The
Property Tax
is made up of two
basic components:
1) Budget needs
(Taxes)
2) Estimates of
Market Value
(Assessed Values)
Let’s look at
budget needs
(taxes) first...
Budget Needs
What do we use
tax dollars for ?
Taxes are used for :
•Schools
Taxes are used for :
•Police Services
Taxes are used for :
•Parks &
Recreation
Taxes are used for :
•Fire & Rescue
Taxes are used for :
•Library
Taxes are used for :
•Streets
Taxes are used for:
Administrative
Services
Budget Needs
We see that each
Department of
Government has
a budget...
Department
• Library
• Police
• Fire & Rescue
• Parks & Recreation
• Public Works
• Schools, Etc
Total Budget =
Budget
$$$$
$$$$$
$$$$$
$$$$
$$$$$$$
$$$$$$$
$$$$$$$$
The total budget
is called the
“tax levy”
The tax
levy:
“The total budget
dollars needed to run
municipal services”
Up until now
we have talked
about budget
needs (taxes)...
Now let’s talk
about how these
budget needs
are assigned...
...to each
residence and
business in
our community...
...so everyone
pays their
“fair share”
of taxes.
It’s done by
relating to the
Assessed Value.
Let’s see
how that’s
done...
The guiding
principle behind
the property tax:
“The value of
property owned
is an indication
of one’s ability
to pay taxes”.
State Laws have been
written to reflect this
idea and to guide the
assessing
process.
By State Law then…
each home and
every business must
be assessed based on
an estimate of value.
Assessors use three
“approaches” for
estimating value for
real property.
• Cost
• Income
• Sales Comparison
Cost
Value based on
actual building costs
depreciated for
various factors.
Income
Value based on
income and expenses
of rental property.
Sales Comparison
Value based on
sales of property.
We will look at the
process for estimating
market value based on
sales of
properties…
“Sales Comparison”.
“Market Value” :
An estimate of what a
home or business would
sell for under normal
market conditions.
Assessors call
these estimates of
market value
“assessed values”
How does the
Assessor’s Office
estimate Market
Value?
The Assessor must
consider every factor
that adds to or
subtracts from
property value.
What makes one
house sell for
more, or less,
than another
house?
House Size
• Small
• Medium
• Large
Location
• Close to Schools
• Pleasant
Neighborhoods
Age of House
• Older
houses
• Newer
Houses
Other things that affect value:
• Construction Quality
• Number of Bedrooms
• Number of Bathrooms
• Family Room
• Decks/Patios/Gazebos
• Recreation Room, etc
Assessors’ must:
•Go to each home and
business to record all
attributes which
contribute
to value.
Assessors’ must:
•Maintain these
records annually to
include all changes
that affect value.
Assessors’ must:
•Determine all
neighborhood
influences on
property value.
Assessors’ must:
•Determine any
special influences on
property value
(such as contamination).
Assessors’ must:
•Review all sales of
property on an
ongoing
basis.
Assessors’ must:
•Enter all data in a
record maintenance
system.
Assessors’ must:
•Statistically analyze all
factors contributing to
value and adjust to
reflect current sales of
property.
Assessors’ must:
•Generate estimates
of value on each
property annually.
Assessed Values are
generated by comparing
each house to similar
properties that have
recently sold, and
adjusting for differences.
Let’s look at a
sales grid for a
simplified example of
how that’s done!
O u r H o u se
3 B e d ro o m
S a le H o u s e
1
3 B e d ro o m
S a le H o u s e
2
4 B e d ro o m
S a le H o u s e
3
2 B e d ro o m
S a le H o u s e
4
3 B e d ro o m
2 B a th
1 B a th
3 B a th
2 B a th
1 B a th
F ire p la c e
F ire p la c e
2 F ire p la c e s
N o F ire p la c e
F ire p la c e
G arag e
G arag e
G arag e
N o G arag e
G arag e
V a lu e ? ? ?
$ 1 0 0 ,0 0 0
$ 1 2 0 ,0 0 0
$ 9 0 ,0 0 0
$ 9 5 ,0 0 0
Let’s assume the
houses in our example
are the same age, size,
physical condition,
quality and in the
same neighborhood.
Our House
3 Bedroom
Sale
House #1
3 Bedroom
Sale
House #2
4 Bedroom
Sale
Sale
House #3
House #4
2 Bedroom 3 Bedroom
2 Bath
1 Bath
3 Bath
2 Bath
Fireplace
Fireplace
2 Fireplaces No Fireplace Fireplace
Garage
Garage
Garage
No Garage Garage
Value???
