11/1/17. Asbury Park 2018 Reassessment Report

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Rosalind Norris
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1 Asbury Park 2018 Reassessment Report

2 Prior Year (2017) Assessment Accuracy Reflection Each October, the NJ Division of Taxation conducts statistical studies which measure the accuracy of current year assessments. These studies could be considered as the assessor s gradebook for that year s assessments and resulting tax distribution. Director s Ratio While the Director s Ratio is a complex calculation, this measurement is intended to express the typical relationship between assessments and sale prices in a given municipality. Attached is a copy of the Certification of the 2017 Average Ratios for the entire state. Asbury Park is on page 16 of the pdf. With recent market appreciation strongly outpacing surrounding communities, Asbury Park s 2017 Director s Ratio was 87.61% (target was 100%). General Coefficient of Deviation (COD) The General Coefficient of Deviation is widely held as the best indicator in determining proper tax distribution. It is a way to measure how tightly clustered assessments are in relation to the average ratio. A lower coefficient of deviation means more accurate and fair tax distribution. The COD normalizes ratios to show accuracy within a municipality regardless of what the Director s Ratio is in any given year. Attached is a copy of the Coefficients of Deviation- Measurement of Property Assessment Uniformity 2017 Data for the entire state. Asbury is on page 46 of the pdf. Through annual reassessments, Monmouth and Somerset Counties are showing improved coefficients when compared to historical or statewide data. The more homogeneous the properties in a municipality are, the lower the coefficient should be. For example, a municipality that is comprised of 90% townhouses would be expected to yield better assessment accuracy when compared to a municipality that is comprised of a complex mix of residential, multifamily and commercial that are highly sensitive to immediate location and condition. From a mass appraisal standpoint, Asbury Park faces extensive challenges because the market is so diverse and dynamic. Mass appraisal in Asbury is arguably one of the most difficult environments in the state. Despite these challenges, distribution is on the more accurate side when compared to other (more homogeneous) municipalities throughout NJ. We are also trending to be considerably more accurate than our own historical coefficients from the past. Below is historical data going back to As you can see, tax distribution is significantly more accurate in the annual reassessment model (highlighted). The median Coefficient of Deviation between 1991 and 2013 was The Coefficient for 2017 was This means that 2017 tax distribution was 1.73 times more accurate than the norm of the past

3 2018 Reassessment Through the 2018 reassessment, changes to global modeling were made to target market value. Adjustments were also made to all individual properties, neighborhoods and submarkets to refine assessment accuracy. The goal is to annually target 100% market value so that the statistical measurements represent better assessment accuracy. Accuracy The primary driver of a reassessment is recent arms-length market transactions. Statutorily, properties are assessed for what they would have sold for on October 1 st of the pretax year. The 2018 valuation date is October 1 st, Our Supreme Court has held value for purposes of taxation has some measure of permanence which renders it secure against general temporary inflation or deflation. Hull, supra, 16 N.J. Tax at 96 (quoting Hackensack Water Co. v. Division of Tax Appeals, 2 N.J. 157, 163 (1949)). True value must be fairly constant and must be gauged by conditions, not temporary and extraordinary, but by those which over a period of time will be regarded as measurably stable. Ibid. (quoting Berkeley Arms Apartment Corp. v. City of Hackensack, 6 N.J. Tax 260, 286 (Tax 1983)). I broadly interpret this case law to provide a level of assessment stability when considering the rigid October 1 st valuation date. In a reassessment, I measure sale prices from the past two years (giving more credibility to the more recent transactions.) The Monmouth County Tax Board has a standardized review process to measure new assessments against sale prices from the current and prior year. Tax Board Standardized review: All 2016/2017 residential usable sales (removing top & bottom 2.5% outliers and properties that had renovations after the sale) Sample Size Weighted Average % Average % Standard Deviation 10.15% Coefficient of Variation 9.84% Median % Since Asbury Park has experienced significant year over year appreciation, it is appropriate to split out the more recent 2017 sales from the older 2016 sales. Below is all 2017 residential usable sales (removing top & bottom 2.5% outliers and properties that had renovations after the sale) Sample Size Weighted Average 95.98% Average 97.08% Standard Deviation 6.78% Coefficient of Variation 6.98% Median 97.23% Assessment : 2017 Sale Price Ratios % % % % % 90.00% 80.00% 70.00% 60.00% Ratio Scatter

