MINUTES
GOVERNMENT OPERATIONS COMMITTEE
JANUARY 10, 2006 3:30
P.M.
SCOTT HEYMAN CONFERENCE ROOM
Present: K.
Herrera, G. Stevenson, D. Randall, D. Kiefer, M. Sigler
Legislators: T.
Joseph, N. Shinagawa, M. Hattery, J. Dennis, R. Booth, P. Mackesey, M. Koplinka-Loehr,
L. McBean-Clairborne
Staff: S.
Whicher, W. Skinner, County Administration; V. Coggin, J. Franklin, Assessment
Department; D. Squires, Finance; J. Wood, County Attorney
Guests: A.
Tutino, Ithaca Journal
Called to Order
Ms.
Herrera called the meeting to order at 3:32 p.m.
Changes to the Agenda
There
were no changes made to the agenda.
Assessment Department
Mr.
Whicher began the presentation on his recommendation concerning the assessment
cycle by stating Real Property Tax Law makes it the prerogative of the
Legislature to set the assessment cycle; it is the assessors responsibility to
determine the level of assessment.
He noted that one process couldn't influence or cross over into the
other.
At
this time the Committee discussed the following memorandum from Mr. Whicher to
the Government Operations Committee dated January 10, 2006 regarding:
"RECOMMENDATION
TO MOVE FROM ANNUAL TO TRIENNIAL REASSESSMENT CYCLE"
"The County Legislature requested a review of the
potential consequences of moving from an annual reassessment cycle to a
triennial cycle. The Assessor,
Assistant Director, and I reviewed the data and it became clear that the
Department of Assessment could provide the necessary data analysis, but it
would be improper for them to make a recommendation to the Legislature.
Determining the reassessment cycle is the prerogative of the Legislature;
selecting the level of assessment is the sole prerogative of the Assessor. I have agreed to provide my analysis
and recommendation. It is important to emphasize that the following analysis
and recommendation are mine, and that the Assessor has taken a neutral position
and will maintain an equitable roll with whichever cycle is chosen.
"This
decision is particularly difficult because an equally strong argument can be
made in favor of either the annual valuation cycle or a triennial cycle. In developing my recommendation I
considered the State Aid, Exemptions, court ordered assessments, department
staffing needs, the burden placed on taxpayers, and the relative abilities of
the two programs to maintain equitable assessment rolls.
"After
careful consideration and review of the data provided to me by the Department
of Assessment, I concluded that there are few, if any consequential impacts on
exemptions and Certiorari decisions.
I have also concluded that the relative ability of the two programs to
maintain equity in Tompkins County is highly dependant on how rapidly market
values are moving. The most
significant differences between the programs fall in the areas of State Aid,
staffing, and the burden placed on the taxpayer.
Shifting from
an annual reassessment cycle to a triennial cycle will result in a loss of
State Aid of $159,000 for each of the first two years of the cycle, for a total
loss of $318,000 over the three-year cycle. However, if the annual reassessment cycle is to be
maintained, an annual $80,000 or $240,000 in additional staffing costs over the
three year period will be required, while the triennial program can be
supported with existing staff levels.
Thus the net cost of moving from the annual to the triennial program
will be approximately $78,000 over the three-year period. It is also important to note that the
impact on the 2007 tax levy will be $159,000.
"The
final two factors to consider are both dependant on how rapidly the real estate
market is moving. In a rapidly
moving market the burden placed on the taxpayer is considerable. When the real estate markets move up or
down significantly in an annual reassessment program, the Department of
Assessment is required to send out large numbers of Assessment change notices
which in turn result in many taxpayer reviews. For example, the Department of Assessment projected that
they will send out approximately 26,000 change notices for the 2006 Assessment
Roll if the annual reassessment cycle is maintained, while switching to a
triennial program would generate approximately 8,000 notices.