$100,000
$120,000
$90,000
1 Bath
$95,000
Simplified Sample data:
Bedroom = $3,000
Fireplace = $1500
Bath = $2,000
Garage = $6,000
Our House
3 Bedroom
Sale
House 1
3 Bedroom
Sale
House 2
4 Bedroom
Sale
House 3
2 Bedroom
Sale
House 4
3 Bedroom
2 Bath
2 Bath
3 Bath
2 Bath
1 Bath
This is a
sales
grid
Value???
showing
Bedroom = $3,000
Bath
= $2,000
“Our
House”...
Fireplace = $1500
Garage = $6,000
Fireplace
Fireplace
2 Fireplaces -------------- Fireplace
Garage
Garage
Garage
------------- Garage
$100,000
$120,000
90,000
$95,000
Our House
3 Bedroom
Sale
House 1
3 Bedroom
Sale
House 2
4 Bedroom
Sale
House 3
2 Bedroom
Sale
House 4
3 Bedroom
…and
sale information
Value???
about
similar
houses...
Bedroom = $3,000
Bath = $2,000
2 Bath
2 Bath
3 Bath
Fireplace
Fireplace
2 Fireplaces -------------- Fireplace
Garage
Garage
Garage
------------- Garage
$100,000
$120,000
90,000
Fireplace = $1500
2 Bath
1 Bath
$95,000
Garage = $6,000
Our House
3 Bedroom
Sale
House 1
3 Bedroom
Sale
House 2
4 Bedroom
Sale
House 3
2 Bedroom
Sale
House 4
3 Bedroom
…along with
examples of factors
Value??? that affect value.
2 Bath
2 Bath
3 Bath
Fireplace
Fireplace
2 Fireplaces -------------- Fireplace
Garage
Garage
Garage
------------- Garage
$100,000
$120,000
90,000
Bedroom = $3,000
Fireplace = $1500
2 Bath
1 Bath
$95,000
Bath = $2,000
Garage = $6,000
The sale properties
are adjusted for
differences to match
“Our House”.
When we are
finished we should
have an estimate of
what “Our House”
would sell for...
…giving us an
example of an
assessed value.
Let’s adjust the
first sale for any
differences from
“Our House”...
Our House Sale House Sale House Sale House Sale House
1
2
3
4
3 Bedroom 3 Bedroom 4 Bedroom 2 Bedroom 3 Bedroom
2 Bath
1 Bath
Fireplace
Fireplace
Garage
Garage
Value???
$100,000
The only
difference is
in the number
of baths...
3 Bath
2 Bath
1 Bath
2 Fireplaces -------------- Fireplace
Garage
------------- Garage
$120,000
$90,000
$95,000
Bedroom = $3,000
Bath = $2,000
Fireplace = $1500
Garage = $6,000
Our House Sale House Sale House Sale House Sale House
1
2
3
4
3 Bedroom 3 Bedroom 4 Bedroom 2 Bedroom 3 Bedroom
2 Bath
Fireplace
1 Bath
+$2000
Fireplace
Garage
Garage
Value???
$100,000
So, we
adjust by
adding $2,000.
3 Bath
2 Bath
1 Bath
2 Fireplaces -------------- Fireplace
Garage
------------- Garage
$120,000
$90,000
$95,000
Bedroom = $3,000
Bath = $2,000
Fireplace = $1500
Garage = $6,000
Our House Sale House Sale House Sale House Sale House
1
2
3
4
3 Bedroom 3 Bedroom 4 Bedroom 2 Bedroom 3 Bedroom
2 Bath
Giving an
adjusted value
of $102,000.
Fireplace
1 Bath
+$2000
Fireplace
3 Bath
Garage
Garage
Value???
$100,000
$120,000
$102,000
2 Bath
1 Bath
2 Fireplaces -------------- Fireplace
Garage
------------- Garage
$90,000
$95,000
Bedroom = $3,000
Bath = $2,000
Fireplace = $1500
Garage = $6,000
Our House Sale House Sale House Sale House Sale House
1
2
3
4
3 Bedroom 3 Bedroom 4 Bedroom 2 Bedroom 3 Bedroom
2 Bath
1 Bath
Fireplace
Fireplace
Garage
Garage
Value???
