Property Tax in Dutchess County

Town of Pleasant Valley Publishes Incorrect Tax Rate Change — Again

2012-01-29T19:59:00.000-05:00

For the third year in a row, the Town of Pleasant Valley has calculated its tax rate change incorrectly. The Town's 2012 budget makes the absurd claim that the 2012 tax rate is 42.3 percent lower than the 2011 tax rate. If only it were so, I'm sure many taxpayers would be very happy! But of course this figure is not remotely correct. Pleasant Valley's 2012 tax rate is just 2.2 percent lower than its 2011 tax rate, not 42.3 percent lower.

The mistake was made by Pleasant Valley Town Supervisor John McNair — who was also the Town Budget Officer for the 2012 budget. McNair's mistake was to compare tax rates based on assessed value, rather than first converting these rates to true value tax rates before comparing. McNair's method is like saying a car slowed from 100 kilometers per hour to 60 miles per hour, so the speed decrease is 40 percent. No, 100 kilometers per hour is “really” 62 miles per hour, so the speed decrease is only 3.2 percent.

McNair failed to take into account the equalization rate changes that have occurred every year since 2010 in Pleasant Valley. He should have divided each tax rate in the budget by the corresponding equalization rate to obtain the true value tax rates before comparing. McNair has been making this same mistake for at least the last three years, with the following results:

**Pleasant Valley Tax Rate Increase**
Year of Tax Bill	Budget Entry (incorrect)	Correct Value
2010	8.3%	17.3%
2011	9.2%	23.9%
2012	-42.3%	-2.2%

Note that the Pleasant Valley budget grossly understates the tax rate increase every year.

What were town officials thinking?

Too bad McNair wasn't aware of my analysis, right? Just kidding! Not only has McNair been aware of my analysis for almost two years, but at least three other town officials have been long aware of this issue. Upon my polite and constructive inquiries with all these officials, two of them not only rejected my analysis, but also responded with open hostility. I thought maybe I'd accidentally contacted the Town of Unpleasant Valley. The third official understood my analysis right away and agreed completely with it. This third person is no longer a town official.

What can we expect in the future?

The two hostile people remain as town officials today, but McNair has been replaced as Town Supervisor and budget officer by Carl Tomik. Hopefully, Tomik will encourage his colleagues to represent the town in a more professional manner. Regarding the publication of incorrect tax rate changes, I can confidently predict that this will not happen in future years. Not because town officials have seen the light, but because the revaluation that occurred in 2011 means that Pleasant Valley's equalization rate will stay constant at 100 percent in future years. Therefore, even calculating future tax rate changes the way McNair did will give the right answer in future years.

My predictions have come true

The main new information here is that despite my many attempts to engage McNair and other Pleasant Valley officials in reasoned dialog, McNair still continued to employ his flawed methodology for one last year, resulting in the ridiculous claim that the tax rate fell 42.3 percent in 2012. I'd predicted this outcome last March in Town of Pleasant Valley Revaluation Will Challenge Supervisor's Miscalculation, long before the 2012 budget or even the Town's assessed valuation was precisely known. My post predicted that McNair's flawed methodology would result in a claimed tax rate decrease of 44.3 percent, pretty close to McNair's 42.3 percent. My post predicted a correct tax rate decrease of 5.6 percent, reasonably close to the actual 2.2 percent, considering the unknowns at that time.

Detailed Report on Pleasant Valley's Tax History

My post last March included a link to my report on Pleasant Valley's tax rate history for the last 12 years, including projected 2012 data. I've now updated this report to include the final 2012 data. You can find my updated report at Town of Pleasant Valley Property Tax Rate History.

The current post contains data from a budget viewpoint, since that would be the viewpoint of Pleasant Valley's budget officer. However, my full report contains data from a taxpayer viewpoint, because that data represents what taxpayers have actually paid (or will pay next month). The two sets of numbers are slightly different from each other, as explained in my post Tax Rate Viewpoints — Taxpayer Versus Budget. Either set of numbers can be considered valid, depending upon your point of view.

Dutchess County 2012 Tax Rate Is Highest In Decade

2012-01-25T13:33:00.000-05:00

Just over a year ago, I posted Dutchess County 2011 Tax Rate Is Highest In Decade. For 2012, the property tax rate for Dutchess County government has increased an additional 6.2 percent, making it once again the highest tax rate in the last ten years. The rising tax rate means that property taxpayers are paying a larger and larger proportion of their wealth — measured by the market value of their property — in taxes. As I've written many times in this blog, the tax rate is the most meaningful way to compare taxes between different years, and between different jurisdictions.

Since the economic meltdown began in 2008, public officials, particularly County Executive William Steinhaus, have focused on the tax levy and changes in the tax levy, while downplaying the tax rate. That's because they know that in a declining real estate market, changes in the tax levy don't sound as bad as changes in the tax rate. But in my view, it's really the tax rate that describes how burdensome your taxes are — not the tax levy.

Let's look at the data:

Alert readers will notice very small differences between the above table and that in last year's post. That's because the above table comprises data from the taxpayer's viewpoint, while that in last year's post comprises data from the budget viewpoint. The differences between these viewpoints are explained in Tax Rate Viewpoints — Taxpayer Versus Budget. All the data in the above table was derived from the tax rate pamphlets published by the Dutchess County Real Property Tax Service Agency. This data matches that on property tax bills.

We can look at this data more easily in graphical form. Dutchess County's taxable market value has continued to drop for the fourth straight year, since the meltdown began:

The above chart shows that Dutchess County's real estate market has been getting worse for each of the last four years. However, a three-year trend of ever-faster declines has reversed itself in 2012, as we can see clearly in the chart of changes in the market value:

This chart shows that Dutchess County's market value isn't falling as fast as it has been: The 2012 decline is smaller than in any of the three previous years. If this new trend continues, 2013 may not be worse than 2012. In the years since the meltdown began, this is what passes for good news.

As real estate values decline, government officials focus on the tax levy, rather than on the tax rate. That way, the news won't sound as bad as it really is. Steinhaus has been a master at this.

Changes in the tax levy are more clearly seen below:

This year is the first for which New York State's famous two percent tax cap kicks in. This law has been widely touted as helping to reign in escalating property taxes. The law limits local government tax levy increases to 2 percent, with some exceptions. So naturally, Dutchess County's 2012 tax levy increase is only ... um ... 3.2 percent. Surprised? Well, I guess you didn't read the fine print — the part of the law about “some exceptions”. It turns out, according to Steinhaus' 2012 budget message, that the state's property tax cap formula includes exceptions which allow Dutchess County's tax levy to increase up to 3.3 percent. If you think the tax cap law is ineffectual, note that even at 3.2 percent, Dutchess County's 2012 tax levy increase is smaller than in all but three of the last 11 years.

The fact that Dutchess County's tax base has decreased, but its tax levy has not, means that Dutchess County's tax rate is bound to increase. Here it is:

For 2012, Dutchess County's tax rate is $3.25 per thousand dollars of market value, a 6.2 percent increase over last year's $3.06. This tax rate information is useful to property owners who want to understand how high their property taxes are compared with their personal wealth, as measured by the market value of their home. That’s exactly what this true value tax rate measures.

For what it's worth, Dutchess County's 2012 tax rate is not yet at an all-time high. In 2001, the first year for which coherent data is available, the County's tax rate was $3.36.

Changes in the tax rate again show increases every year since the 2008 meltdown:

As we begin 2012, we can compare our situation today with that in 2008, when the economic meltdown hit. Property values in Dutchess County (as measured by taxable market value) have now dropped 17.0 percent since 2008, despite any new construction. At the same time that property owners' wealth has been decreasing, Dutchess County government is billing 17.8 percent more dollars in tax levy than in 2008. These two detrimental effects combine to yield a whopping 42.0 percent increase in the true value tax rate since 2008. So 42 percent more of taxpayers' current wealth goes to Dutchess County than in 2008.

This Bad News is by no means unique to Dutchess County government. On the contrary, the story is qualitatively similar for all property taxes in Dutchess County — for towns, cities, villages, school districts, fire districts, etc.

Buechele and Calamari Elected Fairview Fire Commissioners

2011-12-14T15:30:00.000-05:00

Long-time Fairview advocate Virginia “Ginny” Buechele was elected Fairview Fire Commissioner last evening, as was Dutchess County 9-1-1 Emergency Communications Center shift supervisor Andrew Calamari. Buechele will serve for one year, completing the term of Jack Burghardt, who resigned as commissioner this year. Calamari will serve for five years.

One-Year Commissioner Slot

Out of 130 votes cast for the one-year slot, Buechele, leader of the Fairness for Fairview advocacy organization, received 77 votes. Her opponent, John Anspach, Fairview's Board Chairperson until 2009, received 50 votes. Three additional votes went to write-ins. As in the 2008 and 2009 elections, this contest was a choice between a newcomer aligned with taxpayer advocacy and a veteran aligned with the fire station. Just as in those previous years, voter turnout was substantial, and just as in those previous years, the newcomer won.

Five-Year Commissioner Slot

Calamari's election was officially uncontested. However, just as in 2009's election, which was also officially uncontested, there appeared to be an organized write-in effort — or perhaps more than one. Of the 108 votes for the “uncontested” five-year slot, Calamari received only 70 votes. Former Fairview Fire Commissioner Clinton Kershaw received a respectable 23 write-in votes — more than the total number of votes cast in the truly uncontested 2007 election. It is embarrassing to report that your devoted blogger received 11 write-in votes, putting me in third place. The remaining 4 write-in votes were all for single-vote names. In summary, 35 percent of the votes for this “uncontested” position went to someone other than the winner. I'm not sure what's going on here. Calamari only moved into Fairview this year. Kershaw, though he was a commissioner in the past, has not been active here in recent years. Neither man is well known to many people who have been involved in fire district issues in recent years.

Fairview's Board of Fire Commissioners Has Been Completely Transformed

In the spring of 2008, when I first became involved in Fairview Fire District issues, the Board comprised five veterans, all closely associated with the fire station. Since then, newcomers have gradually replaced veterans on the Board. With the resignation of veteran Jack Burghardt earlier this year, and the defeat of John Anspach in yesterday's election, the transformation of the board from all veterans to all newcomers is complete.

Yet Another Board Change Is Expected

On November 8, Commissioner Joe Petito won election as Hyde Park Town Councilman. This means that he is expected to resign as Commissioner by January, leaving an empty slot on the Board. The four remaining commissioners will then have the opportunity to nominate a replacement until the next election in December, 2012.

Fairview Fire District Proposed 2012 Budget May Deepen Financial Crisis

2011-10-13T22:58:00.000-04:00

The Fairview Fire District Long Range Planning Committee announced at a public workshop meeting on May 26, 2011, that recent budgets have not contributed enough money to the apparatus and equipment reserve fund. The money that should have been set aside was used instead to decrease the fire tax levy. If Fairview continues this strategy, it will be out of money when future obligations come due. Fairview's proposed 2012 budget continues this strategy, therefore threatening to deepen Fairview's long term financial crisis.

How much should be contributed to reserve fund?

Fairview Fire Commissioner Bob Gephard is justifiably proud of the fact that he initiated the first long range planning study of the District in quite some time. One result of this work is the Long Range Committee Capital Equipment and Building Plan posted on the District’s website, which shows specific apparatus and equipment expenditures going out 15 years to 2026. This document shows that if nothing is ever contributed to the apparatus and equipment reserve fund, the District will be in the hole about $4.1 million by 2026. However, the current fund balance is actually about $335,000 more than that document assumed, so the District only needs to come up with $3.8 million. On the other hand, it needs to come up with it by 2025, not 2026, because 2025 is when the last significant expenditure occurs. Dividing the $3.8 million by 14 years gives about $270,000 per year that the District must contribute to the apparatus and equipment reserve fund in order to meet anticipated expenses.

The following chart shows how this would play out on a year-by-year basis.

The red bars show the amount projected to be spent each year, according to the Long Range Committee Capital Equipment and Building Plan. The blue bars show the amount available inthe Fund at the beginning of each year. The green bars show the amountcontributed to the Fund each year – in this case $270,000. Note that in 2026, the blue bar is zero, indicating that the yearly contribution of $270,000 is just enough tocarry the district into 2026, paying for everything with no money left over.

What if less than $270,000 is contributed to the reserve fund?

If only $153,000 is contributed to the apparatus and equipment reserve fund every year beginning in 2012, there will be just enough money to carry the district into 2020. Unfortunately, the District's ladder truck, which will then be 18 years old, is scheduled for replacement that year, and the reserve fund will be nearly $1 million short of the projected $1,716,160 replacement cost. Oops!

How much does proposed 2012 budget contribute to the reserve fund?

Fairview's 2010 budget contributed only about $143,000 to the apparatus and equipment reserve fund, and Fairview's 2011 budget contributed nothing to the reserve fund. Fire Commissioner Bob Gephard stated at the May 26 meeting that he regretted supporting the move to not contribute to the reserve funds, seeing that neglect of the reserve funds is at the heart of Fairview's long term financial crisis.

So on September 26, 2011, after careful consideration, the Fairview Fire Commissioners passed a proposed 2012 budget that contributes nothing to the apparatus and equipment reserve fund. Zero! Zilch! Zip! Scratch! Null! Nix! Nada! Even Fairview's Treasurer, James Passikoff, during his presentation of the proposed budget, noted that adding nothing to the reserve funds, “ ... is probably not a good move.” Under the circumstances, this strikes me as a bit of an understatement. In my view, the failure of the proposed 2012 budget to contribute $270,000 to the apparatus and equipment reserve fund is the single most inexplicable decision. It appears that the Board has learned nothing from the May 26 meeting which described the long-term financial crisis.

Proposed 2012 budget makes high-risk assumptions

Unfortunately, the proposed 2012 budget makes a series of high-risk assumptions on smaller items. Consider the following quotes from Passikoff's budget presentation on September 26 (emphasis added):

“We've got a potential to get another $45,000 from Dutchess Community College when the dorms open next September.”
“We also have a chance of getting a SAEFER grant of $75,000.”
Fairview currently has four firefighters eligible to retire. An early draft 2012 budget contained $100,000 needed for a “buyout” in case one of them retired. Passikoff said, “We ended up taking that out. We're gambling that nobody's going to [retire].”

So let's see: “We've got a potential ... We have a chance ... We're gambling ...” Not my words — Passikoff's. These gambles add up to $220,000 that hopefully will fall in favor of the District. But what's the chance that all of the above optimistic assumptions will hold? As far as I can tell, there isn't any “fat” in other parts of the proposed 2012 budget. So if any assumption fails, the District may need to borrow money at taxpayer expense to make up the difference, essentially costing taxpayers more money in the long run.

Proposed 2012 tax levy is low-ball

The proposed 2012 tax levy continues Fairview's strategy, begun in 2009, of starving the District of resources, as I explained in Big Three Fire Districts Use Divergent Tax Strategies. It's true that the proposed 2012 tax levy is 9.3 percent higher than 2011's (or 10.7 percent higher, if you take the budget viewpoint). The problem is that Fairview's 2011 tax levy is artificially low in part because it contributed nothing to the reserve funds. If the 2011 budget had contributed a nominal $250,000 to reserve funds (lower than the $270,000 that's now needed), then the proposed 2012 tax levy would actually be slightly lower than 2011's. A similar analysis shows that if the 2010 budget had fully contributed to reserve funds, the proposed 2012 tax levy would be lower than 2010's. In other words, it's only because recent budgets have neglected the reserve funds that the 2012 tax levy seems large.

In my view, it is more relevant to note that the proposed 2012 tax levy is 5 percent lower than Fairview's pre-meltdown 2008 tax levy. In other words, one could add $150,000 to Fairview's proposed 2012 tax levy and still not exceed Fairview's 2008 tax levy. From the perspective of 2008, Fairview's proposed 2012 tax levy is low indeed.

Fairview's Financial Crisis May Deepen

Given the difficult times we've lived in since the economic meltdown of 2008, it is understandable that Fairview's 2012 budget cannot in any way reverse or compensate for the mistakes of the past. But one can reasonably expect a budget that does not make Fairview's dire financial situation worse. Fairview's proposed 2012 budget, by underfunding the apparatus and equipment reserve by $270,000, and by making $220,000 of other high-risk assumptions, threatens to do just that.

Big Three Fire Districts Use Divergent Tax Strategies

2011-10-07T20:55:00.000-04:00

Each of the Big Three Fire Districts of Dutchess County — Arlington, LaGrange, and Fairview — seems to have employed its own tax strategy for meeting the continuing fiscal challenges of the 2008 economic meltdown. LaGrange's strategy seems a relatively moderate reflection of the economic meltdown, Arlington appears to be on a spending spree, while Fairview appears to be starving the District of resources. This viewpoint about Fairview is consistent with the fact that Fairview has not been contributing adequately to its reserve funds in recent years, as described here.

The following chart gives one way to see the dramatic differences among the three strategies:

Each bar in the above chart shows the cumulative increase in tax levy, compared with the 2008 tax levy. That is, each bar shows how much more money has been collected between 2008 and that year than would have been collected if every tax levy to that point were equal to the 2008 tax levy. For example, a 2009 bar shows the difference between the 2009 tax levy and the corresponding 2008 tax levy, expressed as a percent of the 2008 tax levy; a 2010 bar shows the difference between the 2009 tax levy and the corresponding 2008 tax levy plus the difference between the 2010 tax levy and the 2008 tax levy, expressed as a percent of the 2008 tax levy. Another way to describe this chart is to say that it illustrates the effect over time of deviating from a strategy of holding the tax levy flat at the 2008 level. Because all changes are normalized relative to each District's 2008 tax levy, this chart makes it possible to directly compare each of the Big Three fire districts with each other.

Strategies of the Big Three — Tax Levy Viewpoint

The LaGrange Fire District has taken the moderate strategy of maintaining its tax levy relatively close to its 2008 level. Thus, its bars are barely visible until 2012. The amount of additional tax money LaGrange will have collected through 2012 is just 2.5 percent of LaGrange's 2008 tax levy, or $120,000. That's the meaning of LaGrange's 2012 bar of 2.5 percent.

The Arlington Fire District has taken the strategy of significantly increasing the tax levy almost every year, so that the cumulative increase in Arlington's fire tax levy from 2008 until 2012 (proposed budget) is nearly 60 percent. Thus, the amount of additional tax money Arlington will have collected through 2012 is 60 percent of Arlington's 2008 tax levy, or about $7.8 million.

Now we come to poor Fairview. And I mean poor. The Fairview Fire District has taken the opposite strategy from Arlington by decreasing its tax levy almost every year. The cumulative decrease in Fairview's fire tax levy from 2008 until 2012 (proposed budget) is 26.5 percent. This means that the amount of tax money Fairview has failed to collect through 2012 is 26.5 percent of Fairview's 2008 tax levy, or about $800,000.

Strategies of the Big Three — Tax Rate Viewpoint

Taxable market values in the big three fire districts have fallen every year since 2008. For the period 2008 to 2012, they will have fallen a total of about 22 percent in LaGrange and Arlington, but only 15 percent in Fairview. Fairview's shallower decline means that Fairview's tax rate has taken less of a hit than LaGrange and Arlington have incurred. Nevertheless, the differing strategies of the Big Three are starkly evident in this chart of cumulative tax rate increase since 2008:

The above chart is easier to explain than the previous one. Each bar is simply the percent increase in the true value tax rate for the year, compared with the corresponding 2008 tax rate (rather than compared with the previous year's tax rate). Because all tax rates are normalized relative to each District's 2008 tax rate, this chart makes it possible to directly compare the strategies of each of the Big Three fire districts.

The true value tax rate is a good measure of how steeply taxpayers' wealth — measured by the market value of their properties — is taxed. Therefore, the above chart shows, for each fire district, how much more steeply taxpayers are being taxed compared with the meltdown year of 2008. Looking at the proposed 2012 budgets, Arlington will tax 52 percent more steeply; LaGrange will tax 31 percent more steeply; poor Fairview will only tax 11.5 percent more steeply.

The Proposed 2012 Budgets Continue These Divergent Strategies

The proposed 2012 budgets for all three fire districts are not isolated decisions, but are continuations of strategies that have been followed by each district since the economic meltdown of 2008. I plan to say more about Fairview's proposed 2012 budget in a subsequent post.

Fairview Fire District Commissioners Approve Flawed Budget Document

2011-10-04T18:11:00.000-04:00

I considered an alternate title for this post: “Fairview Fire District Treasurer Presents Flawed Budget Document” Both titles are accurate. But the commissioners actions indicate they wish to take some of the blame for embarrassing the Fairview Fire District.