"Also
affected by the pace of the movement of the real estate market is the ability
of the Department of Assessment to maintain equity. In a slow moving market the intra (within) and inter
(between) class shifts are minor, and relative equity can be maintained without
significant effort. In a rapidly
moving market the various segments of the market move at different rates and at
varying speed. The best examples
of this in Tompkins County are the lake properties and the rental segment of
the commercial market. Given our
market and market conditions triennial reassessment cycles have a distinct
advantage because it is more likely that sufficient sales will accumulate and
time can be allocated for the more complex properties. In addition in a triennial cycle more
time can be scheduled for taxpayer reviews.
"The
decision then comes down to either adding staff to maintain the existing annual
cycle or absorbing $159,000 in the 2007 levy to move to the triennial
program. My recommendation is to
move to a triennial reassessment cycle because I believe it best fits our
varied real estate market and our existing staffing levels.
I.
History:
"During
the 2005 County Legislature elections the annual reassessment cycle was
challenged. Subsequent to the
elections I informed the Department of Assessment that there was a possibility
that the Legislature would want to move to a triennial cycle. In a meeting with Tim Joseph and me,
the Assessor stated that if the Legislature intended to move to a triennial
cycle it should do so for the 2006 roll since she was confident in the equity
of the 2005 roll. The Assessor
also asked that a decision be made no later than January 17, 2006.
II.
Analysis:
a. State
Aid
State Aid in the
amount of $159,000 is paid to Tompkins County each year to offset the
additional costs of maintaining the annual reassessment cycle. If Tompkins County decides to move to a
triennial reassessment cycle the County will be eligible for this amount only
in the third year of the cycle. It
is unknown if State Aid policies will change in the future.
b. Exemptions
Initially there
was a concern regarding the potential impact on exemptions if the triennial
cycle was adopted; of most concern was the STAR exemption. After examination it was determined
that the current laws provide the necessary adjustments. Although rapidly moving real estate
markets will force temporary inter-class shifts, the overall potential shift in
the current market is minimal.
c. Court
Ordered Assessments
Court ordered
assessments, often referred to as Certiorari actions, are the result of
settlements regarding commercial properties. These cases often cover several
years and may include provisions for reducing the court ordered assessments if
the municipality assesses at less than 100%. Tompkins County has several of
these, primarily in the City of Ithaca and the Town of Lansing. Moving to a
triennial assessment cycle may cause an inter-class shift for these taxing
jurisdictions, but that shift should be minimal.
d. Staffing
In this rapidly
moving real estate market the annual assessment cycle is stressing the current
staffing to its limit. This level
of work may be maintained in the short run, but additional resources will need
to be committed if the annual reassessment cycle is to be continued. The current staffing level will provide
adequate support for the triennial cycle although some thought must be given to
the needs required in the third year of the cycle.
e. Taxpayers
One of the driving forces behind the movement to
change from an annual reassessment cycle to a triennial cycle is the concern of
the taxpayers regarding the effort they must make to ensure that they are
equitably assessed. Even though
the Department of Assessment has developed extremely efficient systems to
answer taxpayer concerns the current annual reassessment process does require
time and diligence by the taxpayer.
This burden on the taxpayer should not be overlooked or
underestimated. That said, if the
Legislature elects to maintain the current annual cycle, it might be possible
to introduce some additional tools to make the process more acceptable to the
taxpayers.
f. Equity
The Assessor is
required by law to maintain an equitable assessment roll no matter which
reassessment cycle is chosen by the Legislature. Annual reassessments maintain the roll at 100% of market
value. This level of valuation is
the most transparent valuation method and is easily understood by the
taxpayer. This is the strongest
argument for the annual reassessment cycle. The drawback is that not all segments of the market can be
easily valued on an annual basis.
Lakefront and commercial properties are particularly difficult.
g. Equalization
rates
Moving to a
triennial reassessment cycle will reintroduce the use of Equalization rates
that may produce unexpected shifts when school districts cross the county line.
The impact of these potential shifts is unknown at this time.
III.
Recommendation:
After reviewing
the above I believe that a strong case can be made for either revaluation
cycle. It is very difficult for
staff to provide the Legislature with a recommendation since the decision is
essentially political. It is
particularly difficult for me since I was involved in developing the existing
program.