4 Total Change Net Valuation Taxable Considering all ratable changes, the net valuation of the city will be increasing by 274M (20.06%). Any property whose assessment is going up less than 20.06%, will pay a lesser proportionate share of the tax levy. Any property whose assessment is going up greater than 20.06%, will pay a greater proportionate share of the tax levy Net Valuation Taxable 1,368,550, Preliminary Net Valuation Taxable 1,643,020,400 Change 274,469,700 Change % 20.06% 2017 Final Tax List Class Property Type Count Value Average 1 Vacant Land ,117, ,647 2 Residential ,919, ,961 4A Commercial ,467, ,170 4B Industrial 3 2,399, ,933 4C Apartment ,645,900 1,223, Net Valuation Taxable 1,368,550, Preliminary Tax List Class Property Type Count Value Average 1 Vacant Land ,631, ,420 2 Residential ,166, ,820 4A Commercial ,444,600 1,065,186 4B Industrial 3 2,463, ,233 4C Apartment ,314,200 1,399, Preliminary Net Valuation Taxable 1,643,020,400

Market Appreciation While a municipality s Net Valuation Taxable change incorporates many factors (new construction, renovations, subdivisions, exemption changes, market changes, etc.

5 Market Appreciation While a municipality s Net Valuation Taxable change incorporates many factors (new construction, renovations, subdivisions, exemption changes, market changes, etc.), the largest driving force is general market appreciation or depreciation. Within an annual reassessment model, where the assessor is targeting 100% market value each year, the change in the Net Valuation Taxable of the City can generally be considered as a derivative of the market strength or weakness. The below chart shows the net valuation of Asbury Park since the City began annual reassessment (targeting 100% market value) in Asbury Park Net Valuation ,184,771, ,216,903, ,291,621, ,368,550,700 *2018 1,643,020,400 *Preliminary Tax List Asbury Park Net Valuation Taxable (Property Values) 1,700,000,000 1,643,020,400 1,600,000,000 1,500,000,000 1,400,000,000 1,368,550,700 1,300,000,000 1,200,000,000 1,216,903,600 1,184,771,700 1,291,621,100 1,100,000, *2018

6 Paired Sales Analysis A paired sales analysis is an appraisal technique used to find the value of one particular attribute. The appraiser locates two sales where the only difference is the attribute being appraised. The difference in value is considered to be the value of the attribute. The below example has a sampling of twelve properties that had more than one arm s length transactions since While there were other properties had multiple sales in this timeframe, they were removed from the study since they either had substantial renovations between the sales or one of the two sales was determined to not be arm s length. In the below sample, the only variable with the sale prices was time. The goal of the study is to analyze market appreciation in the residential property class since The paired sales analysis implies that, on average, there has been a 13.12% annual appreciation of residential properties. First or Second Sale Property Location Sale Price Percent Change Deed Date Number of Months Between Sales Implied Percent App per Month First Sale 601 MATTISON 3C 430,000 7/2/2015 Second Sale 601 MATTISON 3C 540, % 8/24/ % First Sale 708 EIGHTH AVENUE 470,000 5/14/2014 Second Sale 708 EIGHTH AVENUE 535, % 12/7/ % First Sale 521 COOKMAN AVE, UNIT ,000 12/1/2014 Second Sale 521 COOKMAN AVE, UNIT , % 1/27/ % First Sale 510 MONROE AVE, UNIT ,000 10/31/2014 Second Sale 510 MONROE AVE, UNIT , % 12/12/ % First Sale 510 MONROE AVE, UNIT ,900 10/1/2014 Second Sale 510 MONROE AVE, UNIT , % 6/30/ % First Sale 501 GRAND AVENUE UNIT ,000 4/30/2015 Second Sale 501 GRAND AVENUE UNIT , % 4/19/ % First Sale 502 FOURTH AVENUE 455,000 12/4/2015 Second Sale 502 FOURTH AVENUE 585, % 6/27/ % First Sale 1503 PARK AVNUE 410,000 3/21/2014 Second Sale 1503 PARK AVNUE 525, % 7/7/ % First Sale 301 SIXTH AVE, UNIT ,000 3/17/2016 Second Sale 301 SIXTH AVE, UNIT , % 6/15/ % First Sale 505 SEVENTH AVE 690,000 5/22/2015 Second Sale 505 SEVENTH AVE 920, % 8/22/ % First Sale 300 COOKMAN AVE, UNIT ,500 8/7/2014 Second Sale 300 COOKMAN AVE, UNIT , % 11/30/ % First Sale 1501 OCEAN AVE, UNIT ,000 8/15/2014 Second Sale 1501 OCEAN AVE, UNIT , % 12/18/ % 1.09% Implied Average Per Month Appreciation: 1.09% Implied Average Annual Appreciation: 13.12%

