TAX LEVY divided by RATABLE BASE equals TAX RATE

Transcription

1 TAX LEVY divided by RATABLE BASE equals TAX RATE

2 2017 TAX RATE CALCULATION: 2017 Tax Levy: 28,455,242 Divided by 2017 Net Valuation Taxable: 1,368,550,700 Equals 2017 Tax Rate: (rate gets rounded up) 2018 REASSESSMENT 2018 NET VALUATION TAXABLE (Preliminary Tax list) IF THE TAX LEVY WAS STAGNANT FROM 2017 TO 2018: 2017 Tax Levy: 28,455,242 Divided by 2018 Preliminary Net Valuation Taxable: 1,643,020,400 Equals Tax Rate would be: *THIS IS A DISPLAY OF THE INVERSE RELATIONSHIP BETWEEN THE TAX LEVY AND THE TAX RATE. IT IS NOT THE ACTUAL 2018 RATE NOR AN ESTIMATION OF THE 2018 TAX RATE. THE ACTUAL TAX RATE WILL BE DETERMINED BY THE FINAL 2018 TAX LEVY AND THE 2018 FINAL NET VALUATION TAXABLE.

3 AS AN EXAMPLE IF THE TAX LEVY WAS STAGNANT FROM 2017 TO 2018: 2017 Tax Levy: 28,455,242 Divided by 2018 Preliminary Net Valuation Taxable: 1,643,020,400 Equals Tax Rate would be: Rick s House at 999 EIGHTH AVENUE ASSESSMENT INCREASE OF 100,000!!! 2017 ASSESSMENT: 500, ASSESSMENT: 600, ASSESSMENT: 500, TAX RATE: TAXES: $10, ASSESSMENT: 600,000 *2018 TAX RATE: *2018 TAXES: $10,392 RICK s TAXES WILL NOT INCREASE 20% BECAUSE HIS ASSESSMENT WENT UP BY 20%! *THIS IS A DISPLAY OF THE INVERSE RELATIONSHIP BETWEEN THE TAX LEVY AND THE TAX RATE. IT IS NOT THE ACTUAL 2018 RATE NOR AN ESTIMATION OF THE 2018 TAX RATE. THE ACTUAL TAX RATE WILL BE DETERMINED BY THE FINAL 2018 TAX LEVY AND THE 2018 FINAL NET VALUATION TAXABLE.

4 Erick Aguiar, CTA Assessor City of Asbury Park One Municipal Plaza Asbury Park, NJ (732) November 6 th, 2017 Dear Property Owner: In late November you will be receiving your 2018 Assessment Postcard in the mail from the Monmouth County Tax Board. The City s real estate market continues to be exceptionally strong with property value appreciation easily outpacing all surrounding communities. We wanted to take this opportunity to provide some background on what is occurring City-wide with property valuations, assessments and the City s 2018 tax rate. Over the last two years, the average residential property valuation has increased by 25%; and the average commercial property has increased 35%. For tax year 2018, the net taxable valuation of the City will be about 20% higher than it was in This does not mean your taxes will go up 20%. It means the value of your property has increased. The valuation of all the properties within the City and the tax rate are directly proportional. By and large, if the valuation increases, the tax rate decreases. Similar to the tax rate change over the past two years, the 2018 tax rate will be lower than the 2017 tax rate because the net valuation of the City is increasing. If your assessment has increased less than the baseline (less than 20%), you will pay a lesser proportionate share of the City s tax levy in Due to the 2018 reassessment, roughly 64% of the City s properties will be responsible for a lesser apportionment of the levy next year. The attached FAQ gives better insight into the assessment function and will provide information on how to file an assessment appeal should you feel your 2018 assessment does not represent the current market value. Please await the mailing of your 2018 assessment postcard as the assessments are not yet certified by the County Tax Board. There will be a public meeting on Wednesday 11/29/2017 at 6PM in Council Chambers where I will answer any questions you may have about the reassessment. You are encouraged to attend. Regards, Erick Aguiar, CTA Assessor City of Asbury Park