The argument
that sways my opinion regards the ability of the current valuation systems to
produce an equitable roll in our varied real estate market. I believe that the triennial cycle best
matches our market challenges.
This is particularly true in the Lakefront market since there are
seldom-sufficient sales in a single year to provide adequate market
information. The result is that
Lakefront properties are held down in value until sufficient sales occur and
then they suddenly jump to the then current market level. This jump tends to cause great taxpayer
concern and increases the burden on the Department. The commercial properties are another concern in general
since they are primarily valued using an income approach and it is difficult to
measure the market changes in a single year. Additionally the large quantities of apartment properties in
the county are particularly important because it takes more than one year of
data to determine and analyze the changes in this segment of the market.
Despite the
increased costs, my recommendation is for the Legislature to move from the
annual reassessment cycle to the triennial cycle beginning with the 2006 roll."
_____________
Mr.
Whicher reviewed the history of the assessment process in Tompkins County,
explaining how we got to this point. He said the Real Property Tax Law directs
the Legislature to set the figure and it is the assessor's responsibility to
determine the level of assessment; therefore, he feels it is important that he
step in and make a recommendation. He said the Department couldn't advocate for
annual or triennial assessment, just as the Legislature cannot tell the
Assessment Department how to determine the level of assessment. Mr. Whicher
said the Tompkins County Assessment Department has been a leader in the State
as it has many of the modern assessment tools and state of the art systems in
place. Tompkins County is one of only two assessing units that assesses 100
percent of the property on an annual basis.
Ms.
Herrera noted that July 1 is the cutoff date for data used and asked if the tax
notices for next year have already been figured out. Mr. Whicher said Jay
Franklin runs the model in January, and that is done. He spoke of the workload going forward and stated if the
annual assessment program is maintained the Department will be sending out
26,000 notices to taxpayers. Maintaining the existing level will require 8,000
notices to go out. He said a portion of the 8,000 are changes in property and
intraclass shifts. Mr. Sigler referred to commercial and lakefront properties
and asked if the market were to slow down would the triennial approach serve
that type of market better. Mr. Whicher said even in a fast-moving market it is
very difficult to get enough sales to draw a conclusion and gave lakefront
properties as an example. He said under triennial assessment year property owners, although they
would receive a break for a couple of years, would get hit hard in the third
year.
Ms.
Kiefer said she recalled there was a lot of enthusiasm when the County went to
countywide annual assessment. She said she was under the impression that the
ORPS (Office of Real Property Services) thinks annual assessment is best for
all residents and to the extent that Tompkins County is viewed as a leader,
wondered what impact there would be if the County stepped back from that. She
said one other important factor is the Director’s and County Administrator’s
opinion that annual assessment is viewed as the most transparent and equitable.
Ms.
Kiefer said her constituents miss getting assistance on comparables in their
notice and said whatever the cycle is she would like that to happen. Mr.
Whicher said there are cosmetic comparables and actual comparables, and preparing
comparable information takes a significant amount of staff time.
Mr.
Koplinka-Loehr asked if the need for more staffing is predicated on the market
continuing to move the way it has. Mr. Whicher said it is; however, the
Department has been taking on the burden of being understaffed for several
years. He also said the Ithaca market continues to be very strong.
Mr.
Franklin said the STAR exemption process is very difficult. He prepared an
analysis on the impact on the exemption and after reviewing that and talking
with the ORPS they found out it can only drop by five percent due to a mandated
restriction on the reduction rather than what it should be, based on the level
of assessment. He said since 2001 the residential values have gone up by 41
percent; however, the STAR exemption has only gone up by 9 percent.
Mr.
Booth asked, in terms of litigation challenges to assessment, is there any
track record that shows one system is better than another. Mr. Wood said years
ago when the County had ten-year assessments there were several challenges on
the tenth year. When the County went to annual assessment there were a lot of
challenges at first. He said if the County moved to triennial assessment he
thinks the majority of cases would be in the third year. He said values are
going up and cases will relate to the value more than they will the cycle.