$100,000
$102,000
Sale
2
3 Bath
2 Bath
1 Bath
needs
2 Fireplaces -------------Fireplace
Garage
------------Garage
several
$120,000 adjustments
$90,000
$95,000
Bedroom = $3,000
Bath = $2,000
Fireplace = $1500
Garage = $6,000
Our House Sale House Sale House Sale House Sale House
1
2
3
4
3 Bedroom 3 Bedroom 4 Bedroom 2 Bedroom 3 Bedroom
-$3,000
2 Bath
2 Bath
3 Bath
-$2,000
Fireplace
Fireplace
2 Fireplaces
Garage
Garage
-$1500
Garage
Value???
$100,000
$102,000
$120,000
$113,500
...for1 an
Bath
adjusted
-------------Fireplace
valueGarage
of
------------$113,500
$90,000
$95,000
2 Bath
Bedroom = $3,000
Bath = $2,000
Fireplace = $1500
Garage = $6,000
Our House Sale House Sale House
1
2
3 Bedroom 3 Bedroom 4 Bedroom
-$3,000
2 Bath
2 Bath
3 Bath
-$2,000
Fireplace
Fireplace
2 Fireplaces
-$1,500
Garage
Value???
Sale House Sale House
3
4
2 Bedroom 3 Bedroom
2 Bath
Sale 3
No Fireplace
needs several
Garage
Garage
No Garage
adjustments...
$100,000
$100,000
$120,000
$113,500
$90,000
1 Bath
Fireplace
Garage
$95,000
Bedroom = $3,000
Bath = $2,000
Fireplace = $1500
Garage = $6,000
Our House Sale House Sale House
1
2
3 Bedroom 3 Bedroom 4 Bedroom
-$3,000
2 Bath
2 Bath
3 Bath
-$2,000
Fireplace
Fireplace
2 Fireplaces
-$1,500
Garage
Value???
Sale House Sale House
3
4
2 Bedroom 3 Bedroom
…and Sale 4
No Fireplace
needs one
Garage
Garage
No Garage
adjustment...
1 Bath
$100,000
$100,000
$95,000
$120,000
$113,500
2 Bath
$90,000
Fireplace
Garage
Bedroom = $3,000
Bath = $2,000
Fireplace = $1500
Garage = $6,000
Go ahead and adjust
sales #3 and #4 on
your work sheet to reflect
the differences between
the sales properties
and “Our House”...
Our House Sale House Sale House Sale House Sale House
1
2
3
4
3 Bedroom 3 Bedroom 4 Bedroom 2 Bedroom 3 Bedroom
-$3,000
2 Bath
1 Bath
+$2,000
Fireplace
Garage
Value???
Fireplace
3 Bath
-$2,000
+$3,000
2 Bath
1 Bath
+$2,000
2 Fireplaces No Fireplace Fireplace
-$1,500
Garage
+$1,500
Garage
No Garage Garage
+$3,000
$100,000
$120,000 $90,000
$95,000
$102,000
$113,500
$97,500
$97,000
Bedroom = $3,000
Bath = $2,000
Fireplace = $1500
Garage = $6,000
Our House Sale House Sale House Sale House Sale House
1
2
3
4
3 Bedroom 3 Bedroom 4 Bedroom 2 Bedroom 3 Bedroom
-$3,000
2 Bath
1 Bath
+$2,000
Fireplace
Garage
Value???
Fireplace
3 Bath
-$2,000
+$3,000
2 Bath
1 Bath
+$2,000
2 Fireplaces No Fireplace Fireplace
-$1,500
Garage
+$1,500
Garage
No Garage Garage
+$3,000
$100,000
$120,000 $90,000
$95,000
$102,000
$113,500
$97,500
$97,000
Our House Sale House Sale House Sale House Sale House
1
2
3
4
3 Bedroom 3 Bedroom 4 Bedroom 2 Bedroom 3 Bedroom
-$3,000
2 Bath
1 Bath
+$2,000
Fireplace
Garage
Value???
Fireplace
3 Bath
-$2,000
+$3,000
2 Bath
1 Bath
+$2,000
2 Fireplaces No Fireplace Fireplace
-$1,500
Garage
+$1,500
Garage
No Garage Garage
+$3,000
$100,000
$120,000 $90,000
$95,000
$102,000
$113,500
$97,500
$97,000
Our House Sale House Sale House Sale House Sale House
1
2
3
4
3 Bedroom 3 Bedroom 4 Bedroom 2 Bedroom 3 Bedroom
-$3,000
2 Bath
1 Bath
+$2,000
Fireplace
Garage
Value???