5 Frequently Asked Questions Concerning the 2018 Property Reassessment and Impact on Property Taxes 1. If my assessment goes up, does that mean I will pay even MORE taxes? Not necessarily. The assessment function does not create revenue for the municipality. The Assessment function is only a distribution mechanism of the separately determined tax levy. In strict adherence with the NJ Constitution, this apportionment is to be based on the value of property. In the 2018 reassessment, the net valuation of taxable property in the city will increase by roughly 20%. Any property whose assessment is changing less than 20% will pay a lesser proportionate share of the tax levy. Conversely, any property whose assessment is increasing greater than 20% will pay a greater proportionate share of the tax levy. Due to the 2018 reassessment and other year over year assessment changes, 64% of properties will pay a lesser proportionate share of the tax levy in My assessment DOES reflect the fair market value, but my taxes are too high. Why? Please be mindful that the assessment function is focused on the uniformity and accuracy of the assessments NOT the resulting tax responsibility. When the assessments are set to the same standard (market value) in a uniform way, the tax levy will be distributed fairly municipal and countywide in accordance with the NJ Constitution. The Tax Assessor does not have control of the tax levy. County, municipal and school budget costs determine the amount of property tax to be collected. A municipality s general tax rate is calculated by dividing the total dollar amount it needs to meet local budget expenses by the net valuation of all its taxable property. An individual s property taxes are directly correlated to that property s proportionate share ownership of the municipality. To put it simply, if a property was worth 5% of the municipality, it would be assigned to pay 5% of the tax levy. Below is the breakdown of the Certified Tax Levy for 2017 in Asbury Park: Tax Levy Amount Percent Contact County Budget $3,706, % District School Budget $7,103, % Local Municipal Purposes $16,882, % Municipal Library Fund $470, % County Health Budget $74, % County Open Space Fund $217, % Overage for Rate Round $10, Total $28,465, % 3. How is the Tax Rate Calculated? In 2017, the tax rate was calculated by dividing the amount to be raised (28,465,854.56) by the net valuation taxable of the Municipality (1,368,550,700). 28,465, / 1,368,550,700 = 2.080% As a result, all properties were taxed at 2.080% of their individual assessments in Will the 2018 tax rate be the same as 2017? No. The 2018 tax rate will be much lower than the 2017 rate because the net valuation of taxable property is increasing by about 20%. We will not know the actual 2018 tax rate until budgets are finalized late The calculation for 2018 will follow the same procedure as 2017 did above. Since the net valuation will be about 20% higher, the tax rate will be lower. 5. My house was recently inspected by your office. What was the purpose of that inspection? In order to annually reassess, the Division of Taxation requires that an inspection is done once every five years on every property. The purpose of the inspections are to gather proper information on each property in the city so that the appraisal process (and resulting tax distribution) is fair and uniform.

6 Please note: The inspectors are not appraisers and are not appraising your home. The inspectors are simply data collectors and return the data to this office where the reassessment process is done. 6. What if the inspector didn t gain access to the interior of my house during that inspection? If the inspector does not gain access to the interior of your property, they will estimate the interior room counts and conditions. For residential property owners, you can contact the assessor s office and request a copy of your Property Record Card (PRC) to be sure that all of the physical characteristics listed on the record are accurate. If you find any issues on the PRC, you should consult with the assessor immediately to determine what remedies are available. If you own a condo, you can contact the assessor and ask for the sales and assessments in your condo association. Remember in the future to make sure the inspector has proper identification before allowing them in your house. If there is any question, please do not hesitate to call this office to verify. 7. How is the appraisal process done? After all inspection data is returned to this office, the assessor reviews all recent sales data and synchronizes the mass appraisal modeling in each market and submarket to target current market value. When the assessments are set to the same standard (market value) in a uniform way, the tax levy will be distributed fairly. Remember, the assessment function is focused on the uniformity and accuracy of the assessments NOT the resulting tax responsibility. 8. What do I do if I feel my 2018 assessment DOES NOT reflect the fair market value? Please be on the lookout for the postcard with your 2018 assessment. This postcard is mailed in late November of If you believe the 2018 assessed value does not reflect the true market value of your property, you should contact the Assessor's office immediately to confirm that the physical characteristics on your Property Record Card (PRC) are accurate. After speaking to the assessor, if you still feel the assessment does not equal the fair market value of the property, you should file an appeal with the Monmouth County Tax Board before January 15th, Here is a link to the appeal site- Please note that the site will not be open until the 2018 assessment postcards are sent out. If you miss the January 15th deadline, you will not be able to file an appeal at the County until the following year (2019). If you choose to file an appeal on your 2018 assessment, you will be required to provide evidence to demonstrate your position. Evidence is typically recent sales of comparable properties. You can research sales data at the Monmouth County Open Public Records site- Select Deed/Sr1a List under step 1 then you can modify your search according to the other fields. 9. Why are we annually reassessing now and how was it done in the past? Monmouth County is engaged in the Assessment Demonstration Program (ADP). The overarching intent of the Assessment Demonstration Program (ADP) is to institute a revised assessment function that provides systemic cost savings and better public service. At the core of the program is the ability to establish and annually maintain individual property assessments at 100% of current market value. This is accomplished by the County and the towns working collaboratively to employ enhanced education, advanced appraisal techniques and modern technology. The fundamental goal of the ADP is to ensure that each taxpayer pays their fair share of the annual tax levy (no more or no less). In the past (and currently outside of Monmouth and Somerset Counties), the assessment function may not have been as uniform and accurate as what current technology allows for. Due to technological and administrative constraints, assessments were set during a revaluation year and remained stagnant despite obvious changes in the markets and sub markets. Annually, assessment to sale price ratios were studied to establish a "common level of assessment ratio. One of the many problems with the old system is that it was based off an assumption that every property within a municipal boundary appreciates / depreciates at the same rate. Obviously, this is not true. Every neighborhood and property class react differently to the market environment. It is necessary to study each of the markets and submarkets individually (annually) to be sure the total tax levy is distributed in accordance with recent and reliable market data. The only appropriate fix for this is to conduct reassessments annually. The old assessment model enabled an environment where assessments were often significantly removed from the current market value of properties. That type environment is ripe for taxes to be inappropriately distributed. Monmouth County has reformed the distribution component of property taxation to address this obvious shortfall.

7 Asbury Park 2018 Reassessment Report

8 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

9 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

10 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

11 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

12 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%

13 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%

14 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.