On September 26, 2011, Fairview Fire District Treasurer James Passikoff presented a proposed budget document to the board of fire commissioners at a budget workshop meeting, and it was approved unanimously by the commissioners with little comment. This budget document contains so many flaws, it's hard to know where to start. If this is sounding like yet another rant against Passikoff, well, that's really only half true. When it comes to the fiscal aspects of the Fairview Fire District, when it comes to following Fairview's budgetary money, when it comes to understanding the financial facts of Fairview, my view is that Passikoff is the smartest guy in the room. To some extent, that's as it should be. The problem is that the standard for smartness that is acceptable to Fairview's board of fire commissioners is so low that Passikoff can present just about anything, it seems, and the board will uncritically accept it.

Officials Don't Understand Fairview Fire Tax Issues

As I see it, Passikoff has a great depth of knowledge concerning many fire district fiscal issues. Unfortunately, when it comes to property tax issues, Passikoff has repeatedly demonstrated that he does not grasp some essential facts about assessed value and equalization rate. See here. More unfortunately, he has not shown an interest in correcting this weakness. Even more unfortunately, Fairview's board has shown itself indifferent to whether the budget numbers presented to the public — or to themselves — make any sense.

Garbage in Budget Document

To find flaws, one need look no further than the first line of numbers on the first page of the proposed budget document. This line, purporting to show a change in Fairview's “assessed property valuation” is all meaningless garbage. Similar garbage is shown on the “Total Assessed Valuation” line on the next to last page. This garbage is an exact repeat from the budget projections spreadsheet presented at the May 26 public workshop meeting. The reason this is garbage is explained in detail here. I sent essentially the same explanation to Passikoff, Commissioner Bob Gephard, and Commissioner Joe Petito on May 24. I received no effective response from any of them, despite months of making myself annoying. Apparently they are all indifferent at best about understanding, correcting, or even repeating this blunder.

Contradictions in Budget Document

The last two pages of the budget document contain data about 2012 assessed value and 2012 proposed tax rate. Each page contains numbers for both assessed value and tax rate, but the numbers do not agree with each other. So which is right? I wrote here that the first set is right. Silly me! It turns out that both sets are wrong! (For details, see my 9/29/2011 comment appended to that blog post.) It's not just a couple of misprints. All the numbers derived from the wrong numbers are wrong too. That's right, the Treasurer presented, and the commissioners passed, a budget with two contradictory tax rates — and both are wrong.

The treasurer didn't look at this beforehand? None of the commissioners looked at this beforehand? Or is it that the tax rate — the rate at which property owners' wealth is taxed — doesn't really matter? One thing is obvious: The commissioners had no idea what the proposed 2012 tax rate really was when they approved the budget. This is more than a little disturbing. It shows a board that has no hand on the wheel. The board doesn't even know there is a wheel.

Fairview Fire District Proposes 13.2 Percent Tax Rate Increase

2011-09-27T18:21:00.000-04:00

The Fairview Fire District's proposed 2012 budget approved by Fairview's fire commissioners last evening calls for a true value tax rate of $5.79 per thousand dollars of market value, the highest in a decade. Under this budget, property taxpayers will pay Fairview a greater portion of their wealth — as measured by the market value of their property — than at any time since 2001, when the tax rate was $6.07.

Tax Rate Increase

Fairview's proposed tax rate increase is 13.2 percent, the highest tax rate increase in a decade, according to my analysis of the budget document from a taxpayer viewpoint. The tax rate increase from a budget viewpoint is 14.6 percent. The taxpayer viewpoint represents taxpayer experience, while the budget viewpoint represents the fire district government's experience. For more details, see Tax Rate Viewpoints — Taxpayer Versus Budget.

It is a little-known fact that Fairview's true value tax rate has decreased for most years of this decade, as shown in the following chart:

Next year will be only the third year this decade that Fairview's tax rate has increased.

In my view, charts like the one above tell a much richer story about what has happened and what is happening with Fairview's taxes than I can tell in words. If you agree, I strongly encourage you to view all six charts in my report Fairview Fire District Property Tax Data. Detailed numerical data is also included.

Tax Levy

The proposed 2012 tax levy of about $2.9 million is the third highest in Fairview's history, exceeded only by the tax levies in 2008 and 2009. The proposed tax levy increase is 9.3 percent, according to my analysis of the budget document from a taxpayer viewpoint. The tax levy increase from a budget viewpoint is 10.7 percent.

Market Value

Fairview's taxable market value for 2012 taxes has fallen for the forth straight year, reflecting the continuing real estate meltdown. Fairview's taxable market value is now just under a half billion dollars, for the first time since 2006. Fairview's taxable market value has dropped 15.3 percent since its high of $586 million in 2008, including 3.5 percent since last year. The market value decreases in recent years have been a major factor in increasing Fairview's true value tax rates over what they would otherwise have been.

Why did I write this post?

Why did I write this post describing Fairview's proposed tax rate increase and trends from previous years? After all, anyone can just look at the proposed 2012 budget document itself and get the same information, right? ... Right?

If you've tried this at home — or even at yesterday's budget workshop where the document was presented — you know the answer: No, you can't.

Well, you can get a few of the numbers: Fairview's proposed tax levy, and even the tax levy increase percent. But the tax rate increase percent? The document does contain a number for this, but the number is incorrect. What about the tax rate itself? And what about the market value of Fairview? The document contains both correct numbers and incorrect numbers for each of these key parameters! Can you tell which is which? I couldn't, without out of band information.

So now you know why I wrote this post. I'll have more to say about Fairview's proposed 2012 budget document in a subsequent post.

Tax Rate Viewpoints — Taxpayer Versus Budget

2011-09-26T22:57:00.000-04:00

This post explains why tax rates on property tax bills can be somewhat higher than tax rates in municipal budgets. This topic is a little more geeky than my usual post.

Around this time of year, local government officials in taxing municipalities (towns, villages, cities, fire districts, other special districts, and, yes, even Dutchess County government) prepare budgets for the next year. (School districts do the same thing in the spring.) As part of the budget preparation process, they set the tax levy — the amount of money the municipality decides to collect from property taxes in the next year. The tax levy divided by the municipality's taxable market value — which is set on the previous July 1 by the town assessor — is the true value tax rate. The true value tax rate expresses how steeply property owners' wealth — as measured by the market value of their properties — will be taxed by the municipality. As such, it is a key parameter for municipal governments, taxpayers, and all other stakeholders.

When tax bills are sent out in January (or in September for school taxes), it is exactly this tax rate which appears on tax bills, and is used to calculate the amount of taxes for the municipality ... in an ideal world. But we don't live in an ideal world, do we?

The Tax Situation in the Real World

In the real world, its not quite that simple. In the real world, property owners sometimes don't pay their taxes. And then they go bankrupt or disappear, and the money is never collected. In the real world, taxable property can be sold at any time to a tax exempt organization, taking it off the tax rolls. In the real world, property owners sometimes take legal action to reduce their taxable assessed value — sometimes even retroactively. All these situations mean that the municipality doesn't collect as much tax in February as it planned for in the budget process the previous fall. Not only that, but sometimes court decisions require that property tax that had been collected from a property owner in previous years “in error” must be given back.

All these real world situations pose a dilemma for the municipality. There is the prospect that the municipality will not receive the full tax levy in its budget, or that it will need to refund money it hasn't budgeted for. So when there's a shortfall of any of these kinds, who do you think is left in the lurch? Who do you think loses out? Who do you think gets left holding the bag?

If you guessed “the municipality”, you've just became the laughing stock of the party. If you're a taxable property owner in the municipality, the correct answer is, ”You!”

How Taxpayers Get To Pay For Budget Shortfalls

Here's how this works in Dutchess County: In February when property taxes are collected, if a municipality has a shortfall, the government of Dutchess County fronts the money to the municipality to make it whole. That way, municipalities don't need to go through any painful re-budgeting process in the middle of the year just because some taxpayer went bankrupt, or some court ordered a refund.

But Dutchess County government doesn't eat these extra costs. After all, it doesn't have any extra money to throw around either. Instead, it remembers its generosity to the municipality, and demands full payback the next year. Payback does not occur through the municipality's budget process. Instead, the town which collects the municipality's tax adds an increment to the municipality's tax rate of just the right size to pay back Dutchess County. By the way, Dutchess County, in its beneficence, declines to charge interest on the money it fronts. It just eats those costs, which are small potatoes. Well, I guess you get to pay even the interest, through county taxes. See? There's no escaping death and ...

This Is a Reasonable System

One advantage of this system is that the municipality is insulated from all these real world situations. It can do its budgeting just once a year, rather than being whipped around by every court decision or bankrupt taxpayer. But it means that taxpayers pay each year for all the extra costs incurred the previous year. In other words, taxpayers pay at a slightly higher tax rate than what the municipality's budget says it's charging them. This is why there's a taxpayer viewpoint and a budget viewpoint for tax rates.

This Blog Focuses on Taxpayer Viewpoint

In my property tax investigations, I prefer the taxpayer viewpoint, because the taxpayer rates are the rates at which taxpayers actually pay taxes. The taxpayer rates are readily available in tax rate pamphlets published each year by the Dutchess County Real Property Tax Service Agency. But the thing is, the taxpayer rates for 2012 aren't available until, well, January 2012. In the fall of 2011, the only 2012 tax rates available are those in municipal budgets. I take these budget tax rates as the best available estimates of the (yet unknown) 2012 taxpayer tax rates. Such tax rates will tend to underestimate the tax rates on tax bills, but generally not by much.

Tax Rate Increases

When the latest tax rate is only a budget tax rate, and not a taxpayer tax rate, the tax rate increase compared with the previous year will be reasonably close to the (yet unknown) taxpayer-view tax rate increase, but will tend to underestimate it. Budget documents, if they show tax rate increases at all, will ordinarily use only budget tax rates, in keeping with the municipality's viewpoint. The result is that these budget tax rate increases will tend to not reflect taxpayer experience as well as my approach. The budget tax rate increases reflect municipality experience.

Example — Arlington Fire District

An example of what I'm talking about can be seen in the Arlington Fire District's proposed 2012 budget. I state here that this budget proposes a 10.1 percent tax rate increase over 2011. The 10.1 percent is figured by comparing Arlington's proposed budget 2012 tax rate of $4.87 with the 2011 taxpayer-view tax rate of $4.43. (Calculations carried to many significant figures, of course.) On the other hand, if the tax rate increase percent is calculated using only budget tax rates, the budget tax rate increase would be 10.4 percent, as I describe here. Both the 10.1 and the 10.4 figures are reasonable, depending on one's point of view. From the taxpayer's viewpoint, the 10.1 figure is the more appropriate.

School Tax Rate Comparisons — Two Viewpoints

Long-time readers of this blog may wonder how the two tax rate viewpoints discussed above relate to the two tax rate viewpoints discussed in School Tax Rate Comparisons — Two Viewpoints. The short answer is that they're unrelated. The viewpoints in that previous post apply only to school districts, not to other municipalities. Both kinds of tax rates discussed in that previous post are taxpayer viewpoint tax rates in the sense of this post. On the other hand, the taxpayer and budget viewpoints of this post can certainly be applied to school districts, further complicating what starts out as a very simple idea.

Arlington Fire District Treasurer Misleads About Tax Rate Increases

2011-09-25T20:29:00.000-04:00

I recently reported that the Arlington Fire District's 2012 proposed budget calls for a 10.1 percent tax rate increase, and that this fact is not mentioned anywhere in the proposed budget. The tax rate expresses how steeply property owners' wealth — as measured by the market value of their properties — is taxed. The tax rate increase expresses how much steeper the taxation is becoming. The omission of the tax rate increase from Arlington's proposed budget makes it difficult for all stakeholders — taxpayers, residents, and even the fire commissioners themselves — to understand how the tax rate is changing.

It's bad enough that the proposed budget document does not contain any tax rate increases, but this document does something worse: It contains percent increase numbers that many people would assume are tax rate increases, but that are not. Stakeholders reviewing this document will therefore be misled, thinking they know what Arlington's tax rate increases are, when they really don't. In my view, thinking you know — but being wrong — is worse than not knowing at all.

Examining Arlington's 2012 Proposed Budget Document

The last three rows on the last page of Arlington's 2012 proposed budget document are labeled as follows:

Rate per Thousand of Assessed valuation for Tax Bills going out Jan 1 (sic)
Increase Per Thousand Over last year (sic)
Percentage increase of Tax Bills going out Jan 1 (sic)

The first of these rows contains the tax rates for each year from 2008 to 2012 (proposed), as one would expect. The second of these rows contains the amount of tax rate increase over the previous year, as one would expect. So far, so good.

The third row is the point of issue. Since the second row is the amount of tax rate increase, the third row should be the percent of tax rate increase. It is not. To calculate the percent of tax rate increase, one would divide the amount of tax rate increase by the tax rate of the previous year. Instead, the numbers in the third row are the amount of tax rate increase divided by the tax rate of the current year. The numbers in the last row represent nothing of much interest, and they certainly don't represent tax rate increases. When tax rates are rising, as they have been for Arlington in recent years, these numbers understate the actual tax rate increases.

Numbers Deliberately Differ From Tax Rate Increases

The percentage increase numbers in the last row of the proposed budget are not a mistake. They were calculated that way on purpose. I don't know what that purpose is, since these numbers have no use that I know of. But the effect, in my view, is that many stakeholders reading the budget document will be misled.

The author of the budget document is James F. Passikoff, Treasurer of the Arlington Fire District. As a certified public accountant, Passikoff knows the formula for percent increase that we all learned in eighth grade (or maybe fifth grade these days). Passikoff confirmed to me that his percentage increase numbers were calculated by dividing by the tax rate of the current year, not the previous year, and he agreed that these numbers do not represent the tax rate increase percent. I expressed concern that many readers would be misled into thinking that these numbers represent the tax rate increase percent. Passikoff responded that nobody understands these numbers anyway.

I have to admit, based on my three years of property tax investigations in Dutchess County, that I have considerable sympathy with Passikoff's skeptical view of his readers. On the other hand, stakeholders can hardly expect to understand tax matters when they are given numbers which look, feel, and smell like tax rate increase percentages — but aren't. Seemingly unconcerned with this outcome, Passikoff told me he is satisfied with what he did, and does not consider these calculations a mistake. I have no reason to think that Passikoff is intentionally trying to mislead stakeholders. On the other hand, his responses seemed to show an indifference to whether stakeholders might be misled.

Correcting the Record

Using the values for tax levy and assessed value in Arlington's 2012 proposed budget, the 2012 proposed tax rate increase is 10.4 percent — not the 9.4 percent number calculated by Passikoff. Alert readers will notice that the 10.4 percent increase is different from the 10.1 percent increase I claimed in my last blog post. The difference is because the 10.1 percent increase is from the taxpayer's view — my preferred viewpoint — but the 10.4 percent increase is from the municipality's view, an appropriate view for a budget document. Each viewpoint is suitable to its own domain. For more detail on this point, see my forthcoming post Tax Rate Viewpoints — Taxpayer Versus Budget.

Recommendation

I recommend that the Arlington Fire District's 2012 budget document be revised prior to the October 18, 2011, public hearing, to include tax rate increase percentages in place of the misleading numbers in “Percentage increase of Tax Bills going out Jan 1”. That way, stakeholders will not be needlessly misled about Arlington's tax rate increases.

Arlington Fire District Proposes 10.1 Percent Tax Rate Increase

2011-09-23T17:43:00.000-04:00

The Arlington Fire District's 2012 tax rate will be $4.87 per thousand dollars of market (or assessed ) value, up 10.1 percent from 2011, according to Arlington's proposed budget, which was finalized September 19. But you won't find the 10.1 percent tax rate increase mentioned anywhere in Arlington's proposed budget, making it difficult for taxpayers, residents, and even Arlington Fire District officials to understand what's going on. I'll have more to say about this omission in a subsequent post. Meanwhile, this post is just about Arlington's proposed 2012 fire taxes in historical perspective, and in relation to the Fairview Fire District.

The proposed $4.87 tax rate would be the highest for Arlington in this millennium. Arlington's proposed 2012 tax levy of $15.4 million would be the highest in its history. The corresponding tax levy increase of 3.1 percent exceeds New York's “two percent tax cap” by 1.1 percent. (The tax cap doesn't really affect fire districts, as I note here.) Arlington's tax situation can be seen in historical perspective as follows:

Another useful way to see the big picture is by displaying columns of the above table as bar charts, such as this one for tax rate:

The true value tax rates shown in this chart express how steeply a property owner's wealth, as measured by the market value of his property, is taxed. For this reason, the true value tax rate is the most important property tax parameter, in my view. The above chart clearly shows the effect of the 2008 economic meltdown: From 2003 to 2008, Arlington's true value tax rate held fairly steady in the approximate range $3.15 to $3.45. But beginning in 2009, Arlington's tax rate reached a new historical high every year. The 2012 data is in yellow, because it is only proposed. You can find charts of the other five columns of the above table, and more commentary, in my report Arlington Fire District Property Tax Data.

Comparison with Fairview

The Fairview Fire District is famous for having the highest true value fire tax rate in Dutchess County, and one of the highest in New York State. Until recently, Arlington has been a not-very-close second in Dutchess County. Fairview's tax rate has hovered in the neighborhood of $5.00 per thousand dollars of market value for nearly a decade, while Arlington's has been well below $4.00 until as recently as 2010. But with Arlington's double-digit tax rate increases in 2009, 2010, and now 2012 (proposed), it might appear that Arlington will soon pass Fairview for the “honor” of highest fire tax rate in Dutchess County.

But not to worry. Fairview has kept its tax rate artificially low the last few years by failing to contribute to its reserve funds. There's every reason to believe that Fairview's board will now begin to make up for these past lapses by increasing its tax rate well above $5.00 in 2012. In fact, according to a preliminary estimate of Fairview's 2012 tax base, Fairview's 2012 tax rate will rise to $5.25 even in the unlikely event it doesn't increase its tax levy at all. These considerations should keep Fairview safely in first place for the next few years.

It's worth noting here that if it weren't for the fact that nonprofit institutions escape fire taxes, Fairview would have had a lower fire tax rate than Arlington in recent years. My report The Big Three Fire Districts of Dutchess County shows that Arlington's 2010 universalfire tax rate — the tax rate if exempt properties paid fire tax — is30 percent greater than Fairview's. As Arlington has been “catching up”with Fairview's tax rate since then, its cost for services is becoming even less favorable, compared with Fairview. This is particularly surprising because economies of scale should have favored Arlington, which is four times larger than Fairview, both in total market value and number of fire stations.

Why Can't I Find Tax Rate Increase Percents in Arlington's Proposed Budget?

Have you actually looked at Arlington's proposed 2012 budget document? If so, you might have noticed that its last row, labeled “Percentage increase of Tax Bills going out Jan 1”, contains percent values that one might reasonably think are tax rate increase amounts for each year. If one thought that, one would be wrong. There's a whole story behind this surprise, which I plan to tell in a forthcoming post.

Fairview Fire District's Staffing Crisis Continues

2011-09-11T11:30:00.000-04:00

I reported in May that the Fairview Fire District is in crisis. At a public workshop meeting on May 26, Fairview officials revealed that there is a short-term crisis in under-staffing, and a long-term crisis in financing. If these crises cannot be resolved, the level of service in Fairview will need to be reduced. Such a reduction would represent a game-changing dismantling of part of Fairview's mission, resulting in increased risk to life and property, as well as increases in insurance rates for all Fairview property owners. This post is an update on the staffing crisis.

What is the staffing crisis?

The staffing crisis was explained at the May 26 meeting by Fairview Firefighter Mark Bendel as follows: The fire station must be staffed by four career firefighters at all times (24x7) in order to maintain Fairview's level of service in the District. This staffing level requires at least 16 career firefighters to fill all shifts, assuming a “normal” 42 hour work week. Three firefighters have recently left the District (retirement and transfer), and one more is unavailable because of medical leave. To continue Fairview's level of service, the remaining 12 firefighters have been working major amounts of overtime (mostly at straight-time pay) for many months. Although the financial cost of this arrangement to the District is minimal, the stress on firefighters is extreme, and unsustainable. Firefighters are overworked, morale is low, and additional firefighters are said to be considering leaving the District, which would further exacerbate the crisis.