Ms.
Coggin explained the grievance process and stated procedures begin when someone
files a formal application for any reason to have their assessment reviewed and
adjusted accordingly by the Assessment Review Board. She stated that is the only entity that
has authority to change an assessment.
Mr.
Shinagawa asked a question concerning the equity and the fair distribution of
the property tax burden. He said
under a triennial system rural people and people who live in areas that don't
have a high market and have lower property values will have to pay more than
their fair share for two of the three years. Under this system a person whose property is rising in value
doesn't have to pay for it going up for two years; therefore, the person in the
rural area will be paying a higher cost for that period. Mr. Joseph said it seems to him
that the critical issue is not whether values are rising in a neighborhood, but
whether it is measurable.
Mr.
Koplinka-Loehr asked if there would be an impact on school districts and
properties outside of the County.
Mr. Whicher said it is hard to predict; however, the one thing that can
be said is that it is going to introduce a degree of uncertainty that does not
currently exist. He said when the
County went to 100 percent market value there was a significant shift from
Tompkins County to Cortland County and it opened up the potential that if we
were at less than 100 percent that shift would return back to Tompkins
County. He said he is referring
to the percentage of the school levy.
Ms.
Coggin explained that there could be a property in Tompkins County assessed at
$100,000 and one in Cortland County assessed at $100,000 and they both could be
in the same school district, but the counties could have different equalization
rates when annual 100 percent market value is not used.
Ms.
Coggin said if the Legislature continues with annual assessment because at that
point the Legislature would have made a statement that annual assessment is the
absolutely correct choice for the property owners, that if the assessment is
correct the taxes are not the Assessment Department's responsibility. She said the rate increase is not the
Department's responsibility and that the values are totally independent from
the level of tax.
Ms.
Kiefer said she will be adding a substitute resolution to the Legislature
agenda.
Ms.
Herrera said the Assessment Department was not staffed properly from the
beginning. She said
switching back and forth from annual to triennial assessment is not fair to the
taxpayer and is irresponsible. She
strongly feels it is difficult to educate people about this but yet believes
fairness is the best fallback option and believes annual assessment is the best
way.
Mr.
Shinagawa said if the Legislature votes to move to triennial assessment the tax
levy will have to remain the same because any increase is not just an increase
but one that will hurt rural people more. He said if changed, the three years will fall on the
eve of an election which means people are going to get very large increases and
that will be a very big problem in the next election.
Mr.
Sigler said he prefers triennial assessment and noted he understands the
staffing crisis faced by the Assessment Department. He feels that the estimates provided related to adding staff
were low. He also said some people
have argued that the three years is a ploy so that high values can be locked in
now and noted there is an opportunity to appeal each year. He said he has heard from many of his
constituents that they are unhappy receiving a notice every year showing their
taxes are increasing. He said
people have said they cannot plan their budget because notices are received
every year.
Mr.
Squires noted that if there is a change to three years, the budget will need to
be amended.
Mr.
Booth hopes that the Committee recognizes that this is a complicated issue for
which there are arguments and rationale on both sides. Staff has compiled information and made
a recommendation and he does not feel anything that is stated by the Committee
should discourage staff from preparing this kind of analysis and presenting it
to the Legislature.
Ms.
Coggin said the Governor is putting property tax on the front burner, and lots
of concepts are being discussed such as a cap on assessment changes, or tying
it to the CPI. Mr. Franklin said
if you go to the ORPS web site you can see how many jurisdictions are
considering change.
Mr.
Sigler commented that the Department of Assessment must get many angry people
and asked about security. Mr.
Whicher said with that in mind the layout and colors were chosen carefully.
No
action was taken by the Committee.
This item will be discussed by the Full Legislature at the January 17,
2006 meeting.
The meeting adjourned at 5:10 p.m.
Respectfully submitted by Michelle Pottorff, TC Legislature Office
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