Fireplace
3 Bath
-$2,000
+$3,000
2 Bath
1 Bath
+$2,000
2 Fireplaces No Fireplace Fireplace
-$1,500
Garage
+$1,500
Garage
No Garage Garage
+$3,000
$100,000
$120,000 $90,000
$95,000
$102,000
$113,500
$97,500
$97,000
Our House Sale House Sale House Sale House Sale House
1
2
3
4
3 Bedroom 3 Bedroom 4 Bedroom 2 Bedroom 3 Bedroom
-$3,000
2 Bath
1 Bath
+$2,000
Fireplace
Garage
Value???
Fireplace
3 Bath
-$2,000
+$3,000
2 Bath
1 Bath
+$2,000
2 Fireplaces No Fireplace Fireplace
-$1,500
Garage
+$1,500
Garage
No Garage Garage
+$3,000
$100,000
$120,000 $90,000
$95,000
$102,000
$113,500
$97,500
$97,000
Now that you have
valued “Our
House”...
…go ahead and do
all the parcels in
this municipality...
…remembering to
account for all the
other variable
factors...
...that affect an
estimate of value:
age, size, physical
condition, quality,
neighborhood, etc.
It’s a massive and
exacting job
requiring much
diligence and
attention to detail.
Let’s look next at
the “fairness” issue:
Equitable Values
“The fair
distribution
of the tax levy...
... characterized by
applying valuation
techniques in an
even-handed
manner.”
In other words,
no single taxpayer
or group of
taxpayers...
...is to be assessed
in such a manner
that an unjust tax
burden would
result.
The goal: No one is
to pay more, or less,
than their fair share
of the tax levy.
As economic conditions
change, values must be
adjusted to prevent
inequitable assessments.
Example #1
Demand for one house
style over another may
change with time, and
with fashion.
Example #2
Demand for one
neighborhood over
another may
change with time.
Much of the
Assessor’s work
goes to accounting
for these constant
changes!
What happens when
a property owner
disagrees with the
assessed value?
Three Steps:
1) Open Book
2) Board of Review
3) Higher Appeals
Open Book:
Informal review of the
assessment roll at the
assessor’s office–meet
with your assessor.
Board of Review:
Formal presentation
of evidence of value
before a board of your
peers.
Higher Appeals:
Appeal in the Court
System or Department
of Revenue, depending
on circumstances.
State law requires
assessments to be
within 10% of market
value once every 5
years.
As we have seen,
market conditions are
constantly changing.
Over time it becomes
necessary to review all
of the properties in a
municipality…
To bring all property
values back into line
with actual market
conditions…
That’s called a
“Revaluation”.
In a revaluation, all
properties are
reviewed, along with
all of the factors
contributing to value.
Assessors attempt to
visit every home and
business to verify
property data.
Changes in property
data are noted and all
properties are
adjusted for varying
market conditions.
The #1 Question:
How will a revaluation
affect my taxes?
We will look at two
scenarios regarding
the affect of
revaluations on taxes:
The year before a revaluation
Taxing Authorities Budget:
$1,000,000
“Newtown” Assessed Value:
$100,000,000
Tax Rate:=
$1,000,000/$100,000,000=.010
Tax on home assessed at $100,000:
$100,000 X .010 = $1,000 Tax
In Revaluation Year
“If Assessed Value doubles but
budget (levy) remains the same”
Taxing Authorities Budget:
$1,000,000
“Newtown Assessed Value:
$200,000,000
In Revaluation Year
( Value doubles but budget remains the same)
Tax Rate:
$1,000,000/$200,000,000 = .005
Home now assessed at $200,000:
$200,000 X .005 = $1,000 Tax
In other words, even if the
assessed value of a house
doubles in a revaluation year,
but the budget remains the
same, the taxes on that house
will remain the same as the
prior year.
In Revaluation Year
“If the Budget increases 10% but
there is no change in assessed value”
Taxing Authorities Budget:
$1,000,000 X 1.10 = $1,100,000
“Newtown Assessed Value:
$100,000,000
In Revaluation Year
( Budget increases 10% but no change in
assessed value)
Tax Rate:
$1,100,000/$100,000,000 = .011
House still valued at $100,000
$100,000 X .011 = $1,100 Taxes
In other words, even if the
assessed value of a house stays
the same in a revaluation year,
but the budget
increases, the taxes on that
house will increase, under
typical circumstances.
We have reviewed the
duties of Assessing
Officers as they
prepare the annual
assessment roll.
We have seen how
State laws and
regulations guide the
assessing process.
We have observed the
#1 goal of the
professional
Assessing Officer:
Using all of our
resources, we
generate assessed
values...
…so everyone
can pay their
fair share of the
budget (taxes)...
…and everyone
can enjoy the
benefits of living
here!
Thank You!