The District cannot simply reduce the fire station staffing from four per shift to three, even temporarily, without major repercussions. Bendel explained that having only three firefighters available to fight a structure fire would dramatically reduce the level of service, resulting in significant increases in risk to both life and property. Not only that, but the reduced level of service would cause all property insurance rates in the fire district to increase considerably. All stakeholders would be substantially affected by a reduced level of service.

Board of Fire Commissioners Eventually Hires Two Firefighters

The staffing crisis was well known to Fairview's board of fire commissioners even before the May 26 meeting. At the April 5 commissioners meeting, firefighters union representatives pleaded with the commissioners to authorize the hiring of three additional firefighters, but the commissioners took no action at that time. However, at the June 7 commissioners meeting, they passed a resolution authorizing the hiring of two firefighters. Two firefighters were hired at the beginning of July.

So problem solved, or at least alleviated, right?

Unfortunately, not. For one thing, the District didn't really hire two firefighters. It hired two EMTs, who must still be trained in firefighting, at District expense. (If the District had just hired “off the street”, the employees would have had to be trained in EMT and firefighting, at much greater time and expense. So hiring EMTs was a big advantage.)

The two EMTs are currently being trained at the New York State Academy of Fire Science in Montour Falls, and cannot be deployed in the department until November. Meanwhile, Fairview's firefighters have continued to struggle under massive amounts of overtime, since only 12 out of a needed 16 firefighters are available. On average, firefighters have been working 56 hours per week, every week. But overtime cannot be distributed evenly, for a variety of reasons. Some firefighters have been working 70 hours a week for many weeks in a row.

OK, so in November, problem alleviated, right?

Unfortunately, not so much. In November, when the two new firefighters are to be deployed in the station, the staffing shortfall was expected to have been reduced from 4 to 2. But in an ironic turn of events, it was announced during the September 6 commissioners meeting that yet another firefighter has submitted his resignation, and will be leaving the District by the end of this month. So the staffing shortfall in October will be an outrageous 5 firefighters out of 16, meaning that the average firefighter will work 61 hours during that month. Beginning in November when the two new firefighters will be deployed, the staffing shortage will still be 3 out of 16 — almost as bad as it's been since last spring.

It Gets Worse

The irony is increased further by the fact that the resigning firefighter is none other than Mark Bendel, the eloquent spokesman for the firefighters at the May 26 meeting. Bendel has been a major asset to the District. His loss will be deeply felt.

And It Could Get Even Worse

As things now stand, Fairview is faced with the need to hire two more firefighters, just to bring staffing up to the minimum of 16 firefighters on staff. And even then, one of those firefighters is on medical leave, so overtime will still be necessary until he returns. But the staffing situation could easily get worse. Four firefighters are eligible to retire, and could do so at any time. And considering the low morale, other firefighters may transfer to other districts, where they can expect to work only 42 hours a week instead of up to 70. During the public comment session of the September 6 commissioners meeting, former Fairview Fire Commissioner and Board Chairman (and current volunteer safety officer for the District) John Anspach reprimanded the current board of fire commissioners for not authorizing full staffing, pointing out that the sustained excessive overtime decreases safety for all the firefighters. At the same meeting, Fairview firefighters union president Tim Gilnack announced that the union was considering filing a formal grievance against the District. Regardless of the outcome of a grievance filing, it would take time, energy, and money away from solving Fairview's problems.

Fairview's Fundamental Problem

If staffing were Fairview's only problem, it could easily be solved: Just hire more firefighters. But as I see it, under-staffing is only a symptom of Fairview's fundamental problem, a shortage of money in the long term. Most of Fairview's budget pays for firefighters' hourly wages and benefits, and most of Fairview's income comes from the fire tax levy to property owners. In other words, unless Fairview can acquire a significant new source of income, the number of firefighters per shift that Fairview can support is roughly proportional to Fairview's fire tax levy.

Fairview's fire tax levy is already high compared with Fairview's tax base. The ratio of the two, which measures how steeply taxpayers' wealth is taxed by the fire district, is called the true value tax rate. Fairview already has the highest true value fire tax rate in Dutchess County, and one of the highest in New York State. Significantly increasing this tax rate may not be politically tenable. Unfortunately, Fairview's tax base is shrinking. This means that even without increasing Fairview's 2012 tax levy at all, Fairview's 2012 tax rate is projected to increase 2.8 percent to $5.25 per thousand dollars of market value, making it Fairview's highest tax rate in a decade.

What Were the Fire Commissioners Thinking?

My understanding is that Fairview's long-term financial crisis is the reason why some commissioners have been hesitant to increase staffing. The commissioners say they authorized two new firefighters in June only because of new concessions by the firefighters union, worth $80,000 over two years. By taking this action, the commissioners may have allowed the District to limp along a little while longer before the day of reckoning arrives. But as the staffing situation continues to be unstable, it's difficult to say how much time this action will buy. If firefighters continue to leave the district, the morale of Fairview's overworked firefighters will continue to deteriorate, accelerating a downward spiral that has already begun.

My thanks to Fairview Fire Chief Chris Maeder and other members of the department for graciously providing me with information about staffing.

Two Percent Tax Cap Does Not Affect Fire Districts

2011-09-07T20:25:00.000-04:00

A key part of Andrew Cuomo's successful campaign for Governor of New York was his five-point plan to build a “new NY”. His second point — controlling government spending — included a local property tax cap. Cuomo signed into law a two percent cap on local property tax levy increases on June 30, 2011. Since then, all local governments in New York, including fire districts, have been wringing their collective hands, trying to determine how the new law affects them. I have just learned that as far as fire districts are concerned, it doesn't.

As always, the devil is in the details. Here they are: The property tax cap law states that the two percent limit on tax levy increases can be overridden by a vote of “sixty percent of the governing body” of the local government. In the case of a fire district, the governing body is a board of up to five commissioners. Sixty percent of that is three commissioners. OK, so three commissioners are needed to override the tax cap. But here's the thing: Three commissioners are needed anyway to pass any budget, regardless of the budget's size. So a board of fire commissioners needs no more support to exceed the two percent cap than to not exceed it.

Technicalities

To conform with the mechanics of the tax cap law, the board must take two votes instead of one: The first to override the tax cap law (if needed), and the second to pass the budget. But this technicality has no practical effect on what boards of fire commissioners can do. As a political matter, however, boards may be reluctant to be seen as thwarting the intent of Cuomo's pledge to control government spending. Or maybe not.

Says Who?

The fact that the two percent tax cap does not affect fire districts isn't just my opinion. It is also the opinion of David B. Garwood, attorney with Scicchitano & Pinsky, PLLC, a law firm marketing itself as “an authority on fire protection and EMS law in New York State”. Garwood stated his opinion to Fairview's board of fire commissioners at a public meeting last evening.

Fire District Spending Out of Control, or Dodging a Bullet?

So is the inefficacy of the two percent tax cap for fire districts bad news or good news? It depends who you ask. For many local property owners hoping for property tax relief, it's bad news. For boards of fire commissioners, it's good news. Most local government officials in New York State have fought bitterly against the passage of this law, warning of dire consequences if it is enacted. Now it seems that fire districts are effectively free from any spending restrictions in the property tax cap law.

Suggestions to Improve Fairview's Fire Tax Projections

2011-09-06T18:03:00.000-04:00

As part of my continuing coverage of the crisis in the Fairview Fire District, this post is the third in a series stemming from my attempt to analyze the Budget Projections Spreadsheet presented at Fairview's May 26 meeting.

As I reported recently, Fairview Fire District Treasurer James Passikoff developed a Budget Projections Spreadsheet which is flawed by some tax data that is incorrect, and some tax data that is meaningless garbage. These flaws make it more difficult for the general public and even the Board of Fire Commissioners to understand what may happen to Fairview fire taxes in the next few years. Unfortunately, even if these flaws are corrected, stakeholders will still have a difficult time understanding Fairview's financial status. That's because the spreadsheet format contains a great deal of extraneous detail, so that it's very difficult to see the big picture. What's needed is a simpler and cleaner presentation of the financial facts. This post suggests some specific ways to improve this presentation.

The first order of business, in my view, is to get rid of the single spreadsheet form of presentation, and replace it with multiple tables and charts, each dealing with a major aspect of budgeting, such as income, expenses, reserve funds, taxes. For now, here are my suggestions for tax-related projections:

Do not display any data involving assessed values or equalization rates. This means not only assessed values directly, but also tax rates measured in dollars per thousand dollars of assessed value. Assessed values and equalization rates are simply artifacts of the legacy way of collecting property taxes, and are not meaningful for planning purposes. Replace these parameters with market values (also known as home values, true values, full values, etc.) and tax rates measured in dollars per thousand dollars of market value (also known as true value tax rates). Once this is done, separate tax rates for Poughkeepsie and Hyde Park become redundant (because they're the same). Replace these separate tax rates by a Fairview Fire District tax rate.
Do not display any parameters for the Hyde Park and Poughkeepsie portions of Fairview. None of these parameters affect tax projections.
Display the year-to-year percent changes in taxable market value and tax levy, just as is done for tax rate. These parameters are important for seeing trends.
Transpose the table of projections. That way, long-term planning can be carried out for any number of years into the future — or past — while keeping a constant table width.

If all the above suggestions are accepted, the resulting table will appear something like this:

but with years extending more into the future and less into the past. The above table is from page 1 of my May 23, 2011, report Fairview Fire District Property Tax Data. The last 6 pages of this report display each column of the table in convenient chart form, showing trends at a glance. For example, Fairview's tax rate trend (page 7) is as follows:

This report was published in conjunction with my blog post Fairview Fire District Tax Base Projected to Drop 2.7 Percent.

Teamwork?

I would be happy to contribute my Microsoft® Excel workbook, used to generate the table and charts, for use by Fairview officials. It can be modified easily to add future years and remove past years. I would also be happy to work with Fairview officials to facilitate this. In my view, the above style of presentation will be easier for may stakeholders to understand than that in the current budget projections spreadsheet.

Fairview Fire District Board Chairperson Withholds Tax Calculations

2011-09-05T20:51:00.000-04:00

As part of my continuing coverage of the crisis in the Fairview Fire District, this post is the second in a series stemming from my attempt to analyze the Budget Projections Spreadsheet presented at Fairview's May 26 meeting.

As I reported yesterday, Fairview Fire District Treasurer James Passikoff developed a Budget Projections Spreadsheet which is flawed by some tax data that is incorrect, and some tax data that is meaningless garbage. These flaws make it more difficult for the general public and even the Board of Fire Commissioners to understand what may happen to Fairview fire taxes in the next few years. Some stakeholders may have decreased confidence in Fairview officials who develop and present such flawed data.

In attempting to analyze these flaws, I naturally wanted access not just to the tabular data appearing on the Fairview Fire District website, but also to the underlying Microsoft Excel workbook file it was derived from. That way, I'd be able to see the formulas used to calculate the various entries, and to verify how the calculations were performed. Accordingly, I asked Fairview Fire District Secretary Cathy Gallinger for this file.

Access Denied

Gallinger informed me that under Fairview's new Freedom of Information Law Policy (FOIL Policy), I can't just ask for this file, but I must submit a written FOIL request to Fairview Fire District Records Officer and Fire Chief Chris Maeder. No problem. I emailed my FOIL request to Maeder on 7/8/2011. Maeder responded that he was on a week's vacation, and was delegating his response to Galllinger. Still no problem. Next, Gallinger denied my request, saying, “The requested sheets are not public documents as they are draft worksheets and possibly personal notes.”

Now it's starting to be a problem. But I wasn't foiled — yet. I knew that under New York State's FOIL act, an initial denial can be appealed. In the case of Fairview, the appeals officer is Fairview Board of Fire Commissioners Chairperson Jill Line, who has made openness and avoidance of secrecy a hallmark of her chairpersonship. Thus, I had some reason to expect a favorable outcome.

Still, in my emailed FOIL appeal to Line, I was careful to state my case as forcefully as I could. I emphasized that the Fairview Fire District owns the Excel workbook file, that New York's FOIL act provides for the presumption of access, with certain exceptions based on potential for harm. In the present case, not only is there no potential for harm, but there are benefits of public scrutiny of tax calculations. But my strongest argument, as I see it, was that the FOIL act is only intended to require government to grant access in most cases. There is nothing in the FOIL act which prohibits government from granting access to records, if the government chooses to do so.

No matter. Line's short denial letter, obviously written in the voice of Fairview Fire District Attorney Brad Pinsky, gives two reasons for denial:

The spreadsheet formulas I requested are embedded metadata, which is in a grey area of possible FOIL access exceptions. Line/Pinsky have determined that these formulas “should not” be disclosed.
“We further opine that the formulas utilized may constitute a ‘trade secret’ of the accounting firm used to produce the spreadsheets.”

Deconstructing the Line/Pinsky Denial

Reason #1: It's true that the spreadsheet formulas I requested are embedded metadata. I don't know whether embedded metadata is in a grey area of possible FOIL access exceptions. But assuming it is, as Line/Pinsky claim, the letter gives no justification for denying access. It's just an arbitrary decision.

Reason #2: The “trade secret of the accounting firm” argument is in my view completely absurd. In the first place, the spreadsheet was not produced by an accounting firm. It was produced by James Passikoff acting as a paid officer (Treasurer) of the Fairview Fire District. The fact that Passikoff is also a principal in a CPA firm is irrelevant to his work for the District. Fire district treasurers are not even required to be CPAs, and most fire district treasurers in New York State are not. The Fairview Fire District has no contract with Passikoff's accounting firm, as far as I know. And even if it has, the standard for government contractors regarding FOIL requests is the same as for the government itself. In other words, a government cannot conceal records from the public just by contracting out the development of these records. In the second place, the trivial formulas used for calculating property taxes in New York State can be trade secrets? You gotta be kidding me!

In summary, the denial developed by Pinsky is a contrived legalistic argument of questionable merit. What I suspect happened is that Passikoff didn't want the Excel workbook released, and Pinsky, as a good lawyer should, found a way to justify not releasing it.

Where was Line in all of this?

In the normal course of human affairs, people in power generally attempt to do what they want, within the various constraints of their office. That's what it means to have power: You get to decide. An outside observer with this understanding of power might reasonably assume that Line wanted to withhold access to the spreadsheet formulas, and she found a way, through Pinsky's contrived legalisms, to do so.

I don't think that's what happened. I think that, to the contrary, Line wanted to grant access to the spreadsheet formulas. She just didn't understand how to exercise the power of her office. Line delegated to Pinsky the task of responding to my FOIL appeal. That in itself is not a problem. The problem is that in doing so, Line did not direct Pinsky to attempt to satisfy her wishes. Instead of saying to Pinsky, “Is there a reasonable way I can grant Rubin's FOIL request?”, she more likely said something passive like, “Please write a response for my signature.” In the absence of direction from Line, Pinsky did the most reasonable thing under the circumstances: He executed his task to conform with the wishes of the most manifest source of power: James Passikoff.

My Appeal Could Have Been Granted

Had Line asserted her authority and directed Pinsky to try to find the outcome she wanted, the dynamics would have been completely different. Since Passikoff is appointed by the Board, Line's power overrides Passikoff's. Pinsky, recognizing this, would have tried to execute his task to conform with Line's wishes over Passikoff's. This would have been easy for him to do in any number of ways. One way would have been to throw out the ridiculous reason #2, and reverse the arbitrary decision on reason #1. But even easier would have been to simply throw out the entire FOIL legal question, and just grant access because she can. To quote from my FOIL appeal to Line, “... if you choose to do so, you can can grant me access to this file, even if FOIL doesn't force you to do so.”

Well, these last two sections are all just speculation on my part, since I don't really know what transpired among the parties. If the above scenario is incorrect, I'm happy to be corrected.

Fairview Fire District Treasurer Bungles Tax Calculations — Again

2011-09-04T21:48:00.000-04:00

As part of my continuing coverage of the crisis in the Fairview Fire District, this post is the first in a series stemming from my attempt to analysis the Budget Projections Spreadsheet presented at Fairview's May 26 meeting.

As I reported in May, Fairview Fire District Commissioner Bob Gephard revealed the dire state of the District's long-term finances at a public workshop meeting on May 26. Gephard's presentation centered around a spreadsheet of budget projections prepared by Fairview Fire District Treasurer James C. Passikoff and posted on the District's website here. Although the general thrust of Gephard's presentation — that Fairview has a long-term financial crisis — is undoubtedly correct, the spreadsheet is flawed by some tax data that is incorrect, and some tax data that is meaningless garbage. These flaws make it more difficult for the general public and even the Board of Fire Commissioners to understand what may happen to Fairview fire taxes in the next few years. Some stakeholders may have decreased confidence in Fairview officials who develop and present such flawed data.

Garbage Data

Almost halfway down page 2 of the Budget Projections Spreadsheet is a row labeled “Total Assessed Valuation”. For each column, the entries in this row can be seen to be the sum of the assessed valuations of the Poughkeepsie and Hyde Park portions of the Fairview Fire District. These sums are garbage. There's no polite way to say it.

For example, consider the 2011 column. In round numbers, the assessed valuations are $375 million for Poughkeepsie and $75 million for Hyde Park. Passikoff simply adds these numbers to get the bogus value of $450 million. The problem is that although Hyde Park's assessed valuation of $75 million is conventionally written in units of dollars, it isn't really dollars as we normally think of dollars, and therefore cannot meaningfully be added to Poughkeepsie's $375 million. That's because Hyde Park's equalization rate is not 100 percent. One needs to divide Hyde Park's assessed valuation by its corresponding 2011 equalization rate of 54 percent, thus converting it to market value, before one can add it to Poughkeepsie's, whose equalization rate is 100 percent. Assessed values corresponding to different equalization rates must be converted to market value (or some other convenient unit) before they can be added.

Passikoff's calculation is like saying, “I delivered 375 pounds of bricks to Poughkeepsie and 75 kilograms of bricks to Hyde Park, for a total of 450 weight of bricks.” No. The total is 540 pounds of bricks or 245 kilograms of bricks. It's not 450 anything of bricks. Passikoff actually performed the correct calculation in the “Total Full Valuation” row directly below, arriving at $514 million for 2011. But including correct results doesn't change the fact that the spreadsheet contains garbage.

As it turns out, Passikoff's mistake — not understanding the true significance of assessed value and equalization rate — is unfortunately all too common in Dutchess County among people who should know better. The most frequent offender is the Poughkeepsie Journal, which made exactly the same mistake last year, as I describe here.

Incorrect Data

The last few rows of the Budget Projection Spreadsheet, labeled “Rate per Thousand of Assessed Valuation” and “Percentage change from last year” for Poughkeepsie and Hyde Park are troubling because they contain data that is not especially relevant for the purposes of budget projection. I will have more to say about this in a subsequent post. But for now, the point is that the data in the last row, showing the percent change in Hyde Park's tax rate for each year from 2010 through 2014, appear to have been calculated incorrectly. In any case, the result is that most of these values are incorrect.

Tax rates expressed in dollars per thousand dollars of assessed value, like those in Passikoff's spreadsheet, cannot be compared with each other (such as by calculating percent changes) unless they correspond to the same equalization rates. Before comparing such tax rates, they must first be converted to the same equalization rate. Typically, one would do this by choosing 100 percent equalization rate (so-called true value tax rate). However, for 2012, Hyde Park's equalization rate happens to be the same as 2011's. Therefore, the tax rate change for Hyde Park for 2012 (three revisions) is correct by accident. For all the other years, it's incorrect.

Passikoff's calculation is like saying, “I accelerated from 50 miles per hour to 100 kilometers per hour, so my speed increased by 100 percent.” No, my speed only increased by 24 percent, because 100 kilometers per hour is “really” 62 miles per hour. (Or if you prefer, 50 miles per hour is really 80 kilometers per hour.)

Perceptive readers will recognize that the percent change mistake is simply another form of the total assessed valuation mistake. It's all about not understanding the true significance of assessed value and equalization rate. This form of the mistake is even more common than the first form among people who should know better. I've already posted about how officials in the Towns of Hyde Park and Pleasant Valley have been making this form of the mistake for years. The Poughkeepsie Journal is another chronic offender on this mistake.

If Fairview's Hyde Park percent changes are calculated correctly, they will be the same as the corresponding Poughkeepsie percent changes. It is therefore pointless to display a separate row for Hyde Park in the Budget Projection Spreadsheet. More on this in a subsequent post.

Mistakes Are Part of a Pattern

This is not the first time Passikoff has made mistakes involving tax calculations with assessed values and equalization rates in the Fairview Fire District. His mistakes in apportioning the fire tax levy between Hyde Park and Poughkeepsie between 2001 and 2008 cost Hyde Park taxpayers more than $200,000 in unfair tax over-billings, as is extensively documented here and especially here.

