Public Relations of Revaluations

Ted Gwartney

[A presentation at the annual conference of the Council of Georgist Organizations, held in Kansas City, Missouri, 2008. Reprinted from GroundSwell, May-June 2009]

It is really critical that when a revaluation is being conducted the public is kept fully informed of what is being done, why it is being done, and how it is being done, and when it is going to get completed. And you have to bring this to their attention time and time again. Usually we have announcements before we get started and then we have press releases as we go along to tell the public about all the steps we are taking. And when we complete the whole revaluation we want to give them as much information as possible. We send out a notice that shows what their assessment was the prior year and what taxes they paid the prior year and then we show what their new assessment is going to be and what taxes they will be paying under the new assessment. This then reduces the amount of questions that come in and the use of court cases and all of the appeals that otherwise people would be taking. Public relations is the job of keeping the public fully informed about everything that is happening.

The property tax is the primary source for local and public school revenue. It is a tax on wealth, basically it is property wealth. And over history it has been the primary source of revenue for financing public services and schools. Before we had income and sales taxes we always had the property taxes going back throughout history. It has become less important following the second world war than it was before the second world war, mainly because many jurisdictions now are using sales taxes and income taxes where they were not using them at the turn of the century.

The purpose of a revaluation is to raise funds needed for the local government and schools in an equitable manner. A revaluation must eliminate any assessment inequalities that have developed since the previous revaluation. Ideally the jurisdiction should reappraise all property every year or every other year. Not all property values raise at the same amount in the same time period. You are going to get into a very unfair situation the longer time that goes on before you have a new revaluation.

The revaluation balances out the property tax burden among all the property taxpayers in the community. A reassessment should be a zero sum gain, and the City Council and the Schools should not look at it as though we are going to get any new revenue because we have a bigger tax base. If the aldermen adjust the mill rate downward first then they may add additional taxes, only as needed but taxes are not going up because the property value is going up. In Greenwich commercial properties went up twice as much as the residential. On average the residential went up about 60% and the commercial went up about 120%. So it was a shift off the residential onto the commercial. It just happened that we were in a very dynamic time with office buildings and retail demands. We of course pointed that out as part of our public relations.

Basically the whole idea behind a revaluation is to bring fairness in collecting the taxes. Properties that are paying too much should see some reductions. Those that are paying too little should see some increases. And if this is explained properly to the public they should understand that.
The property tax is an ad valorem tax. If you have a $500,000 home you pay twice as much as someone who has a $250,000 home. It is based on value, and the costs of government are spread according to all the total values of the community.
There are basically five steps in a revaluation. The first one is to collect data on all the properties in town, and to correct any errors in the property description. We do this in two steps. We start with the land and review all the land purchases first. We develop the land values before the total property values are done. We treat the buildings as a residual value. We estimate the land value first, then we estimate the total value, and the difference between the total value and the land value is the building residual.

Second, you collect all the marketing information. You check for all arms length sales since the last revaluation. The market may be going up or it may be going down but your trending study moves the sales all to a common date, so when you are talking to people you are saying here is the actual selling price and here is the time adjusted selling price and we based all the assessments on this time adjusted market sale as at a set date.

Third, you then create a valid statistical relationship between all the data elements that you collected and the market values from the sales of those properties that sold and oftentimes this is done in terms of a multiple regression analysis, a statistical analysis, where you look at various characteristics of properties and you assign weights for different characteristics.

Then, fourth you apply that statistical relationship to your entire data base.

Fifth, you review and verify the results. You invite the people to first come in for informal public hearings, to meet with your staff and your revaluation consultants.

And finally, if necessary, they may go on to the board of assessment appeals to argue their case.