Prose and Comments: A return to market value assessment
In recent years we’ve heard a cacophony of misinformation, disinformation, and misconceptions on topics including public water and wastewater. Once again, we are being treated to another round, this time on an alleged 30% increase in property tax with a return to property assessments based on market value.
While the public water and wastewater outcry primarily affected Islanders in the Center, the most recent one on market value assessment goes to the heart of Town government’s main revenue engine: property taxation.
And so: “Know what you don’t know; fix ignorance with education,” and get your most recent property tax bill and read along with it in hand.
On the upper right side find the lines that are labeled “Full Market Value” as of 07/01/23, “Uniform Percentage of Value” as of 07/01/23, and “Total Assessment” as of 07/01/23. Market value and total assessment figures will be different for us all, but the Uniform Percentage of Value at 68 applies to Shelter Island. When the Uniform Percentage of Value is assigned by the NYS Office of Real Property Services, it is referred to as the Equalization Rate. The Equalization Rate is a NYS-calculated figure that compares the total assessed value of all properties in Shelter Island to their estimated market value and it is used to ensure fairness in tax distribution across different areas within the state.
If you divide your Total Assessment figure by the Uniform Percentage of Value decimal equivalent (.68) you’ll discover that it equals your Full Market Value figure. By the way, in a market value situation, that 68% would be 100 and the decimal equivalent divisor would be 1.00, making Full Market Value and Total Assessment values equal.
For many years Shelter Island maintained market valuation as the basis for assessing property, but during the pandemic and afterwards, a variety of issues understandably got in the way of that effort. As market values continued to change, local assessed values remained stagnant and without revision. Thus, your current tax bill is based on an assessed value that does not reflect the true value of your property. But that has no impact on your tax bill because it is the size of the Town budget that drives that amount. Assessed values are merely a means to fairly apportion the Town budget to each property on the Island.
So why the push to return to Market Valuation as the basis for property assessment and taxation? Market value assessment is regarded as the best approach for mass appraisal. Mass appraisal is the technique to evaluate thousands of properties (there are some 3,000 on Shelter Island) to determine if property assessments need adjustment. This is the statistical method (using linear regression) to keep assessments in Shelter Island current and uniform because there is no practical way to complete individual property appraisals on every property annually. In the context of fair property tax distribution Market Valuation leads the way for reasons such as:
1. Alignment with Economic Reality
Reflects True Value: Market value assessment estimates the price a property would sell for in an open and competitive market. This ensures that the assessed value is closely aligned with the actual economic value of the property, making it a fair basis for taxation.
Dynamic Adjustments: Market values fluctuate based on local supply, demand, and economic conditions. Regular reassessments ensure that property taxes reflect current market conditions, preventing outdated valuations that could lead to inequities and unfairness.
2. Equity and Fairness
Uniform Standard: Using market value as the basis for assessment ensures that all properties are evaluated using the same standard. This reduces the risk of arbitrary or biased valuations, promoting fairness in tax distribution.
Proportional Taxation: Property taxes based on market value ensure that owners of more valuable properties pay proportionally higher taxes, which aligns with the principle of ability-to-pay.
3. Transparency and Objectivity
Data-Driven Approach: Market value assessments rely on verifiable data, such as recent sales of comparable properties, making the process more transparent and less susceptible to manipulation.
Public Trust: When assessments are based on observable market data, taxpayers are more likely to trust the system, reducing disputes and appeals.
4. Efficiency in Mass Appraisal
Scalability: Market value assessment methods, such as automated valuation models and regression analysis, are well-suited for mass appraisal. Software for this purpose is provided by NY State to assessing jurisdictions such as Shelter Island. These techniques can efficiently evaluate large numbers of properties while maintaining consistency.
Cost-Effectiveness: By leveraging technology and standardized methods, market value assessments reduce the administrative costs associated with individualized appraisals.
5. Legal and Policy Compliance
Widely Accepted Standard: Market value is the most accepted standard for property assessment in many jurisdictions, ensuring compliance with legal and regulatory frameworks. Until needing to abandon the market value approach due to pandemic constraints, Shelter Island was considered one of the best and fairest assessing units in NY State.
Avoids Discrimination: A market-based approach minimizes the risk of discriminatory practices, as it relies on objective criteria rather than subjective judgments.
6. Adaptability to Market Changes
Responsive to Shocks: In times of economic boom or recession, market value assessments quickly reflect changes in property values, ensuring that tax revenues remain stable and equitable.
Regular Updates: Periodic reassessments (Shelter Island conducted them annually) ensure that the tax base remains aligned with current market conditions, preventing long-term distortions.
While market value assessment is the preferred approach, it is not without challenges. Accurate assessments depend on reliable and up-to-date market data. This is driven by sales data provided by Suffolk County. Assessor’s Office data must also be kept current by observation of available information and citizen interaction. Implementing and maintaining a robust market value assessment system requires significant expertise and resources. This is precisely why NY State assessors must be trained and certified (“licensed”) by written examinations just as real estate appraisers.
Market value assessment is the best approach for mass appraisal in property tax distribution because it ensures fairness, transparency, and alignment with economic realities. By using a standardized, data-driven method, Shelter Island can achieve equitable tax distribution while maintaining public trust. However, successful implementation requires addressing challenges related to data quality, market volatility, and administrative capacity.
Never forget that Town government and the Assessor’s Office work for you, the citizen property owner. Once Market Valuation is in place you are free to engage with an assessor about the specifics of your property. Often simple corrections result in a more appropriate value. And even if that approach is not satisfactory, filing of a grievance will result in a hearing before the local Board of Review and possibly a finding in your favor.
Among other roles in local government, Mr. Cronin served as a NYS-certified and twice-elected property assessor on Shelter Island. His term concluded on December 31, 2007.