Feedback from Fairview Officials

The above analysis of the Budget Projections Spreadsheet may be news to many readers of this blog, but it is not news to Fairview's Treasurer James Passikoff or Fairview Commissioners Bob Gephard and Joe Petito. I emailed the main points of the above analysis to all of them on May 24 — two days before their public meeting. Both commissioners indicated to me that Passikoff is solely responsible for the spreadsheet. Unfortunately, I never heard from Passikoff on this matter. Gephard made a concerted effort to provide me with some material feedback, but ultimately he was not able to answer all my questions.

Many Questions Remain

As I see it, the above analysis of the budget projections spreadsheet only begs more questions:

Why do I hedge that the data in the last row “appear to have been calculated incorrectly” rather than just saying straight out that they have been? (It turns out that there's a whole sad story behind this.)
Why couldn't I get a satisfactory response from Commissioner Gephard about the spreadsheet he presented? Or from Treasurer Passikoff who developed it?
How can the budget projections spreadsheet be improved to present a more useful picture of Fairview's long term financial situation?

I plan additional posts to address these questions.

Fairview Fire District Raids Reserve Funds — NOT

2011-08-28T15:06:00.000-04:00

As I reported here on May 28, recent Fairview Fire District (FFD) budgets have not set aside sufficient funds for future maintenance and replacement of apparatus and equipment and other obligations. The money that should have been reserved was used instead to decrease the fire tax levy. As a result, Fairview is now faced with a long-term financial crisis. These facts were publicized at the May 26 meeting of FFD's budget and long term planning committees, and are not in dispute.

However, a month ago I learned that this failure to add to the reserve funds may have understated the true problem. It has been alleged that not only was no money set aside, but money that had previously been set aside in reserve funds was removed and used to lower the fire tax levy. Such an action would constitute what I call raiding the reserve funds. I learned of this allegation from what I consider a well-informed and reliable source. If this allegation were true, then the actions of the Fairview Board of Fire Commissioners were even more ill-advised than previously assumed. But this allegation is not true.

How Can One Determine Whether Reserve Funds Were Raided?

It would seem a simple matter to determine whether Fairview's reserve funds have been raided. I found quite the contrary. Satisfying myself that the reserve funds were not raided was actually a long painstaking process involving considerable analysis on my part, as well as back-and-forth with various officials of the fire district.

My first step was to send a detailed written request to Fairview Fire Chief Chris Maeder, asking for annual data for each reserve fund for the last 5 years. Within a few days, Chief Maeder forwarded to me a relatively complex spreadsheet he obtained from FFD Treasurer James C. Passikoff. Upon examining this spreadsheet, containing a myriad of data and cryptic labels, it was by no means obvious to me what was happening with the reserve funds. Fortunately, Passikoff was willing to spend over an hour on the phone explaining the meaning of the various entries. Based on these conversations, I was able to develop, with some effort, a simple table showing the flow of money in each reserve fund for each of the last 5 years. You can find this summary of Fairview's reserve funds here. The column labeled “Amount Used for Other Purposes” is my polite label for the amount that was raided from each fund. You can see that this amount is zero in every single case. In other words, none of the reserve funds have been raided in the last 5 years.

Although this might seem to be the end of the matter, I knew that my work was not finished. The clearest recent statements about Fairview's financial condition have come not from the Fairview Fire Commissioners or its Treasurer, but from the Fairview Firefighters Union. The Union made the most professional and most understandable of the presentations at the May 26 meeting of the budget committee. The Union even went so far as to hire a consultant CPA (Deborah Bailey Brown) to examine Fairview's financial data. On the other hand, when I asked union president Tim Gilnack by email about the possibility that the reserve funds may have been raided, his initial written response was ambiguous. Later, I met with Gilnack and other union officials, where it was quickly established that the union does not believe the reserve funds were raided. Instead, funds unspent at the end of the budget year, which traditionally had been added to reserve funds, were instead diverted to lower the tax levy.

Why was this question so difficult to answer?

So the question is resolved. Fairview's reserve funds were not raided.

But apart from this conclusion, how did the rumor arise that Fairview's reserve funds were raided, and why did it persist? Why was the union's initial response to my query ambiguous? Part of the answer, in my view, is that official information about the reserve funds was not readily available. And the official information I received was not intelligible without considerable verbal explanation. In other words, there is no straightforward way for an interested stakeholder to determine what was happening with the reserve funds. In this situation, half-truths and ambiguous statements can easily morph into rumors that cannot easily be confirmed or denied. If the Fairview Fire District had produced and made public a simple annual summary of its reserve fund activity like the one I developed, it would have avoided a lot of misinformation. I'll have more to say about this in a subsequent post.

Is There Reason for Hope in Fairview?

2011-07-16T13:56:00.000-04:00

I recently received an email from a veteran of many years of service to the Fairview Fire District, someone whose knowledge and wisdom I respect very highly. Reflecting on Fairview's dire situation, this veteran lamented the fact that nothing seems to change, despite years and years of effort on the part of many creative people. “There are still far too many people who have egos, power trips, political aspirations ... for anything to change.” “... those who should be working together as a team have turned on each other looking for ... a scapegoat to blame for all of the troubles in the world of Fairview and beyond.”

As an engineer by training, I'm essentially a professional pessimist. But you don't need to be cynical to understand that Fairview's difficult situation in the past has now become a crisis. Still, I've found a few reasons to hope that Fairview's problems can be alleviated. All these reasons are new, appearing within the last three years:

A relatively small group of committed people, beginning in 2008, was able to completely transform Fairview's board of fire commissioners by popular vote. To me, this is an inspiring story of the way democracy is supposed to work. The new board is not perfect by a long shot, but in my view, it's a big improvement over the old guard. Private citizens have far greater access to this board than to the old one.
William Steinhaus, Dutchess County Executive for the last twenty years, will end his reign in half a year. Steinhaus has not shown interest in the plight of Fairview and other fire districts. Steinhaus' likely successor, Marc Molinaro, has already been making the correct noises regarding helping the fire districts, including looking at a consolidated county-wide system.
As New York State Attorney General, Andrew Cuomo successfully fought for a New N.Y. Government Reorganization and Citizen Empowerment Act making it practical for local governments such as fire districts to consolidate. This significant new option allows fire services to be provided more efficiently. A few fire districts in other counties are already taking advantage of this new law.
As Governor, Cuomo successfully fought for a two percent property tax cap law. If nothing else, this controversial law will prevent unbounded increases in property taxes.
As I've come to understand what Fairview's firefighters really do (see my Fairview Fire Tax Dollars at Work), it's changed my view somewhat of our high fire taxes: We pay a lot, but we get a lot too, that others who pay less don't get. I know this is little comfort to those on a tight budget, that is, to most people. Perhaps part of the solution to Fairview's high fire tax is to educate people better about what they're getting for their money. As I see it, Fairview's firefighters union has been doing that for a long time, but Fairview's fire commissioners, not so much.
Two of the big three fire districts of Dutchess County, Arlington and LaGrange (the third is Fairview), have seen their tax rates increase dramatically in each of the last three years. This fact can only increase the pressure for fire district consolidation in Dutchess County.
Fairview's crisis might still be eased within Fairview. Fairview's tax exempt institutions may now want to contribute significant Payments in Lieu of Taxes (PILOTs) in their own self interest, to avoid incurring increased insurance costs and decreased safety.

As I see it, the fact that most politicians have egos, power trips, political aspirations, and scapegoats is not a new thing. It's been with us since biblical times, probably since civilization began. Probably since we've been human. If and when the names and faces of all the politicians change, these facts of life won't change. The best form of government that humans have devised — democracy — is messy, and works imperfectly, as we know only too well. Yet it does sometimes work, as items 1, 2, 3, and 4 show.

The other major force in play is our economic system, in which people and institutions tend to act in their own self interest. Such motives can be viewed as having caused Fairview's problem in the first place. But as Items 5, 6, and 7 show, economic self-interest can also act in Fairview's favor.

With these seven reasons for hope, things should work out fine for Fairview. Just kidding! Nothing I've written above changes the fact that Fairview's situation is dire, and that dramatic actions must be taken for Fairview to avoid safety and/or financial disaster. It's just that a number of significant political and economic paths for change are now becoming available, paths that weren't on the horizon just three years ago.

The Big Three Tax Exempt Institutions of Fairview

2011-06-04T20:13:00.000-04:00

This is the third in a recent series of posts about the crisis in the Fairview Fire District. Fairview's long-term crisis is that it has not set aside sufficient funds to pay for future obligations. If Fairview cannot increase its income, it will be forced to take the drastic step of reducing service. Reducing service would increase risk to life and property in measurable ways, and it would also increase insurance rates for all property owners in Fairview.

Approximately 95 percent of Fairview's income comes from the fire tax levy. But simply increasing the tax levy is problematic for two reasons:

Fairview's fire tax rate is already the highest in Dutchess County, and one of the highest in New York State. With the continuing drop in property values, Fairview's 2012 fire tax rate is projected to increase 2.8 percent even if the tax levy is held constant. The resulting true value fire tax rate will be $5.25 per thousand dollars of market value — the highest in a decade. Fairview property owners have argued that the fire tax is already too high.
If Gov. Cuomo's 2 percent tax cap becomes law, it may be difficult or impossible for Fairview to substantially increase the fire tax levy.

Payments In Lieu Of Taxes (PILOTs)

For these reasons, it makes sense for Fairview to look beyond the tax levy to other sources of income. A longstanding proposal is to ask Fairview's tax exempt institutions for Payments In Lieu Of Taxes (PILOTs). Tax exempt institutions represent 48 percent of Fairview's total market value. Indeed, these exempt properties represent a major reason for Fairview's high tax rate. Accordingly, this post focuses on Fairview's tax exempt institutions.

The Big Three

The following pie chart shows the components of Fairview's tax exempt market value, which I compiled from the tentative assessment rolls applicable to the 2012 tax bill:

Note that this chart differs only slightly from the 2010 chart published on page 11 of The Big Three Fire Districts of Dutchess County. Marist College, St. Francis Hospital, and Dutchess Community College can be called the big three tax exempt institutions of Fairview. Together, they comprise more than three quarters of Fairview's exempt market value:

Institution	Market Value	Percent
Marist College	$218,248,000	42.1%
St. Francis Hospital	$120,114,500	23.2%
Dutchess Community College	$56,007,500	10.8%
all others	$123,527,889	23.9%
Total:	$517,897,889	100%

In the last few years, the general trend of property values in Dutchess County has been downward, and this trend has continued for 2012. Thus, St. Francis Hospital's tax exempt market value is down 9 percent from 2010, and Dutchess Community College's is down 4 percent. Most parcels of Marist College are down 4 to 8 percent; however, one of Marist's parcels increased in value from $274,000 to $17.8 million due to the construction of residence halls. The net effect is that Marist College's exempt market value has increased by 3 percent from 2010.

Hudson River Psychiatric Center

The fourth largest tax exempt institution in Fairview is the Hudson River Psychiatric Center (HRPC). However, this is destined to change soon. The New York State Office of Mental Health has recently announced that it will close Hudson River Psychiatric Center by October 1, 2011. Once HRPC is gone, the big three tax exempt institutions will dominate Fairview's tax exempt landscape even further.

PILOTs From the Big Three

Marist College has been contributing PILOTs to the Fairview Fire District every year for a number of years. The yearly contribution amount has been trending upward, with the most recent yearly contribution being $125,000. But to put this number into perspective, if Marist College were entirely taxable (instead of almost entirely tax exempt), its annual Fairview fire tax would exceed one million dollars. To the best of my knowledge, St. Francis Hospital has not contributed PILOTs in recent years. However, it has contributed some services to the fire district with monetary value per year in the low 5-figure range. I believe Dutchess Community College has occasionally contributed one-time PILOTs to Fairview in the low 5-figure range.

Can the Big Three Save Fairview?

The Fairview Fire District faces a long-term financial crisis which, if not resolved, could result in reduced services to all Fairview property owners and residents. These reduced services have quantifiable costs: All property owners would see increased insurance rates. There are also unquantifiable costs in reduced safety, resulting in greater risk of injuries and deaths. The Big Three Tax Exempt Institutions of Fairview may feel these costs more than some other stakeholders. It may be in their self-interest to avoid these costs by bailing out the fire district with new or increased PILOTs.

Fairview Fire District Is in Crisis

2011-05-28T12:36:00.000-04:00

On Thursday, May 26, 2011, the Fairview Fire District Board of Fire Commissioners combined Budget and Long Range Planning Committees held a remarkable public workshop meeting at the Fairview Fire House. The picture of Fairview's status painted at this meeting is nothing short of dire. This meeting marks a major turning point in Fairview's history. To put this turning point into perspective, it helps to know Fairview's previous turning point:

Fairview's Previous Turning Point

On April 24, 2008, over 400 residents of the Fairview Fire District attended a meeting of Fairview's Board of Fire Commissioners to express their outrage at the exorbitant Fairview fire tax. Fairview's fire tax rate had for years been the highest by far of any fire district in Dutchess County, and one of the highest in New York State. That meeting marked the beginning of increased involvement by Fairview's residents (including me) in Fire District matters. In the following three years, voters turned out in extraordinary numbers to elect three newcomers to the Board of Fire Commissioners, Jill Line, Bob Gephard, and Joe Petito. These newcomers replaced veterans who had run Fairview for years, if not decades. In my view, this is an inspirational story of democracy in action, a counterexample to the common lament that politicians who displease us are entrenched, and that there's nothing we can do about it. The fact is that a surprisingly small group of dedicated Fairview taxpayers and residents was able to replace the veterans with newcomers who were believed to better represent the interests of Fairview's residents.

Public Workshop Meeting

This week's public workshop meeting was billed as an attempt to “discuss with the residents the status of the District”. I had commended Mr. Gephard beforehand for initiating and leading the long range planning committee, and for arranging for this public workshop meeting. As I saw it, openness about long range planning helps all stakeholders see what possible futures may look like, and allows the public to influence decisions before things get really bad. At worst, this exercise does no harm. I did not realize beforehand the critical situation that would be revealed at the meeting. That fact, in my view, makes Bob's contributions even more important than I'd originally thought.

Advance publicity for the meeting was minimal, and it gave no clue that two bombshells would be dropped at the meeting. This is probably why less than a dozen residents attended, mostly the regulars at monthly commissioners meetings. However, many other stakeholders were present, including career and volunteer firefighters, Fairview Board Chairperson Jill Line, Fairview Treasurer Jim Passikoff, and various other officials. In the end, perhaps 30 people were there, including about half a dozen presenters.

Commissioner Gephard, Firefighter Mark Bendel, and others presented two hours of detail on the financial and operational status of the district, followed by an hour of questions and comments from the floor. A serious difficulty, in my view, was that there was precious little in the way of summary of the main points by the presenters, particularly in the financial area. I have frankly struggled to divine what the main issues are. What follows is my best understanding of the main points. I likely haven't got everything right here, and I welcome corrections and clarifications.

So What's the Crisis?

There are actually two crises, an immediate one, and a long-term one:

The immediate crisis is that the fire station has become understaffed, and that the firefighters are greatly overstressed.
The long-term crisis is that the fire district has not been setting aside sufficient funds for future obligations. When these costs come due, the District will not have the funds to pay them.

The problem is that it may not be wise to attempt to solve the immediate crisis without knowing how the long-term crisis will be solved.

Short Term Staffing Crisis

Mr. Bendel's presentation on the immediate crisis was particularly effective. Bendel explained that the fire station must be staffed by 4 career firefighters at all times (24x7) in order to maintain Fairview's level of service in the District. This staffing level requires at least 16 career firefighters. Unfortunately, in recent months 3 firefighters have left the District (retirement and transfer), and one more is unavailable because of injury. To continue Fairview's level of service, the remaining firefighters have been working overtime (mostly at straight-time pay) for a number of months. Although the financial cost of this arrangement is minimal, the stress on firefighters is extreme, and unsustainable.

The District cannot simply reduce the fire station staffing from 4 per shift to 3, even temporarily, without major repercussions. Mr. Bendel explained that having only 3 firefighters available to fight a structure fire would dramatically reduce the level of service, resulting in significant increases in risk to both life and property. Not only that, but the reduced level of service would cause all property insurance rates in the fire district to increase considerably. All stakeholders would be substantially affected by a reduced level of service.

A decision to reduce the level of service amounts to a game-changing dismantling of part of Fairview's mission. The Fairview Fire Commissioners would presumably ask for input from all major stakeholders before authorizing a reduced level of service. This public meeting appears to be the beginning of such an inquiry.

Long Term Financial Crisis

In recent years, Fairview's budgets have not set aside sufficient funds for future maintenance and replacement of apparatus and equipment and other future obligations. The money that should have been set aside was used instead to decrease the fire tax burden. The result is that Fairview's fire tax rate has remained remarkably steady at just over $5.00 per thousand dollars of market value since the economic meltdown of 2008, despite falling property values. See the chart on page 7 of Fairview Fire District Property Tax Data. Fairview's steady tax rate on that chart is in sharp contrast to that of the other of the big three fire districts of Dutchess County — Arlington and LaGrange. The tax rates of both these fire districts have been climbing steadily since 2008. I had seen Fairview's constant tax rate in recent years as the result of prudent management. In reality, it has been just the opposite. Fairview has essentially been “robbing Peter to pay Paul” by not setting aside money for future needs.

What are Fairview's choices at this point to solving its financial crisis?

Decrease the budget. However, this cannot be done without reducing staffing, because staffing is the primary cost in the budget. Reducing staffing cannot be done without major safety and insurance repercussions, as described above.
Increase the fire tax levy significantly. However, a strong case can be made that the fire taxes are already as high as can be tolerated. Many would argue that the tax rate is higher than can be tolerated, although it's been at about the same $5.00 rate for nearly a decade. On the other hand, Fairview's tax rate was $6.07 in 2001 and $5.73 in 2002. See Fairview Fire District Property Tax Data. So a painful argument could still be made that there's room to increase the tax rate by almost $1.00. Even so, would that be enough? On the third hand, if Gov. Cuomo's two percent tax cap applies to fire districts, this choice is entirely off the table.
Obtain significant and sustained funding from sources other than property tax.

The most obvious place to turn for funding is Marist College, St. Frances Hospital, Dutchess Community College, and the other not-for-profit institutions in Fairview which are exempt from fire tax. Tax exempt properties make up 48 percent of Fairview's market value. In the past, these institutions have provided only very limited support. But the circumstances may be different now. If these institutions do not contribute substantial payments in lieu of taxes (PILOTs), they may be faced with a substantial degradation in services from Fairview, resulting in increased risk to their property (and the lives of their students, patients, and employees) and increased insurance premiums at the same time. These considerations may persuade these institutions that it is in their interest to increase their support to Fairview.

Tying the Two Crises Together

How much time does Fairview have to resolve these crises? The staffing crisis is clearly urgent, and cannot be allowed to continue any longer than necessary. However, simply adding staff now to solve the immediate crisis would only make sense if the financial crisis can be solved by finding more income, a strategy which is not certain of success at this point. If Fairview replaces staff now, and then fails to secure more income, Fairview will need to decrease staffing after all. It might not be prudent for Fairview to bring on more staff now without some assurance that it can be paid for.

Fairview is indeed in a very difficult position. It is by no means certain that Fairview can continue to provide the level of service that it has in the past. Resolving this crisis will require continued openness by the new Board of Fire Commissioners, as well as the cooperation of all other stakeholders. Even then, it will require skill, creativity, and perhaps even some good luck.

Fairview Fire District Tax Base Projected to Drop 2.7 Percent

2011-05-23T19:27:00.001-04:00

The taxable market value of the Fairview Fire District, assessed at $514.3 million for 2011 tax bills, is projected to drop 2.7 percent to $500.5 million for 2012 tax bills, according to my calculations from tentative assessment rolls published in recent weeks by the Dutchess County Real Property Tax Service Agency. This is the fourth year in a row that Fairview's tax base has decreased, and it is the second largest decrease in that time. This drop in the tax base will aggravate the difficulty of holding down Fairview's tax rate.

Fairview has had the highest true value tax rate of any fire district in Dutchess County for many years, and one of the highest fire tax rates in New York State, with recent rates hovering just over $5.00 per thousand dollars of market value. If Fairview's final assessment is unchanged from the tentative assessment, and if Fairview’s 2012 tax levy is unchanged from 2011 (just as a point of reference), then Fairview’s true value tax rate will increase 2.8 percent to $5.25 per thousand dollars of market value, making it Fairview's highest tax rate in a decade, and its second highest tax rate increase in a decade.

