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Taxes and Fees
At a recent work session, Town Assessor Dave Marrano addressed the Lancaster Town Board on the reasons the town should consider doing a property reassessment in 2010. Marrano focused on equity, fairness and the need for transparency when making his presentation.
Marrano handed out a 20 page document that covered his proposed “Lancaster Assessment Equity Project”.
The first two pages identified two property sales that illustrated inequities in assessments. Marrano told the group to keep in mind that the assessments were from the 2005 reval and that the full market assessments were based on the equalization rate, as Lancaster is not being assessed at 100% market value.
A property on Kiefer (Village) sold for $28,000 in 10/2007 and was assessed at full market value for $53,656. At average tax rate of $40 per thousand (town/ county/ village/school), the property is paying $1984 in yearly taxes. Based on sale of $28,000, the assessed value should be $28,000 -$30,000 and the taxes should be $1,200. “This homeowner is paying 65% more in taxes than they should,” declared Marrano.
Marrano then presented the example of a house on Hillside Parkway that sold in 7/2007 for $296,000; a neighborhood that has seen a lot of growth and one he lives on. The assessed valuation was $224,000. The full market value was $240,800 (equalization rate). At average Town of Lancaster tax rate of $30 per thousand (town/county/school) the property is paying $6,720 in yearly taxes. Based on sale, the assessed value should be $296,000 and the taxes $8,880. “This property owner is paying 32% less in taxes than they should,” said Marrano.
“This means that the properties are not assessed appropriately and fairly, said Marrano. “People are not paying their fair share of taxes.”
Marrano debunked the belief that the number one reason for doing a reval is to raise tax dollars. “When we do assessment equity, it has nothing to do with increasing tax dollars. The point is to make sure the tax dollars are being distributed equitably.”
Marrano went on to say that despite the number of house sales dropping, the values are still increasing in our area. “The longer we wait to update our property values some people are paying more than their fair share while others are paying less than their fair share. The people who have a little more disposal income could be subsidized by some of our less wealthy residents.”
“There is no incentive here to raise taxes,” declared Marrano. The board makes a budget based on what it costs to operate the town. It has nothing to do with my assessed values. Tax rates are determined by a municipalities tax levy as determined by their governing board.
Why are frequent reassessments necessary?
According to Marrano, the real estate market is constantly changing. In Lancaster the biggest change in values is taking place south of William Street, north of Walden Avenue and in his subdivision. Not all properties will change in value at the same rate. While property values in the Village of Lancaster appear flat, property values in Depew are declining.
Marrano again stressed that the number one reason for doing an assessment equity project is for fairness; paying taxes on market value. “Properties do not increase or decrease in a uniform rate, yet our Equalization rate is a town-wide average. Our equalization rate is now at 93%. The equalization rate does not reflect town growth and some people are winning and some are losing. The NYS Office of Real Property Services (ORPS) wants all municipalities to be at 100% market value. That’s our goal.”
The equalization rate becomes a simple thing when you’re assessment is based on market value. Your house is worth $100,000, it’s assessed at $100,000. When the town is not assessing at 100% market value, two key exemptions, STAR and Veterans programs get reduced.
At 100% market value assessment, the town’s STAR exemption was $30,000. When the town went to a 95% equalization rate, the exemption decreased to $28,500. “If our equalization drops again, so will our STAR exemption reimbursement. The same is true with the veteran’s exemption.”
Marrano made it known that municipalities with 100% assessments have better a bond rating, fewer court cases and costs from those challenging assessments, the town gets advisories from ORPS and bottom line, it’s the right thing to do.
The following towns and cities are in the 100% annual update program:
Clarence – 10th year
City of Buffalo – 8th year
Brant – 8th year
Boston – 4th year
Lackawanna – 3rd year
Evans – 1st year
North Collins – 8th year
Amherst is re-entering the 100% annual program after last update in 2006 – new update effective with 2009 roll.
State-wide enrollment: 561 of 994 town or city assessing units have reassessed since 2004. 66 more units plan to reassess in either 2008 or 2009.
What Happens During an Assessment Equity Project?
Marrano says the following takes place:
• We value property based on current market conditions; some properties increase, some decrease and some stay the same. Most areas are in line, but some areas, like my subdivision have accrued value and need adjustments.
• We update inventory on all properties in town
• We will communicate, communicate and communicate to the public the steps we are taking. Community outreach will be the key to process success.
• Taxes do not necessarily increase, or decrease. The Assessment Equity project is unrelated to Tax Rates – they are determined by Municipal Boards based on their Tax Levy needs.
Financial Considerations
• The State funds up to $5 per parcel if the town goes to assessing at 100% market value. If the town stays on annual update, it gets the $5 every year.
• If the town signs a 1537 agreement with the county, the county will assist in the project and the state will provide an additional one-time $1 per parcel to split with the county.
• Outside contractor cost is approximately $15 - $18 per parcel.
