what a home or
business would sell for under normal market
conditions.
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Assessors call these estimates of market value
assessed values
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How does the Assessors Office estimate Market
Value?
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The Assessor must consider every factor that adds
to or subtracts from property value.
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What makes one house sell for more, or
less,than another house?
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House Size

• Small
• Medium
• Large

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Location

• Close to Schools
• Pleasant Neighborhoods

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Age of House

• Older houses
• Newer Houses

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Other things that affect value

• Construction Quality
• Number of Bedrooms
• Number of Bathrooms
• Family Room
• Decks/Patios/Gazebos
• Recreation Room, etc

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Assessors must

• Go to each home and business to record all
  attributes which contribute to
  value.

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Assessors must

• Maintain these records annually to include all
  changes that affect value.

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Assessors must

• Determine all neighborhood influences on property
  value.

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Assessors must

• Determine any special influences on property
  value (such as contamination).

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Assessors must

• Review all sales of property on an ongoing
  basis.

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Assessors must

• Enter all data in a record maintenance system.

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Assessors must

• Statistically analyze all factors contributing to
  value and adjust to reflect current sales of
  property.

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Assessors must

• Generate estimates of value on each property
  annually.

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Assessed Values are generated by comparing each
house to similar properties that have recently
sold, and adjusting for differences.
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Lets look at asales grid for a simplified
example of how thats done!
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Lets assume the houses in our example are the
same age, size, physical condition, quality and
in the same neighborhood.
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Simplified Sample data
Bedroom 3,000 Bath 2,000
Fireplace 1500 Garage
6,000
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This is a sales grid showing Our House...
Bedroom 3,000 Bath 2,000
Fireplace 1500 Garage
6,000
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and sale information about similar houses...
Bedroom 3,000 Bath 2,000
Fireplace 1500 Garage
6,000
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along with examples of factors that affect
value.
Bedroom 3,000 Bath 2,000
Fireplace 1500 Garage
6,000
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The sale properties are adjusted for differences
to match Our House.
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When we are finished we should have an estimate
of what Our House would sell for...
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giving us an example of an assessed value.
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Lets adjust the first sale for any differences
from Our House...
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The only difference is in the number of
baths...
Bedroom 3,000 Bath 2,000 Fireplace
1500 Garage 6,000
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So, we adjust by adding 2,000.
Bedroom 3,000 Bath 2,000 Fireplace
1500 Garage 6,000
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Giving an adjusted value of 102,000.
102,000
Bedroom 3,000 Bath 2,000 Fireplace
1500 Garage 6,000
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Sale 2 needs several adjustments
102,000
Bedroom 3,000 Bath 2,000 Fireplace
1500 Garage 6,000
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...for an adjusted value of 113,500
-3,000
-2,000
-1500
113,500
102,000
Bedroom 3,000 Bath 2,000 Fireplace
1500 Garage 6,000
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Sale 3 needs several adjustments...
Bedroom 3,000 Bath 2,000 Fireplace
1500 Garage 6,000
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and Sale 4 needs one adjustment...
Bedroom 3,000 Bath 2,000 Fireplace
1500 Garage 6,000
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Go ahead and adjust sales 3 and 4 on your work
sheet to reflect the differences between the
sales properties and Our House...
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-3,000
3,000
2,000
-2,000
2,000
-1,500
1,500
3,000
102,000
113,500
97,500
97,000
Bedroom 3,000 Bath 2,000 Fireplace
1500 Garage 6,000
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-3,000
3,000
2,000
-2,000
2,000
-1,500
1,500
3,000
102,000
113,500
97,500
97,000
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-3,000
3,000
2,000
-2,000
2,000
-1,500
1,500
3,000
102,000
113,500
97,500
97,000
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-3,000
3,000
2,000
-2,000
2,000
-1,500
1,500
3,000
102,000
113,500
97,500
97,000
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-3,000
3,000
2,000
-2,000
2,000
-1,500
1,500
3,000
102,000
113,500
97,500
97,000
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Now that you have valued Our House...
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go ahead and do all the parcels in this
municipality...
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remembering to account for all the other
variable factors...
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...that affect an estimate of value age, size,
physical condition, quality, neighborhood, etc.
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Its a massive and exacting job requiring much
diligence and attention to detail.
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Lets look next at the fairness issue
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Equitable Values
The fair distribution of the tax levy...
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... characterized by applying valuation
techniques in an even-handed manner.
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In other words, no single taxpayer or group of
taxpayers...
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...is to be assessed in such a manner that an
unjust tax burden would result.
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The goal No one is to pay more, or less, than
their fair share of the tax levy.
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As economic conditions change, values must be
adjusted to prevent inequitable assessments.
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Example 1 Demand for one
house style over another may change with time,
and with fashion.
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Example 2 Demand for one
neighborhood over another may change with time.
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Much of the Assessors work goes to accounting
for these constant changes!
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What happens when a property owner disagrees with
the assessed value?
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The Appeal Process
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Three Steps 1) Open Book 2) Board of
Review 3) Higher Appeals
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Open Book Informal review of the assessment roll
at the assessors officemeet with your assessor.
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Board of Review Formal presentation of evidence
of value before a board of your peers.
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Higher Appeals Appeal in the Court System or
Department of Revenue, depending on circumstances.
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The Revaluation Process
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State law requires assessments to be within 10
of market value once every 5 years.
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As we have seen, market conditions are constantly
changing.
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Over time it becomes necessary to review all of
the properties in a municipality
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To bring all property values back into line with
actual market conditions
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Thats called a Revaluation.
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In a revaluation, all properties are reviewed,
along with all of the factors contributing to
value.
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Assessors attempt to visit every home and
business to verify property data.
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Changes in property data are noted and all
properties are adjusted for varying market
conditions.
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The 1 Question How will a revaluation affect my
taxes?
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We will look at two scenarios regarding the
affect of revaluations on taxes
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The year before a revaluation Taxing
Authorities Budget 1,000,000 Newtown Assessed
Value 100,000,000 Tax Rate 1,000,000/100,000
,000.010 Tax on home assessed at
100,000 100,000 X .010 1,000 Tax
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In Revaluation Year If Assessed Value doubles
but budget (levy) remains the same Taxing
Authorities Budget 1,000,000 Newtown Assessed
Value 200,000,000
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In Revaluation Year ( Value doubles but budget
remains the same) Tax Rate 1,000,000/200,000,0
00 .005 Home now assessed at
200,000 200,000 X .005 1,000 Tax
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In other words, even if the assessed value of a
house doubles in a revaluation year, but the
budget remains the same, the taxes on that house
will remain the same as the prior year.
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In Revaluation Year If the Budget increases 10
but there is no change in assessed
value Taxing Authorities Budget 1,000,000 X
1.10 1,100,000 Newtown Assessed
Value 100,000,000
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In Revaluation Year ( Budget increases 10 but
no change in assessed value) Tax
Rate 1,100,000/100,000,000 .011 House still
valued at 100,000 100,000 X .011 1,100 Taxes
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In other words, even if the assessed value of a
house stays the same in a revaluation year, but
the budget increases, the taxes on that house
will increase, under typical circumstances.
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We have reviewed the duties of Assessing Officers
as they prepare the annual assessment roll.
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We have seen how State laws and regulations guide
the assessing process.
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We have observed the 1 goal of the professional
Assessing Officer
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Using all of our resources, we generate assessed
values...
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so everyone can pay their fair share of the
budget (taxes)...
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and everyone can enjoy the benefits of living
here!
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Thank You!