For further details, including a history of Fairview's market value, tax levy, and tax rates from 2001 to 2012 (projected) in table and chart form, see Fairview Fire District Property Tax Data.

Upcoming Fairview Public Meeting

In past years, the Fairview Fire District, like many local taxing jurisdictions, has done budgeting and planning mainly year-to-year. However, the Fairview Board of Fire Commissioners, to its credit, has recently established a long range planning committee to look further into the future than just one year ahead. This committee, headed by Commissioner Bob Gephard, has scheduled a public workshop meeting for Thursday, May 26, at 6:00 pm at the Fairview Fire House. The agenda includes discussing goals such as public protection versus risk versus cost, early review of next year's budget, and long range costs. In looking at the big picture — both short and long term — the tax rate and the change in the tax rate is, in my view, one important measure of the status of the District. Perhaps the long range planning committee will find my analysis of previous and projected tax information useful. I plan to attend this meeting, and to report here on what transpires.

BOCES Is Indifferent to the Accuracy of its Property Tax Data

2011-05-08T11:06:00.000-04:00

Every year, the Dutchess County Board of Cooperative Educational Services (BOCES) publishes two comprehensive documents, a Contract Analysis book and a Fact Book, both for assisting school district administrators in their budgeting processes and in negotiating with labor unions. Each document consists almost exclusively of tabulations comparing numerous parameters for the 13 school districts in Dutchess County.

Contract Analysis 2010-2011, published January 2011, is a 157-page document, most of whose tables relate to salaries and benefits of school district employees. However, a 35-page section called Financial contains district-wide tables related to budgets, costs per student, costs per expense category, and, yes, property tax information, including assessed values, tax levies, and tax rates. Naturally, that's the part I've focused on.
Dutchess County Fact Book 2005-2006 through 2009-2010, published January 2011, is a 69-page document containing additional financial information, including more extensive property tax tables than appear in the Contract Analysis book.

In examining the above documents, I looked first at the current school district true value tax rates for the 13 school districts in Dutchess County, listed on page 144 of the Contract Analysis PDF (page 32 of the Financial section). Comparing with my own analysis, I noticed significant discrepancies in 4 districts: Beacon, Millbrook, Poughkeepsie, and Spackenkill. The BOCES rates are lower than mine by 5 percent or more in most cases. My report BOCES Tax Rate Variances documents these discrepancies in detail. I sent this report to BOCES Assistant Superintendent for Business Services Linda Poleski, with the hope that she would review my analysis and determine whether the issues I raised about the accuracy of BOCES current true value tax rates could be substantiated. Ms. Poleski graciously accepted my report, and within a few days informed me that BOCES has confirmed that all my tax rates are correct, and has adjusted its records accordingly.

OK, so far so good. Encouraged by this initial interaction, I examined additional BOCES property tax tables, and found a significant number of additional discrepancies:

True Tax Rates – Historical table on page 147 (page 35 of the Financial section) of the Contract Analysis book contains tax rates for every school district going back a decade. Although most of the tax rates in this table agree with my analysis, a significant number did not agree. I found at least one disagreement in every year, and at least one disagreement in each of 8 school districts. For the Poughkeepsie school district, there was no agreement in any year. For the 2000-2001 school year, there was no agreement in any school district. A number of disagreements exceeded 5 percent.
Total Property Value on page 19 of the Fact Book PDF (numbered page 13) contains true value taxable assessments for each school district in 2009 and 2010. Of the 26 assessments, 12 agree with my analysis and 14 do not — more than half. Most BOCES assessments are a few percent greater than mine, but 4 assessments are over 10 percent greater than mine. The disagreements are especially puzzling since these numbers are used to compute the true value tax rates, for which we have much more agreement.
Comparison of Property taxes for 2005-06 to 2009-10 on page 15 of the Fact Book PDF (numbered page 9) contains the tax levies for these years for each school district. The 2009 tax levies also appear on page 116 of the Contract Analysis PDF (page 4 of the Financial section). I found no agreement at all between any of this data and my analysis. Typically, BOCES data was on the order of 10 percent lower than mine, a very large variance. Once again, this disagreement is especially puzzling since these numbers are used to compute the true value tax rates, for which we have substantial agreement.

I documented these discrepancies in Other BOCES Property Tax Variances, which I sent to Ms. Poleski on April 11. I had some confidence that these new issues would be taken seriously, since BOCES had already accepted my previous discussion as being both responsible and accurate. Unfortunately, after a number of conversations with Ms. Poleski it became clear that BOCES will not attempt to determine whether the new issues I raised regarding BOCES property tax tables are valid. Ms. Poleski also stated that BOCES “will not go back and correct previous years”. My conclusion from these interactions is that BOCES is indifferent to whether the property tax data in their two publications is accurate.

In summary, BOCES property tax data has been brought into serious question, and these questions have not been answered. School district administrators may want to avoid relying on this data for their budget processes and union negotiations.

School District Tax Rate Comparisons

2011-04-28T17:02:00.000-04:00

I've consolidated my recent posts on Dutchess County's 2010 school district tax rates into an 18-page PDF document, School District Tax Rate Comparisons. This document includes not only all the information in my last three posts, but it also contains the tax rate information in tabular form. In addition, it includes information on tax rate increases since 2009, in both chart and tabular form.

School Tax Rate Rankings — Taxpayer Viewpoint

2011-04-13T09:19:00.000-04:00

Which property taxpayers in Dutchess County pay the highest school tax rate? The lowest? Where does your property stand in the school district rankings? Here are the answers.

The first thing to understand is that the answers are different for homes (homestead properties) than they are for businesses (non-homestead properties). That's because 5 of Dutchess County's 13 school districts — Arlington, Beacon, Poughkeepsie, Spackenkill, and Wappingers — tax their home properties at lower true value rates than their business properties. The second thing to understand is that in the Arlington, Beacon, and Wappingers School Districts, properties are taxed at different rates depending not only upon whether they are homestead properties, but also upon which town the property lies in. For more details on these points, see School Tax Rate Comparisons — Two Viewpoints.

School Tax Rankings for Homes

The following chart shows the 2010 true value school tax rates for homes in Dutchess County. For the 5 school districts using the homestead tax option, the homestead tax rates are shown. The primary data source is the Dutchess County Real Property Tax Service Agency's 2011 Tax Rate Pamphlet. To improve clarity, I've grouped Arlington's municipal segments (Towns) with nearly the same true value tax rate into a single bar.

As the chart shows, first place for homesteads goes to the Hyde Park segment of the Arlington School District. Homesteads in this segment pay the highest true value tax rate of any homes in Dutchess County — by far. Arlington's Hyde Park rate of $22.02 is 15 percent higher than for second place Pawling, and almost double that of “last place” Poughkeepsie. The reason for the exceptionally high tax rate in the Hyde Park segment of Arlington is that this segment contains a large number of farms with partial tax exemptions. It turns out that the Hyde Park segment of Arlington contains only a few dozen homestead properties. Thus, only a few taxpayers are affected, presumably not enough taxpayers to mount an effective complaint.

Apart from the anomalous Hyde Park segment of Arlington, with its exorbitant $22 tax rate, school tax rates for homes in Dutchess County can be seen to be split between high-rate districts (Arlington, Pawling, Hyde Park, Red Hook, Dover, and Spackenkill, in the range of about $17 to $19), and low-rate districts (Rhinebeck, Beacon, Wappingers, Webutuck, Pine Plains, Millbrook, and Poughkeepsie, in the range $11 to $14).

Although Poughkeepsie has the lowest homestead school tax rate in Dutchess County, Poughkeepsie gets a greater proportion of its funding from sources other than school taxes of any school district in Dutchess County.

School Tax Rankings for Businesses

The following chart shows the 2010 true value school tax rates for businesses in Dutchess County. For the 5 school districts using the homestead tax option, the non-homestead tax rates are shown. Once again, I've grouped segments with nearly the same true value tax rate into a single bar for clarity:

The chart shows first place for non-homestead tax rates going to Spackenkill by a landslide, with a bank-breaking $38.02 tax rate. To put Spackenkill's sky-high tax rate in perspective, it is more than double Hyde Park's 4-th place rate of $18.60, and more than triple Webutuck's $11.92. The primary business properties in the Spackenkill school district have historically belonged to IBM Corp., which has been willing in the past to pay exorbitant school taxes into a district where many of its professional employees lived.

Way “behind” Spackenkill, but still easily capturing second place is Arlington, in the $23.50 to $27 range, depending upon segment. Trailing considerably after Arlington is a large pack of school districts in the $16.50 to $19 range. The remaining five school districts — Millbrook, Pine Plains, Webutuck, Poughkeepsie, and Rhinebeck — managed to keep their commercial school tax rates at the low end, between $11 and $14. Of these five, all except Poughkeepsie have the same tax rate for homes and businesses.

How should these rankings be interpreted?

The rankings in this post compare how steeply homes and businesses are taxed by school districts in Dutchess County. The first chart can be used to determine the relative school tax bills for homes in Dutchess County in 2010. For example, if you own a home in the Hyde Park segment of the Arlington School District, your 2010 school tax bill was almost double that of a home with the same taxable market value in the City of Poughkeepsie. Similarly, the second chart shows that if you own a commercial property in the Spackenkill School District, your 2010 school tax bill was more than triple that of a commercial property with the same taxable market value in the Webutuck, Pine Plains, or Millbrook School Districts.

In summary, these charts show how steeply school districts tax their properties — from the taxpayer's point of view. These charts are not appropriate for comparing how steeply the various school districts tax their tax base on average, because many school districts tax different properties at different rates. For this latter comparison, see School Tax Rate Rankings — School District Viewpoint.

Out of County School Districts

A small number of Dutchess County property owners do not pay school taxes to any of the Dutchess County school districts listed above. Instead, they pay to so-called “out-of-county” school districts Carmel, Haldane, or Taconic Hills. The 2010 true value tax rate for the Taconic Hills School District is only $10.07, making it the lowest school tax rate for Dutchess County home or business property taxpayers. At the other extreme, the 2010 true value tax rate for the Carmel School District is $20.34, placing it second only to the Hyde Park segment of Arlington for homes, and third only to Spackenkill and Arlington for businesses. Finally, the Haldane School District's $14.75 tax rate places it between the low-rate and high-rate districts for both homes and businesses.

School Tax Rate Rankings — School District Viewpoint

2011-04-07T16:40:00.003-04:00

Which school district in Dutchess County has the highest tax rate? The lowest? Where does your school district stand in the rankings? You're about to find out.

The winner by a landslide is the Spackenkill School District, whose 2010 aggregate tax rate of $24.75 per thousand dollars of market value is way “ahead” of second-place Arlington. Before we go any further, it's crucial to understand the meaning of the rankings in this post. The most important thing to know is that these rankings are from the school district point of view. The aggregate tax rates in this post measure how steeply each school district taxes its tax base. These rates are useful to understand how school districts compare with each other, tax-wise. They are generally not appropriate for comparing the taxes paid by individual taxpayers, because in some school districts, different taxpayers pay at different rates. Subsequent posts will present rankings from the taxpayer viewpoint. For more on school district versus taxpayer tax rates, see School Tax Rate Comparisons — Two Viewpoints.

Here are the aggregate tax rates for the 13 school districts in Dutchess County, which I compiled primarily from data in Dutchess County Real Property Tax Service Agency's 2011 Tax Rate Pamphlet.

The school districts' aggregate tax rates fall roughly into 4 groups: low, medium, high, and almost-off-the-chart. The low ranking districts include Millbrook — lowest of all in Dutchess County — Pine Plains, Webutuck, and Poughkeepsie. The medium group include Wappingers, Rhinebeck, and Beacon. The high group — the largest group — includes Dover, Red Hook, Hyde Park, Pawling, and Arlington. Spackenkill comprises it's own almost-off-the-chart group.

How should these rankings be interpreted?

Probably narrowly. It is fair to say that these rankings compare how steeply each school district taxes its tax base. But aggregate tax rate is only one of a number of objective metrics for evaluating school district financial performance. Although most school districts in Dutchess County get the bulk of their funding from the tax levy, the proportion of other funding varies considerably from one district to another. A few districts — such as Poughkeepsie, in the low group — get less than a third of their funding from the tax levy.

Even if aggregate tax rate were a reliable measure of a school district's financial performance, does a low tax rate mean that the school district is short-changing its students and staff, or does it mean that the district is using its funds more efficiently than other districts? Does a high tax rate mean the school is superior, or that it is more wasteful? There's really no end to such imponderable questions. Depending upon how one wants to look at it, there are many additional useful ways of measuring school district financial performance. (Examples: cost per student, market value per student, etc.)

BOCES Corrects Its Tax Rates

School officials and others who are familiar with the Dutchess County Board of Cooperative Educational Services (BOCES) publication Contract Analysis 2010-2011 may notice some discrepancies between that publication's table, True Value Tax Rates for 2010-11 on page 32 of the Financial section, and my ranking chart above. The data should be the same, because both are measuring the same thing. Although most of the data in the BOCES table agrees with mine to the penny, I found 4 school districts with substantial disagreement: The BOCES table's tax rates for Beacon, Millbrook, Poughkeepsie, and Spackenkill are lower than mine by 5 percent or more in most cases. After consulting with a senior BOCES official about these discrepancies, I'm happy to report that BOCES has accepted all my tax rates as correct, and has adjusted its records accordingly. BOCES has earned my thanks for its gracious and prompt handling of my inquiries.

School Tax Rate Comparisons — Two Viewpoints

2011-04-04T10:44:00.017-04:00

I'm beginning a series of posts on school district tax rates in Dutchess County. School taxes are by far the largest single property tax for most taxpayers. In fact, property owners often pay more in school taxes than in all other property taxes combined. Another way of saying this is that the school tax rate is greater than the sum of all the other tax rates (town, county, fire, library, etc.) for a typical taxpayer.

Comparison Requires True Value Tax Rates

In order to properly compare tax rates — any tax rates — the tax rates must be expressed in dollars per thousand dollars of market value, as I have explained countless times in this blog (for example, here, here, and here). Tax rates expressed in terms of market value rather than assessed value are sometimes called true value tax rates.

True value tax rates are useful for comparing school tax rates with town, county, fire, and library tax rates, as above, and they are also useful for our main focus here, which is comparing various school tax rates with each other. Comparison of school tax rates arises in a number of useful contexts, including comparisons among school districts, comparisons in the same district among years, and comparisons within the same district (or even different districts) among taxpayers. We will investigate all of these contexts in this series of posts.

School District Viewpoint versus Taxpayer Viewpoint

It is important to understand that in Dutchess County, school tax rate comparisons should be conducted in two different ways, depending upon the purpose or viewpoint of the comparison. These two viewpoints are the taxing authority viewpoint (in this case, the school district viewpoint) and the taxpayer viewpoint. These seemingly similar viewpoints can be described by the following two sets of questions:

Q1 (School District Viewpoint): How steeply does each school district tax its tax base? Which school district in Dutchess County has the highest tax rate? The lowest? Where does your school district stand in the ratings?

Q2 (Taxpayer Viewpoint): How steeply are property owners taxed by their school district? Which property owners in Dutchess County pay school taxes at the highest rate? The lowest? Where does your property stand in the ratings?

If every school district taxed all their property owners at the same true value tax rate within the district, the above two sets of questions would have the same answers. Unfortunately, this is not quite the case. Of the 13 school districts in Dutchess County, 8 school districts tax all their property owners at the same true value tax rate within the district. The remaining 5 school districts have a more complex taxing structure, taxing different property owners at different rates. These different rates occur for two different reasons, homestead tax option and apportionment option.

School District	Tax Rate Structure
Dover Hyde Park Millbrook Pawling Pine Plains Red Hook Rhinebeck Webutuck	Single tax rate
Poughkeepsie Spackenkill	Homestead tax option
Arlington Beacon Wappingers	Homestead tax option Apportionment option

(I've chosen to ignore for the most part the small regions in Dutchess County lying in the out-of-county Carmel, Haldane, and Taconic Hills school districts.)

Homestead Tax Option

Under New York State Real Property Tax Law, school districts and certain other taxing authorities can opt to classify the taxable properties in their jurisdiction into two separate classes. Properties in the homestead class (essentially homes) are taxed at a relatively low rate, while properties in the non-homestead class (essentially businesses and commercial properties) are taxed at a higher rate. The Poughkeepsie, Spackenkill, Arlington, Beacon, and Wappingers school districts utilize the homestead tax option, as shown in the above table. In these five school districts, a property's true value tax rate depends upon whether the property is classified as a homestead or a non-homestead property.

Apportionment Option

Nearly all school districts in Dutchess County comprise portions of more than one town. (The only exceptions are Poughkeepsie and Spackenkill.) The portion of a school district lying in a particular town is called a municipal segment. Ordinarily, property taxing authorities in New York State are required to apportion their tax levy among municipal segments in such a way that all properties (or all properties of a given property class, if the homestead tax option is used) are taxed at the same true value tax rate.

However, for school districts, New York State Real Property Tax Law provides an optional exception to this common-sense rule. The exception permits school districts to apportion their tax levy among their municipal segments based on a different criterion than uniform true value tax rates. Essentially, the tax levy is apportioned based on total market value, rather than on total taxable market value. Only the Arlington, Beacon, and Wappingers school districts utilize this special apportionment option, as shown in the above table. The important point here is that in these three school districts, a property's true value tax rate depends not only upon the property's class (homestead or non-homestead), but also upon which town (municipal segment) the property lies in.

School District	Number of Towns
Arlington	9
Beacon	3
Wappingers	5

OK, enough about real property tax law. Here's how the two sets of comparison questions can be answered using various kinds of tax rates:

Aggregate Tax Rate

I define the aggregate tax rate for a school district to be simply its total tax levy divided by its total taxable market value. The aggregate tax rate is a true value tax rate which measures how steeply a school district taxes its tax base. Thus, the aggregate tax rate is appropriate for comparing school districts with each other (Q1). If a school district taxes all its taxpayers at the same true value tax rate, as do 8 of the school districts in Dutchess County, then the aggregate tax rate is this rate. If a school district taxes different taxpayers at different true value tax rates (5 school districts with homestead and/or apportionment options), then the aggregate tax rate is the average of those rates, weighted by the proportion of taxable market value in each taxing class and/or municipal jurisdiction.

Homestead and Non-Homestead Tax Rates

For a school district using the homestead tax option, the homestead tax rate is simply the portion of its total tax levy assigned to the homestead class, divided by the total taxable market value of its homestead class. Thus the homestead tax rate is a true value tax rate. The non-homestead tax rate is defined similarly. For property owners in the Poughkeepsie and Spackenkill school districts, these rates are appropriate for measuring the steepness of their taxes, and comparing them with those of property owners elsewhere (Q2).

Segment Tax Rates

In the Arlington, Beacon, and Wappingers school districts, a property's school tax rate depends not only upon the property's class (homestead or non-homestead), but also upon which town (municipal segment) the property lies in. I define the homestead segment tax rate for homestead properties in a municipal segment to be the portion of the homestead tax levy apportioned to homesteads in the municipal segment, divided by the taxable market value of homesteads in that municipal segment. Thus the segment tax rate is a true value tax rate. Non-homestead segment tax rate is defined similarly. For property owners in the Arlington, Beacon, and Wappingers school districts, the segment tax rates are appropriate for measuring the steepness of their taxes, and comparing them with those of property owners elsewhere (Q2).

For example, in the Arlington School District, the 2010 homestead tax rate in the Town of LaGrange is $18.92 per thousand dollars of market value, while that in the Town of Poughkeepsie is $18.61. This means that a homestead property in the Town of LaGrange paid 1.7 percent more Arlington school tax in 2010 than a homestead property with the same taxable market value in the Town of Poughkeepsie.

Ranking the School District Tax Rates

In subsequent posts, I'll present the rankings of Dutchess County school district tax rates, from both the school district and the taxpayer viewpoints.

Arlington School District Superintendent Continues Tax Levy Misstatement

2011-03-18T17:59:00.001-04:00

Arlington School District update: Superintendent's tax levy data is more correct now, but his key summary statement is still wrong.