• The work can be done by our inside staff and an outside contractor. The town has two licensed certified appraisers in the Assessor’s office. The town would do all commercial properties and all residential and vacant land in the Villages of Lancaster and Depew. The outside contractor would only do residential and commercial properties in the Town Outside Villages and assist in the Community Outreach program.
• ORPS will also assist in commercial and land valuation.
Timetable
Marrano told the board that if they were interested in moving along with the project, the following timetable would be put in place:
• A Request for Proposal (RFP- bid process) will be presented to outside contractors by 1/1/09. Look at outside contractor costs.
• Do inventory cleanup through 4/1/09; residential – data mailers or property survey; commercial – income and expense survey/data verification.
• Valuation Analysis completed by December 2009 (field review of values).
• Assessor Value Review and input to RPS file to be completed by January 2010.
• Assessor Disclosure - mailing notices to taxpayers about changes in February 2010; increases, decreases, etc.
• Informal Hearing Phase – during the month of March which has proved to be a successful process whereby residents meet with the assessment office personnel.
• Tentative Roll – The tentative roll takes place in May.
• Board of Assessment Review Hearings – take place on the fourth Tuesday in May (2010).
• Final Roll – announced on July 1, 2010.
Financial Impact
Reviewing the financial impact to the Town, Marrano presented the following:
There currently is up to $5 per parcel from the State for funding this project. There are 17,509 parcels in Lancaster. The town would receive a payment of $87,545 assuming the State reimbursement stays at $5. That payment continues as long as the town stays in the program (100% market value assessment).
The town would also get in the first year of the program a one-time $1 payment that it would split with the county (sign 1537 agreement with county). That number would be $9,161.
The first year’s revenue to fund the project would be $96,706. In year two and three in the project the town would continue to receive $5 per parcel ($87,545 x 2 = $175,090). In total, the State funding would amount to $271,796 for the three year project.
The cost to the town would be from paying an outside contractor to look at the residential parcels in the Town Outside of Villages. 10,612 parcels @ $18 =$191,016. The $18 per parcel cost could be lower, it’s just an estimate. Add another $10,000 in year one for department overtime. Total = $201,016.
Marrano informed the board that as long as they stayed in the Equity project they would more than recoup their project money after three years. The Assessment office would do as much work in-house as possible. “The ultimate goal is to make sure taxpayers are being assessed fairly.”
Next Steps
• The Town Board needs to make a decision if they want the Assessor’s office to move forward with the Equity Project. “Call us and we will answer any of your questions,” Marrano told the board members.
• If the board decides to move forward, ORPS and I will put together a RFP to set up the outside contractor.
• Meet with the board in early January with recommendation on contractor and timetable for next steps.
Marrano closed his presentation by telling the board that “fairness is what we want.” “If we don’t update the assessment roll we’re not being fair. We are not distributing the tax levy equitably among the property owners. That is my goal and I am sure it is your goal.”
Questions from the Board
Councilman Ronald Ruffino asked Marrano on the outside contractor costs ($18 per parcel). “Did you calculate to see what the costs would be if we did it internally?”
Marrano replied that his staff would be heavily engaged in the project and even estimated $10,000 for overtime. “We have the experienced personnel (two appraisers) but it is the sheer number of parcels involved that would require us to have outside help to do it properly and not be challenged in court. We need to look at every parcel to make sure the project gets done right.”
Ruffino asked whether it would be possible to hire someone to assist in the project to lower town costs.
“There are several ways to approach this,” offered Patty Valvo from ORPS. “Is it possible to hire another appraiser and get this done? Possibly, but he would have to be trained in the process.”
That’s where I’m coming from,” declared Ruffino.
Marrano informed the board that he will investigate several options to lower town costs.
A question was asked as to how firm the $5 per parcel return was? Valvo answered that the number now stands at $4.90 per parcel. Marrano added that if anything changed because of the State fiscal crisis the town would have to reconsider its position. “However, the State is pretty committed to getting everyone to a 100% equalization rate. It is the easiest way for municipalities to properly put values on the homes.”
Marrano closed by telling the board that the biggest upside to doing an annual assessment update is that if property inventory change doesn’t take place, but that the property does increase in value, he is unable to make equitable assessment changes if they were not in the program.
If the town did nothing for a number of years, houses accruing in value would be paying less than their fair share and houses decreasing in value would pay more in taxes than their fair share. “Even if the market continues to slide, we can make the appropriate adjustments. There’s an area in the Village of Depew that has lead contamination. That impacts their values. If the town were on an annual Equity program the town could react to that.”
ORPS representative Valvo interjected that with the town having performed a property revaluation in 2005, the changes should be nowhere severe.
Comment
This writer is a proponent of the Equity program. The levy determines what your taxes are. The town and school need so much money to operate. They set the tax rate. The intent of the Equity program is to distribute that levy equitably; as fairly as possible. It is the right thing to do!
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