Analyzing property tax data is often challenging given
the workings of the property tax system, the availability of data,
and how they can be used to reflect a point of view. The following
notes are intended to help clarify these issues.
The data uses
“assessed” property value to calculate average property
taxes. Assessed value is the amount that the property is valued
for tax assessment and taxation purposes. It does not usually reflect
“market” or “equalized” value; a calculation
intended to reflect market value of the land and improvements of
a parcel. Assessed value reflects what property owner pay in taxes.
Users that want to develop what average taxes would be “if
parcels were assessed at market value” can perform those calculations
by dividing the property value by the “assessment ratio”
– found in Column H, “State Equalization Table Average
Ratio (Decimal Form)” of the Property Tax Table Files”
The
average residential property tax calculation is a useful tool to compare taxes between municipalities. It is less useful in comparing
taxes from one year to the next in a single municipality.
Since the average property value may increase due to new construction,
the resulting increase in the average residential value in a municipality
does not mean taxes went up on the “average” homeowner – whose assessment
did not likely change from one year to the next.
The
statewide average for municipal,
school, county and total tax rates are calculated by taking the
total levy (L) for that category and dividing it by the total valuation
taxable (V) divided by 100 for the statewide rate for the category (L/(V/100). This more accurately reflects what
taxpayers pay for these services on a statewide basis.
The
average residential property value is calculated
using the total value of residential properties and farm homesteads
divided by the number of residential properties and farm homesteads.
This is also done on a statewide basis arriving at a weighted average
for the statewide average residential value.
A
change in taxes driven by increased
average value does not mean that the actual amount of taxes paid
by the “average” homeowner changed. In this case, analyzing
changes in the local tax rate is a better indicator of increases
or decreases in taxes between years. Changes in tax rate will
more likely affect the taxes on an individual property rather than
an increase in average taxes in a municipality.
A
complete analysis of this data will also consider changes in appropriations
and the tax levy of the taxing district. This figure more
accurately reflects the spending side of the tax equation and reflects
on the local management and policy challenges facing elected officials.
It
is also important to recognize that on a statewide basis, the percentage
increase in property values often exceeds the percentage increase
in tax levies.This has the effect of reducing the true increase (based on spending)
in statewide average property tax. As this reflects the aggregate,
each municipality will vary from the average, given its own changes
in value and tax levy.
Finally,
Property Taxes worksheets indicates (Column labeled “R”) those municipalities
that experienced a property revaluation (RV) or reassessment (RA).
In these cases comparing the tax rate and average value between
years will be skewed by the affect of the assessment action.
In these cases, taxes on an average residential property are the
next best indicator of analyzing change from the previous year.