Recent Post Highlights Data Errors and Key Misprint

My recent post Arlington School District Proposes Lowest Tax Levy Increase in Decade — NOT exposed the fact that Arlington School Superintendent Geoffrey Hicks used incorrect tax levy data to reach an incorrect conclusion in his 2011-2012 Budget Draft 2 presentation of February 15, 2011. This incorrect conclusion was that the 2011-2012 budget proposal represented the lowest tax levy increase in 10 years. In reality, it represents the second lowest tax levy increase.

As an aside to my main point, I made light of a ridiculous misprint on a key summary page, which unintentionally stated

Lowest proposed tax levy in 10 years

instead of

Lowest proposed tax levy increase in 10 years

The proposal actually represents the highest proposed tax levy in 10 years, and almost certainly the highest in the history of the Arlington School District, not the lowest.

My Contacts with Arlington Officials

Before posting, I worked closely with a senior Arlington official to correct some of Arlington's past tax levy data, though we were not able to resolve disparities from 2000 to 2004. After posting, I emailed Hicks, to be sure he would have direct access to my post.

Revised Presentations Continue Misstatement

Hicks has now presented two revisions of the February budget draft, Arlington Central School District: Community Budget Forum on March 12, and Arlington Central School District: Budget Study Session on March 15. Happily, both these revisions provide the partial correction to Hicks' chart of tax levy increase history. This partial correction is enough to establish the correct conclusion that the proposal represents only the second lowest tax levy increase in a decade, not the lowest. This correct conclusion is hinted at by the fact that the word “second” has been prepended to the main summary page bullet item, which in both of this week's drafts reads

Second lowest proposed tax levy in 13 years

So “second” was inserted, and “10” was changed to “13”, but the key term “increase” didn't make it into either revised draft. So this twice-revised summary statement is still as wrong as it ever was.

Stakeholders May Be Mislead

I'm sure that Arlington's Board of Education and readers of this blog will easily understand the intended meaning of Hicks' key summary statement, despite the misprint. But in my view, many of Arlington's less sophisticated stakeholders who read only Hicks' summary page will not catch the blunder, especially since it's now been repeated in three successive presentations. It's unfortunate that Hicks has been unable to correctly communicate a key feature of the proposed 2011-12 budget — even after three tries.

Town of Pleasant Valley Revaluation Will Challenge Supervisor's Miscalculation

2011-03-16T15:23:00.002-04:00

In November I wrote in this space that the Town of Pleasant Valley has been calculating its town tax rate increases in a meaningless way, that this incorrect calculation has been a systematic part of the Town's fiscal methodology for at least the last three years, and that therefore both the town government and its stakeholders are being mislead about the true tax rate increases. For example, Pleasant Valley's 2011 Adopted Budget claims that the Town tax rate increased 9.1 percent from 2010. My analysis showed the tax rate increase to be 23.3 percent, based on information available at the time. (My analysis of final tax information released 6 weeks ago by Dutchess County's RPTSA shows Pleasant Valley's 2011 tax rate increase to be 24.4 percent.)

On November 24, I emailed Pleasant Valley Town Supervisor John McNair — who is also the Town Budget Officer — as well as three of the four Town Board members, alerting them to my blog posts. (I did not attempt to contact board member Steve Albrecht. In this second decade of the third millennium, officials without an email address cannot expect to play a serious role in public affairs.) I've received no response from any of these officials.

Revaluation Implies 100 Percent Equalization Rate

That's the background. Update to today: A story in the Poughkeepsie Journal on February 25 announced that the Town of Pleasant Valley has completed a revaluation of all properties, and that tentative taxable assessed values are available. The revaluation is a significant step forward for Pleasant Valley for many reasons. The most important reason for our purposes is that Pleasant Valley's equalization rate will be 100 percent for this year, and for every year from now on. This means that assessed values will be equal to market values, and that tax rates expressed in dollars per thousand dollars of assessed value will be equal to tax rates expressed in dollars per thousand dollars of market value. This further implies that changes in the tax rate can be calculated in the future without first converting from assessed value to market value, since the two are the same. It is the need for this conversion that is at the core of McNair's mistake.

McNair's Approach Is Flawed For One More Year

As I explained at length in my previous posts, McNair's way of calculating tax rate increase is flawed because it doesn't account for changes in the equalization rate. But in the future, the equalization rate won't change — it will stay fixed at 100 percent. This means that McNair's way of calculating tax rate increases will give the right answer in the future.

You did notice that I wrote “in the future”, right? “In the future” refers to the 2013 property tax rate increase, the 2014 property tax rate increase, and so on. It does not refer to the 2012 property tax rate increase, which will be determined next November. That's because the equalization rate will change dramatically from the 2011 tax to the 2012 tax — from 59 percent to 100 percent. If McNair continues to use the flawed calculation of tax rate increase that has been used for the last three years, the resulting tax rate increase will be absurd.

Possible 2012 Tax Rate Increase

Consider this thought experiment: Suppose for the moment that Pleasant Valley's 2012 taxable market value is unchanged from 2011. Suppose also that Governor Cuomo's 2 percent property tax cap proposal is enacted, and that Pleasant Valley raises its tax levy for 2012 by exactly 2 percent. Then Pleasant Valley's tax rate, measured in dollars per thousand dollars of market value, will increase exactly 2 percent, from the current $2.45 to $2.50. Couldn't be simpler, right?

McNair's Absurd Tax Rate Increase

If McNair continues to use the calculation method of the last three years, what tax rate increase would he get? Well, Pleasant Valley's 2011 tax rate is shown in the Dutchess County Real Property Tax Service Agency's latest tax rate pamphlet as $4.15 per thousand dollars of assessed value. Pleasant Valley's 2012 tax rate would be $2.50 per thousand dollars of assessed value, as noted above, since assessed value is equal to market value for the 2012 tax. Therefore, Pleasant Valley's tax rate “increase” would be figured from these two rates as -40 percent. Yes, folks, that's minus 40 percent! McNair would need to claim that by increasing the tax levy 2 percent, he has somehow decreased Pleasant Valley's tax rate by 40 percent. Such a ludicrous statement is entirely meaningless, and corresponds to nothing in the real world.

A More Precise Tax Rate Increase Projection

For simplicity, the above analysis assumed that Pleasant Valley's 2012 taxable market value is unchanged from 2011. In reality, the revaluation has uncovered a significant amount of taxable market value that had been unaccounted for in past years. That's one of the main reasons for doing the revaluation. This newly-discovered value more than compensates for the continuing downward trend of market values in recent years. It turns out that Pleasant Valley's taxable market value for the 2012 tax year is actually up 8.1 percent from 2011 to $1,068,553,959. (This tentative figure will probably decrease slightly before the final assessment roll appears on July 1, 2011.)

Using this tentative market value in our thought experiment, Pleasant Valley's 2012 tax rate becomes $2.31 per thousand dollars of market (or assessed) value, instead of the $2.50 from the oversimplified example. Comparing this with the 2011 tax rate of $2.45 shows that in 2012, Pleasant Valley will have a tax rate decrease of 5.6 percent. Once again, this result assumes a tax levy increase at Cuomo's 2 percent level.

What does this mean for the individual taxpayer in Pleasant Valley? If your taxable market value for 2012 happens to be unchanged from 2011, you will see a 5.6 percent decrease in the Town portion of your 2012 tax bill. However, quite a few properties will see a substantial increase in their 2012 taxable market value. After all, that 8.1 percent market value increase for the Town must come from somewhere. These property owners will obviously see increases in their tax amount in accordance with how much their property value has increased.

Supervisor's Miscalculation

OK, back to McNair's dilemma. With the above more precise projection of market value, McNair's flawed method requires calculating the percent change of 2012's tax rate of $2.31 per thousand dollars of assessed value from 2011's $4.15. McNair will be faced with needing to claim that an 8.1 percent increase in market value and a 2 percent increase in tax levy results in a tax rate decrease of 44.3 percent.

My Message to Pleasant Valley Town Officials

As I stated in my emails to Pleasant Valley Town Supervisor McNair and Town Board members, my purpose is not to embarrass the Supervisor or other Town officials. My purpose is to help correct what I believe to be an honest mistake, in order that property taxpayers, other stakeholders, and not least the Pleasant Valley town government itself can have a correct picture of how the town's property tax rate is changing.

Acknowledgement

I'm grateful to Pleasant Valley Town Assessor Teresa Stegner for graciously providing me with the Town's tentative taxable assessed value and other helpful information.

Pleasant Valley Table and Charts Are Available

The format of this blog is not really suitable for presenting the large table and charts of Pleasant Valley's tax rate history that I would have liked to show as part of this post. Interested readers can find this supplementary information in my report Town of Pleasant Valley Property Tax Rate History.

Arlington School District Proposes Lowest Tax Levy Increase in Decade — NOT

2011-03-05T13:49:00.002-05:00

In the dry, geeky world of tax statistics, it's not often one encounters a humorous misstatement, especially when dealing with the effects of the economic meltdown of 2008. I say “dealing with” rather than the more optimistic “recovering from” because the budget situation in the Arlington School District, many other school districts, and indeed many local taxing authorities is nothing short of dire. As I see it, many institutions are not so much being squeezed as they are being partially dismantled. But that's another story.

Anyway, Arlington School Superintendent Geoffrey Hicks provided some unintentional humor — gallows humor, perhaps — in his 65 page 2011-2012 Budget Draft 2 presentation of February 15, 2011. In a key foil on page 50 summarizing dozens of pages of detailed budget issues, Hicks presents three main points, the second of which is inadvertently written as

Lowest proposed tax levy in 10 years

Oh, how we wish it were true! In reality, the proposed tax levy is the highest in 10 years, and almost certainly the highest in the history of the School District, as Hicks undoubtedly knows. But of course, Hicks didn't mean to write Highest either. It is clear from context that what he meant to write was

Lowest proposed tax levy increase in 10 years

Indeed, the corrected statement already appears in a February 22 Poughkeepsie Journal story about Arlington's budget.

Faulty Tax Levy Increase Data

The problem is, even after fixing the typo, this statement is still wrong! That's because Hicks' statement is based on faulty data about Arlington's tax levy increases. His data is presented in a chart on page 51, in the form of a graph of Arlington's tax levy increase for each year beginning in 2003. Most of this data is wrong. Wrong enough to make Hicks' summary statement wrong.

My analysis of Arlington's tax levy increase history, based on data from Dutchess County's Real Property Tax Service Agency (which maintains the data for preparing property tax bills), looks like this:

The above chart shows that Hicks' proposed tax levy increase of 4.47 percent noticeably exceeds 2007's tax levy increase of 3.98 percent. One way Hicks can correct his statement is to write

Second lowest proposed tax levy increase in 10 years

This would harmonize well with Hicks' third main point on the same summary foil, “Second lowest spending increase in 10 years”.

Hicks' tax levy data isn't all wrong. It is actually correct for 2008 and later years. But for 2003 to 2007, it bears no relation to the historical record.

Kudos to Hicks, despite mistake

Hicks' mistake isn't a really big deal, especially in the context of the total budget proposal. I'm quite impressed with the breadth and depth of his total presentation, which considers a very wide variety of factors I can't begin to summarize here. This is already Hicks' second major version of this year's budget proposal. The first one, presented in January, begins with the following candid foil:

Hard Facts

2011-12 will be the most difficult budget construction cycle in memory.
There will be additional staff reductions and budget cuts in Arlington for 2011-12. There is no way to avoid it.
There is a potential “perfect storm” of factors that threaten to place extreme stress on the existing system.
Starting the process early and being completely transparent are the best means for making critical decisions.

I find Hicks' approach of summarizing the Bad News and his openness about presenting the issues to be an admirable approach, well worth emulating by other districts in this difficult time.

Acknowledgement

I'm grateful to Arlington School District Assistant Superintendent for Business Robin Zimmerman for confirming the correctness of my 2005-2010 tax levy data, and for many helpful discussions.

Arlington School District Table and Charts Are Available

The format of this blog is not really suitable for presenting the large table and charts of Arlington's tax rate history that I would have liked to show as part of this post. Interested readers can find this supplementary information in my report Arlington School District Aggregate Property Tax.

Poughkeepsie Journal Misstates Property Value Data

2010-12-21T20:24:00.002-05:00

The Poughkeepsie Journal has been remarkably consistent in its property tax analysis mistakes. It keeps making the same mistake, but in different forms. The mistake is to focus on assessed values when market values are the appropriate parameter. For towns assessed at full market value, it makes no difference, because assessed values are market values. But for towns not assessed at full market value, using assessed values can give garbage results. On the good side, the Journal is reporting about important trends in property taxes, even if it gets the numbers wrong.

A front-page feature story in today's Poughkeepsie Journal by reporter John Davis is headlined, “Assessments lose $1.8 billion”. The subtitle reads, “18 of 22 Dutchess County towns and cities have taxable real estate decrease from 2009 to 2010”. (Headlines in print edition.) As we will see, the $1.8 billion and the 18 towns are incorrect. The story's first two sentences restate these numbers, and add two important facts:

Tax rates are going up.
Tax bills may not be going up.

I have to say, it's excellent that the Poughkeepsie Journal is calling attention to some of the important trends in property taxes in Dutchess County: Property values down — check; tax rates up — check; tax bills flat — check. Unfortunately, the story is marred by many misleading and incorrect numbers, including those in the headlines. All the mistakes relate to the 7 Dutchess County towns not assessed at full market value. Most revealing of the Poughkeepsie Journal's misunderstanding about property values is the following story excerpt:

A reduction in taxable assessed values is most noticeable in the towns and cities that are committed to keeping them aligned with the current market values — qualifying them for a 100 percent equalization rate by the state. They range from a drop of 12.7 percent in the overall assessed values in the Town of Clinton to a 1.12 percent reduction in Amenia. The towns that are not assessed at full market value will see either a slight increase or decline in their overall taxable values. [emphasis added to original]

The reason a reduction in taxable assessed value is “noticeable” in towns assessed at full market value is that changes in assessed values are changes in market value. That's the whole point of maintaining assessments at full market value. It is market value (also known as “home value”, “full value”, “full market value”, and “property value”) that is meaningful in the real world — not assessed value. The only people who need care about assessed value are assessors and other property tax geeks.

All Towns Have Dropped in Value

For towns not assessed at full market value, assessed values typically don't change year-to-year. That's the whole point of not assessing at full market value! For towns not assessed at full market value, the change in market values is reflected in the change in the equalization rate. That's why it's not meaningful to compare assessed values. To properly compare such a town's taxable value in 2009 and 2010, you must first convert the assessed values to market values by dividing them by the equalization rate for each year. Once you do that, you find that in place of a “slight increase or decline” all towns had a decline, and for all but one town, the decline was double-digit. The following table compares the Poughkeepsie Journal's numbers and those I obtained from the Dutchess County Real Property Tax Service Agency (RPTSA):

The Journal's mistake results in wildly optimistic market value increases for these towns.

Dutchess County's Property Values Are Down $2.7 Billion

Just as you can't compare assessed values across years for towns not assessed at full market value, you also can't just add together a bunch of assessed values of different towns not assessed at full market value. It would be like adding together lengths measured in yards, meters, fathoms, rods, and cubits. You can't do that until you've converted them to a common unit of measure. That's why the headline “Assessments lose $1.8 billion” is incorrect. First of all, it makes no sense to talk about Dutchess County's “assessments” unless you mean that word as a loose term referring to market value. Secondly, and more important, Dutchess County's market value declined $2.7 billion, not $1.8 billion. Readers of my recent blog post Dutchess County 2011 Tax Rate Is Highest In Decade already know that Dutchess County's market value has declined 7.7 percent from last year (see table in that post). That table also lets them calculate the $2.7 billion difference between Dutchess County's 2009 market value and its 2010 market value. Once again, this data comes right from the RPTSA.

Poughkeepsie Journal's Record of Misunderstanding

It's been nearly a year since I wrote Poughkeepsie Journal's Incorrect Tax Rate Analysis. That post outlined what is essentially the same misunderstanding as described above, but applied to tax rates, rather than to property values. As I noted in that post, Poughkeepsie Journal management refused my request last year to speak with reporters, and it stood by its figures. This year, the Journal has continued to publish a series of articles by different reporters, all with the same incorrect tax rate analysis. My post last month describes four such stories. So it's clear how today's story fits into the pattern.

I have two reasons to doubt that Poughkeepsie Journal reporters or management have vetted today's story or the previous ones with a third party knowledgeable about property tax matters:

In my conversation nearly a year ago with Poughkeepsie Journal management, it became clear that management was dead sure they were right and I was wrong. If you're dead sure, there's no reason to check things out with someone else, right?
If they had consulted a knowledgeable third party, they presumably wouldn't keep making the same mistake.

I would like to think that a knowledgeable third party could be found just about anywhere. I know I've found many. On the other hand, I have to admit that I've also found many local officials — many more than I expected — who should know better, but who simply don't get it about property taxes. On the third hand (yes, I have three hands), you can't go wrong talking with the good folks at Dutchess County RPTSA or the New York State Office of Real Property Tax Services.

Petito Elected Fairview Fire Commissioner

2010-12-15T16:19:00.001-05:00

Local attorney Joseph Petito won reelection last evening as a commissioner in the Fairview Fire District. He received 58 out of 62 votes cast. (The other 4 votes went to various write-in candidates.) Petito began serving as commissioner last summer when he was appointed by Fairview's Board to fill out the term of Tom Ashline, who died on March 7, 2010.

This year's election was officially uncontested. It also turned out to be uncontested in fact, unlike last year's “uncontested” election. Last year, 29 write-in votes — more than enough for victory in a normal election — went to Chairman of the Board John Anspach, but newcomer Bob Gephard won anyway because of a concerted effort to get out the vote.

Petito's reelection can be seen as completing the power shift, begun in 2008, from the old guard to the newcomers. This year's election is the third in a row in which a newcomer has been elected to the board, thus establishing a solid majority over the old guard. The lack of visible opposition to Petito may indicate an acceptance of newcomer Board Chairperson Jill Line by supporters of the old guard.

Dutchess County 2011 Tax Rate Is Highest In Decade

2010-12-15T11:46:00.001-05:00

In this second of two posts on property tax for Dutchess County government, I show how this tax has evolved over the last decade.

In a previous post, I stated that market values in Dutchess County have doubled in a decade, but that the tax rate is about the same as a decade ago. This does not mean that we've seen a steady increase in market value during the decade. This also does not mean that the County's tax rate been constant during the decade. In fact, as I show below, both of these assertions are false. But why should we care about these details? Isn't it enough to know where we stand now, and where we stood a decade ago?

I think not. The trend in the past decade is not at all what one would expect from just looking at 2002 and 2011. Therefore, the future cannot be extrapolated from just those two years of data. Unless you've just arrived here from Planet 10, you know that there was an economic meltdown two years ago. Has this affected the County tax situation? You betcha! Let's see how. Here's what's actually been happening to the Dutchess County government's property tax situation in the last decade:

I don't know about you, but looking at all these digits makes my eyes glaze over. We can see better what's happening by charting each column. The biggest part of the story is the trend in market value:

The above chart shows clearly that although market values have doubled from 2002 to 2011, they actually more-than-doubled from 2002 to 2008, and have dropped 15 percent in the last three years. That's the economic meltdown right there. Note that although real estate values began dropping in early 2008, the effect is delayed from a tax viewpoint. That's because the government figures market values a year and a half behind the property tax bill. For example, your January 2011 tax bill is figured based on the market value of your property as of July 1, 2009. The drop in market values since 2008 has actually been accelerating, as can be seen clearly from the following chart:

This decrease in the tax base is a major reason for the increase in the tax rate. But there's another. Since the tax base has been getting smaller, the cost of services from County government has been decreasing also, right? Just kidding! When does that ever happen? Here's the trend in tax levy — the major source of income for Dutchess County government:

Notice that the tax levy has doubled in the past decade. But unlike for market value, there is no dip in tax levy after 2008. This fact is Bad News for the tax rate, as we'll see shortly. Here's a closer look at how the tax levy has changed year-by-year:

The tax levy increase for 2011 isn't missing — it's zero! The goal of zero tax levy increase for 2011 was proposed by County Executive William Steinhaus in his original budget message in October, and the County Legislature essentially concurred with this spending limit. A year ago, Steinhaus also proposed a zero tax levy increase for 2010, but the legislature chose to increase the tax levy by 7 percent. In both cases, Steinhaus and the legislature cynically focused on the change in the tax levy, rather than on the tax rate, which they knew (or at least Steinhaus knew) would tell a more sobering story. And here is the story, which Steinhaus has gone out of his way to hide:

The tax rate is simply the tax levy divided by the taxable market value. As you can see, the 2011 tax rate is the highest in 10 years, though admittedly by only a few cents. Still, the trend of the last three years is ominous. The tax rate increases can be seen more clearly in the following chart:

You did know that Dutchess County's tax rate is up 8.4 percent, right? Although Steinhaus has made a major effort to hide this information, the Poughkeepsie Journal has been doing a good job to inform its readers of the 8.4 percent tax rate increase. The Journal has reported this fact frequently this season, including in today's story, which announces the final budget outcome. This is a big improvement for the Poughkeepsie Journal, compared with last year at this time. As I've blogged here and here, Steinhaus was silent about the tax rate increase last year, and the Poughkeepsie Journal just went along with it. Once again, a big improvement in reporting by the Poughkeepsie Journal.