7 Tax Apportionment Impact The aggregate change of the ratable base is 20.06%. The below chart gives better insight into the actual tax apportionment impact on properties. Since 20.06% is the aggregate change of the entire ratable base, 20.06% can be seen as the baseline of apportionment change. Any property increasing greater than 20.06% will pay a greater proportionate share of the tax levy. Conversely, any property increasing less than 20.06% (or decreasing) will pay a lesser proportionate share of the tax levy. Assessment change of all ratable properties (excluding new construction and properties that had renovations): 65% of properties will decrease in percentage share of tax levy 35% of properties will increase in percentage share of tax levy No Change or Decrease 337 Increase: 0-5% 297 Increase 5-10% 547 Increase: 10-15% 795 Increase: % 754 Increase 20.06%-25% 435 Increase: 25-30% 360 Increase: 30-35% 255 Increase: 35-40% 134 Increase 40% % (1,478 properties) will pay a greater proportionate share of the tax levy in 2018 than they did in % (2,730 properties) will pay a lesser proportionate share of the tax levy in 2018 than they did in Assessment Changes Baseline Change of 20.06%

8 Commercial Appraisal As evidenced by statistical analytics produced by the Division of Taxation, Monmouth County has made significant strides in improving the accuracy and transparency of its residential mass appraisal. Commercial mass appraisal has proven to be a challenge because the commercial market is thought to be far more complex than the residential. In many ways, commercial valuation is actually more predictable than residential since the residential market is driven by a greater amount of factors that are not quantifiable. Typically, commercial properties are bought and sold by investors based on potential income, expected expenses and anticipated return on and return of the investment. An investor s willingness to pay for a commercial property is also driven by interest rates and the availability and cost of capital. While it has been identified in some states, generally within New Jersey there exists a lack of application of these concepts in assessment modeling. Furthermore, ability to address specific market and submarket changes becomes impossible when annual reassessments are not being applied with this type of modeling. Through the Assessment Demonstration Program (ADP), Monmouth s ultimate goal is to establish and annually maintain more fair tax distribution (accuracy of individual assessments). In order to achieve this, commercial property valuation must be rooted by methodology used by the actual buyers and sellers in that marketplace. Tax Court has already accepted this reality and recognizes the income approach as the most applicable appraisal approach for income producing properties. Obviously, it is not practical to individually appraise each commercial property every year. For 2018 assessment modeling I built an income producing property database to root the assessment methodology for the City s income producing property categories. The modeling now supports dynamic income approach methodology which can be updated annually as the income producing property market characteristics change. The modeling also provides for superior confidence in appeal defense and will reduce the likelihood of significant appeal refunds. The concept required segmentation of properties into different categories and sub categories; each with their own respective global cost drivers. Ultimately, this model results in uniform treatment of properties within individual categories by use of income approach.

9 2018 Class Totals (preliminary tax list)

TAX LEVY divided by RATABLE BASE equals TAX RATE

TAX LEVY divided by RATABLE BASE equals TAX RATE 2017 TAX RATE CALCULATION: 2017 Tax Levy: 28,455,242 Divided by 2017 Net Valuation Taxable: 1,368,550,700 Equals 2017 Tax Rate: 2.080 (rate gets rounded