So what does this all mean? To start, the trend of the last three years is drastically different from what one would think looking just at 2002. The county tax rate hit a low in 2008, and has been increasing at an average of more than 10 percent per year since then. The 2011 tax rate is up 34 percent over that in 2008. In other words, holding the tax levy constant, as Steinhaus has been proposing, isn't good enough to keep the tax rate from rising significantly. That's because the economic meltdown has caused property values to fall dramatically in recent years.

The economic meltdown of 2008 is the worst economic event in the memory of most people alive today. It doesn't just affect real estate values. It affects us in 100 different ways. The 8.4 percent increase in the Dutchess County property tax rate is just one more of these ways.

Acknowledgement: Many thanks to the Dutchess County Real Property Tax Service Agency for providing most of the data used in this report.

Dutchess County Taxes in 2002 and 2011

2010-12-13T15:49:00.002-05:00

In this first of two posts, I show how property taxes of Dutchess County government today (well, next month) compare with those of a decade ago. Briefly, they're equally as steep as a decade ago, but the charges are twice as high because we're twice as wealthy. In a subsequent post, I'll detail the path taken by Dutchess County property tax throughout the last decade.

In order to pay for the services it provides, Dutchess County government charges every taxable property in the county. This charge appears on your January property tax bill, along with charges for other local governments (town, fire, etc.). By New York State law, the county charge is a fraction of the current market value of your property, and is the same fraction for every taxable property in the county. Every year, the fractional amount changes. But every year, the market value of your property changes too. So the amount you pay each year changes, because of changes in both the fractional amount set for that year and your market value for that year.

Fraction Is Tax Rate

Although the fraction charged could be expressed as a decimal value or as a percentage, it is traditionally measured as a tax rate in dollars per thousand dollars of market value. For example the 2011 Dutchess County tax rate is $3.07 per thousand dollars of market value. This is the same as the fraction 0.00307, or as 0.307 percent. For a taxable property with market value of $100,000 for the 2011 tax year, the county tax is $3.07 x $100,000 / $1,000, or $307. If you used the fraction or percent representation, you'd get the same result. That's because $3.07 = 0.00307 x $1,000.

The Tax Rate Is What Matters

As I have argued elsewhere, the tax rate — not the amount of your tax — is the most meaningful measure of how steeply you're being taxed. That's because the tax rate takes into account the fact that market values change. Follow me here: If your neighbor's property is worth $200,000, you'd expect her to pay twice as much tax as you at $100,000. This is fair and reasonable because your neighbor is twice as wealthy as you, as measured by the market value of her property. Now suppose your own property is worth $100,000 in 2002, but appreciates to $200,000 in 2011. If nothing else changes, that is, if the tax rate is the same in 2011 as in 2002, then you'd expect to pay double the tax in 2011 as in 2002. After all, you're twice as wealthy as you were then.

Market Appreciation Is Like Getting a Second House

Think of it this way: Suppose you owned a $100,000 house in 2002. Somewhere along the way, somebody just gave you a second house of equal value. For free. No mortgage. Now you own two $100,000 houses instead of just one. Great deal, right? Only problem is that you need to pay property taxes on both houses. So your property taxes have doubled. Of course, nobody actually gave you a second house; it's just that your current house is worth twice as much as before. But you really are twice as wealthy, as you'd realize if you go to sell your $100,000 house and find that you can get $200,000 for it.

Yes, I know, you might not be planning to sell, and you can't really afford the double taxes — the “free” house you were “given”. Unfortunately, there's no way to decline your market appreciation. And consider that you probably wouldn't “decline” to take the extra $100,000 you'd get for selling your house.

This Is Real

Folks, the above dynamic is not a hypothetical example. It is pretty close to what's been happening. Property values in Dutchess County have nearly doubled in the decade from 2002 to 2011. And the tax rate in 2002 was $3.02, just a few pennies less than the 2011 tax rate of $3.07. So the typical property owner in Dutchess County may be paying twice as much county tax as ten years ago. But that's because the typical property owner is twice as wealthy, as measured by the market value of the property.

Well, this analysis is a little oversimplified. It doesn't take into account the significant increase in Dutchess County market value caused by new development and property improvements. So the typical property owner isn't quite twice as wealthy in 2011 as in 2002. But close enough to establish the general idea.

What Has Been the Trend?

Since Dutchess County's market value for 2011 is double that of 2002, does that mean we've seen a steady increase in market value during the decade? No, it does not. Since Dutchess County's 2011 tax rate is about the same as in 2002, does that mean that the tax rate has been constant for the entire decade in between? No, it does not. Both inferences are incorrect. In a subsequent post, I'll show the trends in property tax for Dutchess County government in the last decade.

Why Should Property Taxes Fall When Market Values Do?

2010-12-01T20:53:00.001-05:00

I was glad to receive the following thoughtful anonymous comment today on my post Town of Hyde Park Misunderstands Property Tax Rate Increases:

All of Mr. Rubin's charts and discussions are rather confusing and redundant. His point is that even if your tax bill stays the same from one year to the next, tax amount as a percentage of market value has increased since your property value has decreased. His gripe has nothing to do with budget methodology but instead is focused on the decline in market value of the property.

One's mortgage payment doesn't fall when the home price falls. One's heating bill doesn't fall when the home price falls. One's car payment doesn't fall when the home price falls. One's food price doesn't fall when the home price falls. Why exactly should property taxes be any different?

Using Mr. Rubin's rationale, property tax bills should have doubled from 2001 to 2009 simply because home prices doubled in that time period.

Municipalities have no control over the market value of property. They do have control over expenditures and assessments.

I welcome the above comment for a number of reasons:

The commenter appears to understand and accept my argument.
I agree with most of what the commenter says.
His/her comment gives me a great opportunity to clarify some things. Here goes:

“The Charts and Discussions Are Confusing”

Hmmm. I did my best. Please say more specifically what needs clarification.

“The Charts and Discussions Are Redundant”

I couldn't agree more!!! I feel like I've been writing the same thing over and over, in numerous posts spanning more than a year. It's only recently that a few people have shown that they understand what I'm saying. Hopefully, I'll not need to keep doing this much longer.

“Why Should Property Taxes Be Different From Mortgage, Heating Bill, etc.?”

Great question! The question can be rephrased as, “Since mortgage payment, heating bill, car payment, etc. do not fall when the home price falls, why should property taxes be any different?”

Unlike other household expenses, property taxes are directly coupled to your current home price. The coupling is through the tax rate. The ratio of your property tax to your home price is essentially your tax rate in dollars per thousand dollars of market value. The tax rate measures how steeply your property is taxed. If your tax amount does not fall in proportion to the drop in your home price, then your tax rate goes up, and you are being taxed more steeply than before. In other words, your wealth, as measured by the market value of your property, is being taxed at a higher rate than before. This is bad because you're paying more tax, in proportion to your wealth, than before. Also, if you sell your house, your house will be less attractive to a buyer than a similarly valued house in a jurisdiction with a lower tax rate. Tax rate is also a measure of how steeply your municipality is charging taxpayers for its services. Perhaps the worst thing about increasing tax rates when property values fall is that it is tempting for municipalities to maintain the higher tax rate even after property values rise again. When this happens, your tax bill will increase in proportion to the increase in your property value at the same time that the municipality is (correctly) saying, “We're not increasing the tax rate.”

“By Your Reasoning, Property Tax Bills Should Have Doubled From 2000 to 2009”

That's right! Or almost right. It's really 2008 when home prices stopped increasing, so let's go with that. And there are some technical issues with fairly comparing taxes before 2001, so let's look at the interval 2001 to 2008:

Doubling of property tax bills is exactly what has happened in some municipalities from 2001 to 2008. For example, my report, The Big Three Fire Districts of Dutchess County, shows that in the Arlington Fire District, the LaGrange Fire District, and the Fairview Fire District, taxable market values more than doubled from 2001 to 2008, but the tax rates in each of these districts stayed very close to constant during this period. This implies that the tax levy (roughly proportional to tax bills) has doubled during this period. See my report for detailed charts of market value, tax levy, and tax rates for each of these fire districts for this decade.

Admittedly, the Town of Hyde Park has not followed this pattern. Although property values have doubled there from 2001 to 2008, as they have in most jurisdictions in Dutchess County, the Hyde Park tax rate as shown here has actually decreased quite substantially during this period. Therefore, Hyde Park's tax levy has only increased 31 percent from 2001 to 2008, rather than doubling. In my view, this is actually a pretty good record. (For what it's worth, the records for the Town of Pleasant Valley, the Town of Beekman, and the Beekman Fire District are similar to that of Hyde Park.)

In summary, doubling of tax bills has occurred in the high-priced fire districts, but not in the three towns I've looked at in detail. Thus, the record is mixed.

“Municipalities Control Expenditures and Assessments, Not Market Value”

A interesting observation, but only two-thirds right! Obviously, municipalities control expenditures (to the extent they can be controlled, what with mandates, union agreements, and many other “locked in” costs). And obviously, municipalities do not control market values. But a municipality does not “control” assessments, not as long as the Town Assessor lives up to his/her oath of office. According to New York State Real Property Tax Law, assessors are sworn to assess properties in such a way that every assessed value divided by the Town's equalization rate is equal to the market value of that property. The assessor gets to set the equalization rate for the Town, but has precious little leeway in doing so. In fact, if the State thinks the assessor's equalization rate is “wrong,” it will overrule the Town and set the equalization rate to what the State thinks it should be. The rules for assessing individual properties are quite elaborate, and leave only a small amount of leeway to the assessor. It is more accurate to say that the assessor administers the assessment process, rather than “controlling” assessments.

At least that's the theory. Obviously, in the real world there are all kinds of inaccuracies, errors, delays, mistakes, and disputes, many of which are only settled in court. But the basic principle of how assessments work is simple, fair, and fundamentally driven by market values. In summary, the only way a municipality has for controlling the tax rate is by setting the tax levy, which is primarily controlled by expenditures.

I hope I've shed some light on the matters raised by the anonymous poster. I encourage others (or the same poster!) to post comments that can further the discussion.

Town of Pleasant Valley's Tax Rate Increase Mistake is Entrenched

2010-11-24T20:48:00.001-05:00

On Monday I reported that the Town of Pleasant Valley's 2011 property tax rate increase of 9.19 percent, as reported in the Poughkeepsie Journal, is wildly inaccurate, and that the correct rate increase is 23.3 percent. On Tuesday, I reported that the principle blame for this mistake lies with the Town of Pleasant Valley, rather than with the Poughkeepsie Journal (which has been known to make mistakes of exactly this kind). Today I've determined that the calculation mistake by the Town of Pleasant Valley is not a single isolated error, but has been a systematic part of the Town's fiscal methodology for at least the last three years. Pleasant Valley's 2011, 2010, and 2009 Town budgets all show this mistake on the first page. In other words, the government of the Town of Pleasant Valley has no idea how much it is increasing its tax rate each year.

A Bad Example — Dutchess County Government

To put this mistake into perspective, consider how a more sophisticated government, such as that of Dutchess County, handles tax rates and tax rate increases. County Executive William Steinhaus' 2011 Budget Message does not even mention tax rates, let alone tax rate increases. You can be sure of three things:

Steinhaus knows full well exactly what the proposed tax rate and tax rate increase are. The county has an entire department that is expert at such matters.
The County tax rate will increase in 2011. That's because the County's taxable market value has decreased, Steinhaus is proposing to freeze the property tax levy at the 2010 level, and the County Legislature is very likely to increase the tax levy. Even a frozen tax levy guarantees increasing the tax rate if the market value has decreased.
The omission of tax rate information in Steinhaus' budget message is no accident. The omission is a deliberate attempt to make the situation sound not as bad as it really is, by focusing on the tax levy, and not the tax rate. Steinhaus is skilled; he did exactly the same thing last year.

In summary, Steinhaus avoided making any false statements, and he avoided telling the Really Bad News (a significant tax rate increase), all the while knowing full well what's really going on with County finances. I'm definitely not recommending Steinhaus' approach for the Town of Pleasant Valley — or for any municipality. By withholding the most important tax parameters — the tax rate and the change in the tax rate — Steinhaus makes it essentially impossible for his constituents and other stakeholders to sort out what's really happening to property taxes. This is the opposite of open government, and should be roundly condemned.

A Worse Example — Town of Pleasant Valley

However, Steinhaus' approach is better in two ways than what the Town of Pleasant Valley has been doing:

Steinhaus knows what's really going on regarding changes to the tax rate. The government of the Town of Pleasant Valley does not. The Town thinks it's only increasing the tax rate by 9 percent, when it's really increasing the tax rate by 23 percent. So, unlike the executive branch of Dutchess County Government, the Town of Pleasant Valley is flying blind.
Dutchess County taxpayers and other stakeholders don't know how much Steinhaus is proposing to increase their tax rate. As bad as this is (and it's Bad!), it's still better than for the taxpayers and other stakeholders of the Town of Pleasant Valley, who think they know, but what they know is wrong! In my view, not knowing is better than “knowing” something that's wrong.

It is disturbing, to say the least, that the Town of Pleasant Valley and its stakeholders think they know what's happening, when the reality is quite different. It's probably too late to do much about this for 2011. However, for the 2012 proposed budget, the Town of Pleasant Valley should publish the correct tax rate increase.

Town of Pleasant Valley Misunderstands Property Tax Rate Increases

2010-11-23T19:34:00.001-05:00

It's the Town of Pleasant Valley, and not the Poughkeepsie Journal, that is primarily responsible for calculating the wildly incorrect tax rate increase of 9.19 percent reported in the Journal on November 20. My post yesterday to this blog, Town of Pleasant Valley Increases Tax Rate 23.3 Percent, explains why the published tax rate increase is incorrect, and how to calculate it correctly.

Pleasant Valley Town Supervisor (and Budget Officer) John McNair asserted today that, “The rate increase is as stated in the Poughkeepsie Journal.” In other words, McNair considers the 9.19 percent tax rate increase reported in the Poughkeepsie Journal to be correct.

Given that the 9.19 figure is wrong, and considering that this incorrect figure reflects more favorably on the Town of Pleasant Valley than the correct figure of 23.3 percent, some might conclude that McNair is intentionally fabricating budget figures; in other words, lying. I doubt this is the case, for two reasons:

Although government officials deliberately make misleading statements every day of the week, they generally prefer to avoid lying. Instead, they make assertions that are true (but irrelevant), or that are difficult to dispute. The 9.19 figure is neither. It's false, and it's easy to show that it's false. Why would a government official lie about something that is so easy to refute?
Other institutions that should know better have been calculating tax rate increases incorrectly. I've already found two: The Town of Hyde Park has been making this mistake for at least three years. The Poughkeepsie Journal has been making this mistake for at least 10 months. In both cases, I've found evidence that these have been honest mistakes — not deliberate deception.

The tax rate increase mistakes committed by the Town of Hyde Park and the Poughkeepsie Journal are entrenched. So far, both institutions have vehemently denied that their published tax rate increase percentages are incorrect. How entrenched is the Town of Pleasant Valley's tax rate increase mistake? I don't know, but I'm hoping to find out. Stay tuned.

Town of Pleasant Valley Increases Tax Rate 23.3 Percent

2010-11-22T15:31:00.002-05:00

The headline on the front page of the November 20 Poughkeepsie Journal (print edition) reads, “Pleasant Valley OKs 2011 budget; tax rate rises 9.19%”. So why does the title of this post say the increase is 23.3 percent?

If you're a regular reader of this blog, you already know the answer. It's the same refrain I've written about numerous times in this blog, such as here, here, here, and here. The 9.19% figure was arrived at by directly comparing the 2011 tax rate with the 2010 tax rate, with both rates measured in dollars per thousand dollars of assessed value. Such a comparison makes no sense, because the two tax rates correspond to different equalization rates. It would be like comparing today's Dow Jones industrial average, measured in dollars, with yesterday's, measured in Euros.

Correct Computation Requires Conversion

To compare tax rates in dollars per thousand dollars of assessed value, one must first convert them to dollars per thousand dollars of market value by multiplying them by their corresponding equalization rates. Thus, Pleasant Valley's 2010 tax rate is $3.79 per thousand dollars of assessed value. Multiplying this by the 2010 equalization rate of 52 percent yields a tax rate of $1.97 per thousand dollars of market value. Similarly, the 2011 tax rate of $4.12 per thousand dollars of assessed value multiplied by the 2011 equalization rate of 59 percent yields a tax rate of $2.43 per thousand dollars of market value. Now the converted tax rates, $1.97 and $2.43, can be directly compared, yielding a 23.3 percent increase. (If you try this at home, be sure your input data and all calculations are good to at least 6 significant figures. Otherwise, noticeable round-off errors can accumulate.)

Who's To Blame for Mistake?

This is by no means the first time that the Poughkeepsie Journal has published wildly inaccurate tax rate increases for jurisdictions with varying equalization rates. In the past, I have had direct confirmation that Poughkeepsie Journal reporters have performed the mistaken calculations. However, in the Town of Hyde Park, it is clear that the municipality itself is primarily responsible for the mistaken calculations. For Pleasant Valley, I have not yet been able to determine whether it is the Town or the Poughkeepsie Journal that is responsible for the mistake. I'll post again when I find out.

Town of Hyde Park to Increase Property Tax Rate 16.9 Percent

2010-11-19T18:31:00.022-05:00

At a special meeting to begin within the hour, the Hyde Park Town Board is expected to approve its 2011 budget, and to announce that this budget will result in roughly the same tax rate (0.4 percent decrease) compared with last year. If you are asking why the title of this post refers to a 16.9 percent tax rate increase, then you haven't been reading this blog recently. My post of November 11 explains that the Town of Hyde Park has not understood how to properly calculate property tax rate increases. The Town has incorrectly assumed that it can simply compare the tax rates in dollars per thousand dollars of assessed value from year to year. However, this procedure is invalid for jurisdictions like Hyde Park with equalization rates that change every year. By not properly computing the tax rate increase percent, the government of the Town of Hyde Park, and the citizens who are evaluating its budget, are flying blind. Since posting on November 11, I've learned that the same flawed 2011 budget process was also present in the 2010 and 2009 budget processes. I have not determined whether this fundamental flaw was present in Hyde Park budgets prior to the 2009 tax year.

Staffing Changes

I've also since learned that the Hyde Park Town Board has enacted some significant staffing changes during the last half year: Twenty-three year veteran bookkeeper Joanne Lown was fired in June 2010 in what some claimed was an unceremonious procedure. The Board simultaneously abolished her position, replacing it with a new comptroller position. Ann Boehm was then hired as a temporary, part-time comptroller until her full-time replacement by Darlene Deary on September 15.

Why is Hyde Park's 2011 Tax Rate Increase so High?

Hyde Park's equalization rate for 2011 property taxes is 54 percent, up 17.4 percent from 46 percent for the 2010 taxes. This major increase in equalization rate swamps the small (0.8 percent) increase in assessed value, causing Hyde Park's taxable market value to decrease 14.1 percent. The large drop in market value means that even if the 2011 tax levy were unchanged from 2010, Hyde Park would see a double-digit increase in tax rate. However, the tax levy for 2011 is expected to increase a small amount (0.4 percent) to $4,490,122. Doing the math results in a 16.9 percent tax rate increase.

Response of Town Officials

My repeated attempts to contact Town of Hyde Park officials were not fruitful until Monday, November 15. By that time, officials apparently figured it was too late to do anything about the tax rate calculation error for this budget cycle. News stories this week about Hyde Park in the Poughkeepsie Journal continue to report wildly inaccurate tax rate increase information, as they have done since last month. In my view, Hyde Park Town Supervisor Tom Martino owes it to the public to accurately and faithfully report the correct tax rate increase percent for the 2011 budget — not the wildly inaccurate tax rate increases being claimed. Taxpayers will eventually be able to determine the true tax rate increase when they get their tax bills.

Remedy

In order to correct this unfortunate problem in future years, no action is needed by the Town Board. The problem can be corrected administratively by whoever is responsible for preparing the budget details, presumably Deary. Once she makes this correction, citizens — and the government itself — will be able to see what the true financial situation is.

100 Percent Equalization

In addition, however, the Town Board might be wise to consider modernizing the assessment process by moving to 100 percent equalization, as all but 8 jurisdictions in Dutchess County have already done. Once this is accomplished, the misunderstandings of recent years will not be possible. And the move to 100 percent equalization has considerable additional benefits as well, without incurring any cost or penalty.

Poughkeepsie Journal Still Reports Inaccurate Tax Rate Increases

2010-11-15T14:16:00.001-05:00

This is the second of two posts commenting on the Poughkeepsie Journal's recent coverage of property tax issues. The first post complimented the Journal for including tax rate increase information in headlines, lead sentences, and sidebars. This one criticizes the Journal for consistently publishing wildly inaccurate tax rate increase information for jurisdictions with changing equalization rates.

Last year (August 2009 to early spring 2010), Poughkeepsie Journal property tax stories occasionally included tax rate increase data. These stories contained inaccurate tax rate increases for some jurisdictions because of an analytical mistake. This year (beginning August 2010), essentially every property tax story includes tax rate increase data. Furthermore, this data is much more prominently displayed than it was last year. It's great that readers are now much better informed about tax rate increases. Unfortunately, last year's analytical mistake still has not been corrected, despite the new focus on tax rate increases. This means that inaccurate tax rate increases are published more often — and more prominently — than last year. And when I say inaccurate, I mean wildly inaccurate. The published tax rate increases are much lower than the actual tax rate increases, leading readers to think that the tax situation is much better than it really is. It's a shame that the Journal's greatly improved coverage of tax rates and tax rate increases is marred by inattention to the issue of accuracy.

The analytical mistake is to not account for changes in equalization rates. My post last year described the mistake in detail, and how to fix it. This mistake is manifest only for jurisdictions whose equalization rate changes in 2010. I found five stories this season (since August 2010) with wildly inaccurate tax rate increase percentages.

Hyde Park School District

On August 27, 2010, a short, unsigned story entitled, "New school-tax rate adopted for Hyde Park" appeared on page B-1 of the print edition. The lead sentence claimed that the Hyde Park school tax rate will increase “less than 1 percent”. The brief article concludes by listing the tax rates — in dollars per thousand dollars of assessed value — for the 5 towns within the Hyde Park School District, together with purported tax rate increases in each town. The listed tax rate increases ranged from 0.55 percent in Hyde Park to about 3 percent in the Towns of Clinton, Poughkeepsie, and Rhinebeck. These listed tax rate increases are wildly inaccurate. The tax rate increases in the article were apparently calculated by subtracting the 2009 tax rate from the 2010 tax rate, with both rates measured in dollars per thousand dollars of assessed value, and then saying that the result is somehow a percent, rather than a tax rate.

The correct tax rate increase is 19.31 percent for the portion of all 5 towns in the Hyde Park School District. Not incidentally, New York State real property tax law requires the tax rates in all the municipal segments of a special district (like the Hyde Park School District) to be equal, when expressed in dollars per thousand dollars of market value. This fact implies that the school tax rate increase will the same for all properties in the school district regardless of which Town they're in.

Arlington School District

On August 31, 2010, a front-page story was entitled, “Average Arlington tax bill to go up 7%”. A sidebar listed 9 towns with portions in the Arlington School District, and their corresponding tax rates in dollars per thousand dollars of assessed value and tax rate increases. Six of those 9 towns are at 100 percent equalization rate; for them, the published tax rate increases around 16 percent are correct. For the 3 remaining towns, the published tax rate increases are as follows: Hyde Park: -1.5 percent; Pawling: 10 percent; Pleasant Valley: 2.1 percent. These numbers are wildly incorrect. The correct tax rate increase for these three towns is about 16 percent, the same as for the other 6 towns, as required by New York State law. The math works out, once you convert from assessed value to market value.

Staatsburg Library District

A story entitled, “Staatsburg seeks library-tax hike”, appeared on September 9, 2010. The lead sentence is, “Residents of the Staatsburg Library District are being asked today to approve a 13.7 percent tax-rate increase.” Once again, this number is wildly incorrect. The correct tax rate increase is 33.5 percent. It's the same issue as in the above school districts: Staatsburg, in the Town of Hyde Park, has seen its equalization rate increase 17.4 percent. The story failed to take this fact into account.

Town of Hyde Park

Two stories about the Town of Hyde Park's budget appeared on October 13 and November 11, 2010. These stories stated that the Town proposes to raise the tax rate by 17 percent and 14.5 percent, respectively. My most recent post discusses this case in considerable detail, concluding that the Town of Hyde Park government does not understand how property tax increases work. Their most recent claim of a 14.5 percent tax rate increase is really a whopping 32 percent tax rate increase. So once again, the published tax rate increase is wildly incorrect. Although the Poughkeepsie Journal got it wrong again, they surely had plenty of “help” in this case from the Town of Hyde Park.

Getting it Right

The Journal's masthead proudly proclaims, “The Poughkeepsie Journal corrects errors of fact.” Yet the Journal has continued to publish wildly inaccurate tax rate increases for jurisdictions with changing equalization rates, despite my blog post on the subject last year. Admittedly, some of the blame belongs to the government of the Town of Hyde Park, which has provided copious inaccurate public information. But the Journal has not yet made a serious attempt to avoid publishing tax rate increases that are just plain wrong.

Town of Hyde Park Misunderstands Property Tax Rate Increases

2010-11-11T21:07:00.002-05:00

The Town of Hyde Park's budget process is seriously flawed because the Town misunderstands how much it's squeezing its property taxpayers — its primary source of income. The Town claimed to be proposing a 17 percent tax rate increase (according to an October 13 Poughkeepsie Journal story), now reduced to a 14.5 percent tax rate increase (according to a story in today's Poughkeepsie Journal). But both these numbers are wrong. The Town of Hyde Park is proposing at least a 32 percent tax rate increase, according to my calculation based on publicly available information. The Town's mistake comes from a fundamental misunderstanding of the meaning of property tax rate increases. For the benefit of the Town, I'll try to explain in simple terms:

Property Tax Rate

In New York State, real property is taxed in proportion to the market value of the property. (In the geeky world of property taxes, market value is usually referred to by various other names, such as “full value” or “true value assessment”.) The property tax rate, measured in dollars per thousand dollars of market value, is the proportionality constant. In other words, the amount of tax paid on a given property is equal to the market value of that property multiplied by the tax rate in dollars per thousand dollars of market value. For example, if a particular jurisdiction has a tax rate of $10 per thousand dollars of market value, then the tax on each property will be exactly one percent of the market value of that property (100% x $10/$1,000). Thus the tax rate in dollars per thousand dollars of market value measures how steeply a property is taxed.

Property Tax Rate Increase

Since tax rate in dollars per thousand dollars of market value measures how steeply a property is taxed, increases in this tax rate measure how much more steeply a property is being taxed. For example, if a jurisdiction has a tax rate of $2.00 per thousand dollars of market value in 2010, and then it proposes a $2.50 tax rate in 2011, the proposed tax rate increase is simply 100% x ($2.50 - $2.00)/$2.00, or 25 percent. So in 2011, properties would be taxed at a 25 percent higher rate than in 2010. That's all there is to it.

Assessed Value and Equalization Rate

The above narrative has not mentioned the concepts of assessed value and equalization rate. That's because assessed value and equalization rate play no fundamental role in how steeply properties are taxed. How steeply properties are taxed is measured in terms of market value. Assessed value and equalization rate are historical artifacts of the legacy process for collecting taxes.

What this means is that quantities involving assessed values generally cannot be compared with each other. The only exception is if the quantities correspond to the same equalization rate. Of the 20 towns in Dutchess County, 12 have had a constant equalization rate (of 100 percent) for the last few years. Unfortunately, Hyde Park isn't one of them.

Hyde Park's Meaningless Assessment Charts

In order to compare Hyde Park data involving assessed value, this data must first be converted to market value. If this is not done, the results will be meaningless. For example, the “History of Taxable Assessment” chart on page 10 of Hyde Park's 2011 preliminary budget is garbage. I don't know how else to say it. The chart shows a steady increase in the meaningless quantity “Taxable Assessment” from around $850 million in 2001 to $940 million in 2010, an increase of roughly 10 percent. Neither the shape of this curve, nor the 10 percent increase, correspond to anything meaningful in the real world (or in any mathematical world). To create a meaningful chart, the assessed values must be converted to market values by dividing each one by its corresponding equalization rate. Like this:

Note that the market value more than doubles from 2001 to 2009, and then declines. This behavior is in general agreement with the market value of most other jurisdictions in Dutchess County. The “12 Year Period Town Assessment” chart on page 9 of Hyde Park's preliminary budget suffers from the same problem — and has the same kind of solution.

Hyde Park's Meaningless Tax Rate Chart

The “History of Tax Rate per 1,000 of Assessed Valuation” chart on page 11 of Hyde Park's 2011 preliminary budget is also garbage. To create a meaningful chart, the tax rates measured in dollars per thousand dollars of assessed value must first be converted to dollars per thousand dollars of market value, by multiplying each by its corresponding equalization rate. Here's the result:

Notice that the Town's “Assessed Valuation” chart looks nothing like the corrected chart. The corrected chart shows the tax rate dropping steadily through the decade until 2008, when the tax rate starts to increase by ever-larger percentages. The rightmost bar is the proposed 2011 tax rate, based on an assumed tax levy of $5,080,000, as reported in today's Poughkeepsie Journal. The proposed 2011 tax rate of $2.92 is $0.71 greater, or 32 percent greater, than the 2010 tax rate of $2.21 per thousand dollars of market value.

Call to Action

In my view, the Town of Hyde Park needs to replace its faulty comparisons of assessment-related data with corrected information based on properly converted quantities. Until it does so, the government of the Town of Hyde Park, and the citizens who are evaluating its budget, are flying blind.

Poughkeepsie Journal Improves Truth-in-Taxing Reporting

2010-11-09T16:16:00.002-05:00

The Poughkeepsie Journal has substantially improved its reporting on property tax issues this season, by including tax rate change information in headlines, lead sentences, and sidebars. By including and highlighting this “truth-in-taxing” information, the Poughkeepsie Journal has taken a major step forward in informing its readers about what's really happening with their property taxes. This first of two blog posts describes the truth-in-taxing improvements in recent Poughkeepsie Journal stories. A forthcoming post will describe how the Poughkeepsie Journal continues to publish wildly inaccurate tax rate increase percentages for certain jurisdictions — just as it did last year.

In my Truth-in-Taxing series begun last year, I criticized the Poughkeepsie Journal for, among other things, failing to make tax rates and changes in tax rates the central issue in its stories on property taxes. I've argued in Truth in Taxing that tax rate information is the key parameter for describing property taxes, especially in this era of falling property values. I ended one blog post about a year ago with the following words:

Readers of the Poughkeepsie Journal need the tax rate and change in tax rate in order to understand the essence of what's happening. This means they need the change in the tax rate in the headline itself, in the lead sentence, and possibly also in the sidebar information — not buried in the tenth paragraph, or omitted entirely. The change in the tax rate is the story. Most recent Poughkeepsie Journal stories related to property taxes have failed to provide truth in taxing disclosures. I would very much like truth in taxing to become standard policy in the Poughkeepsie Journal's property tax reporting. [emphasis in original]

What a difference a year makes! Last year (late August 2009 to early spring 2010), Poughkeepsie Journal property tax stories rarely placed tax rate change in the headline, the lead sentence, or the sidebar, though there were a few exceptions. All too often, tax rate information wasn't in the story at all! This year (beginning in late August 2010), the situation is reversed: Nearly every story I've seen on property taxes includes the tax rate change in the headline, the lead sentence, or the sidebar — sometimes in all three.

Town of Fishkill Withholds Tax Rate

Here's the one exception that proves the rule: The Town of Fishkill, for which reporter Susan Campriello wrote two stories. The first of these stories, published October 14, 2010, includes an elaborate “excuse” by Town of Fishkill Comptroller Robert Wheeling as to why he hadn't “yet” provided 2011 tax rate information. The second story, published November 8, simply notes that Wheeling failed to provide this information. In both stories, Campriello includes in the sidebar last year's tax rate, as well as a note that this year's tax rate is “unavailable”. In this way, Campriello makes it unmistakably clear to the reader that the tax rate information is important, and that a government official is withholding it. (By the way, you can be sure that Fishkill's tax rate increase will be large: Just the tax levy alone has increased by 10 percent. Combining this with an estimated 6 percent decrease in Fishkill's tax base means that Fishkill's tax rate will probably increase about 16 percent.)

Tax Rate Increase Is Prominent

Apart from the stories on Town of Fishkill, I've seen 12 other stories on property taxes since end of August. Here's how they've dealt with tax rate information: Eight of the 12 stories had sidebars; every sidebar included the tax rate and the tax rate increase amount. Eight of the 12 stories (not quite the same 8) stated the new tax rate in the lead sentence. Two of the 12 stories stated the tax rate increase amount in the headline, and a third story in the subheading. The headline of a fourth story ambiguously reads “Hyde Park plan raises taxes 17%”. That could mean anything. Only by reading the story does one learn that the “17%” is actually the tax rate increase. Partial credit for that. Another partial credit for the headline, “New school-tax rate adopted for Hyde Park”. At least it focuses attention on the tax rate.

In summary, every one of the 12 stories includes the tax rate change in the headline, the lead sentence, or the sidebar. The Poughkeepsie Journal has made a major improvement in implementing Truth-in-Taxing in its coverage of property tax issues. I'm gratified to see what appears to be a new editorial policy to focus on tax rates and changes in tax rates.

Major Calculation Errors Persist

My praise for the Journal's truth-in-taxing efforts is less than wholehearted because this season's stories continue to calculate tax rate changes incorrectly for certain jurisdictions. This means that the Poughkeepsie Journal is now giving greater prominence than last year to tax rate changes that are inaccurate — wildly inaccurate. My next blog post will discuss this issue in detail.

Poughkeepsie Journal Fails Its Readers – Again

2010-04-18T11:08:00.000-04:00

Once again, the Poughkeepsie Journal fails to properly inform its readers about property taxes. There is an important story about property taxes, but the Journal fails to tell it.

Today's front page feature story, Property taxes weigh heavily in Dutchess, by Joseph Spector, is full of numbers and statistics, but it fails to mention – fails to even mention – any tax rates or changes in tax rates. This is just like having a story about high sales taxes and never mentioning any sales tax rates or changes in sales tax rates. It makes it impossible for readers to understand what’s going on.

School Tax Report is Misleading

As just one example of misleading reporting, the story refers to school officials saying that “the school-tax-levy increase in the current school year was 1.85 percent, the lowest in at least 10 years.” This sounds like a bright spot in the tax picture – but it is not. Dutchess County property values were down 5 percent in the current school year. Therefore, school tax rates are up approximately 7 percent. In other words, property owners paid 7 percent more of their wealth – as measured by the market value of their properties – to schools this year than they did last year. Not a bright spot at all.

School officials aren’t stupid. They deliberately talk about tax levy increases now, because that makes things sound better than they really are. But the Poughkeepsie Journal has a duty to expose this deception by showing how school tax rates were stable in the past but are increasing now. It's the tax rate that allows you to make a fair comparison with the past.

Comparison to Westchester is Misleading

Here’s a second example of misleading reporting: The story asserts that “Westchester and Nassau counties … have the highest taxes in the state”. It sounds like these counties have it worse than Dutchess. But the Journal fails to point out that Westchester and Nassau also have the highest property values in the state. If your property’s market value is greater, of course you’re going to pay more taxes! Saying it another way, if you can afford to buy a house in Westchester, you can afford to pay the taxes. But your tax rate could be the same as or lower then in Dutchess. There’s no way to tell from this story. It's the tax rate that allows you to make a fair comparison.

Journal Misses the Real Story

People belly-ached about property taxes ten years ago, and they're bellyaching about property taxes now. The difference is that up until two years ago, property tax rates have been relatively stable, whereas now property tax rates are dramatically increasing. Because property tax rates are starting to increase significantly for the first time in many years, complaints about property taxes are much more justifiable now than they were in the past. This is the real story. It's too bad the Journal hasn't told it.

Many of my previous Truth in Taxing posts to this blog describe a pattern of failure by the Poughkeepsie Journal to properly inform its readers about property tax issues. To view these posts, click on label “Truth in Taxing” in the right column of this page.

The Big Three Fire Districts of Dutchess County

2010-04-07T15:19:00.001-04:00

Of the 30 fire districts and fire protection districts in Dutchess County, I call the Arlington, LaGrange, and Fairview fire districts the big three fire districts. They are the big three in two different ways:

They have the three highest tax levies.
They have the three highest tax rates.

I've just posted a report to my sister website Fairview Fire Tax about the big three. This report compiles current and retrospective information about tax levies, tax rates, market values, and exempt percents for the big three fire districts into a series of 24 bar charts, 8 tables, and 4 pie charts, with analytical commentary. Bar charts include a ten-year history of market values, tax levies, and tax rates, and annual changes in these values. Some highlights of the report:

Fairview has the highest fire tax rate in Dutchess County. However, if fire taxes were billed universally – to tax exempt as well as to taxable properties – Arlington would have the highest universal tax rate, with Fairview second. Economies of scale should have favored Arlington’s universal tax rate, since Arlington is four times larger than Fairview, both in total market value and number of fire stations. Yet Arlington’s universal fire tax rate is 30 percent greater than Fairview’s.
From 2001 to 2008, the tax rates of all the big three fire districts have decreased. With the economic meltdown, 2009 and 2010 tax rates in Arlington and LaGrange (but not Fairview) have significantly increased. In 2008, Fairview’s tax rate was 61 percent larger than Arlington’s, but in 2010, Fairview’s tax rate has become only 20 percent larger than Arlington’s.
Nearly half of Fairview’s market value is tax exempt. Fairview’s exempt percent has been 47.7 percent plus or minus 0.2 percent in each of the last three years, when adjustment is made for a 2008 tax assessment blunder by the Town of Poughkeepsie Assessor's office.
If the City of Poughkeepsie’s fire department were a fire district, it would be in the Big Three, both for its equivalent tax levy and its equivalent tax rate.

The big three are high priced fire districts. But high priced fire districts also tend to be high quality-of-service fire districts.

Fairview's 2008 Exempt Percent Understated due to Assessment Blunder

2010-03-31T17:05:00.000-04:00

A $120 million blunder by the Town of Poughkeepsie Assessor's office in 2007 caused the Fairview Fire District's official 2008 exempt percent to understate the true exempt percent. The true portion of Fairview's market value that was exempt from fire taxes in 2008 is not 41.7 percent as I reported, and as confirmed by a Dutchess County official. The true portion is probably near 47.9 percent, an increase of 6.2 percent.

Background

The Fairview Fire District has the highest fire tax rate of any fire district in Dutchess County, and possibly the highest in New York State. Until nearly two years ago, a widely-quoted reason given for Fairview's high tax rate is that 70 to 80 percent of Fairview's market value is tax exempt. My report, Tax Exempt Properties in Fairview posted to my Fairview Fire Tax website on June 18, 2008, showed this reason to be an urban myth. My analysis showed that for the 2008 fire tax year, only 41.7 percent of Fairview's market value was tax exempt. This result was later confirmed by Kathleen Myers, Director of Dutchess County's Real Property Tax Service Agency.

Fairview's 2008 exempt percent had some practical importance. At the time my report was posted, State Senator Stephen Saland and State Assemblyman Joel Miller were sponsoring bills intended to benefit fire districts with very high exempt percents. Also, Dutchess County Legislator James C. Doxsey was sponsoring a related resolution. All these efforts ended after my report was posted, because Fairview would not have been eligible to benefit from any of them.

41.7 Percent Figure Has Been Unchallenged

There has been no credible challenge to the assertion that 41.7 percent of Fairview's market value for the 2008 fire tax year is tax exempt. And how could there be? After all, the 41.7 figure is based on a primary source of data — the 2007 assessment roll for the Fairview Fire District — the same data used in the preparation of 2008 fire tax bills. Each assessor signs an oath every year certifying that all properties have been assessed at a uniform percentage of market value. There simply isn't a more authoritative basis for calculating Fairview's exempt percent. There would seem to have been no reasonable basis for questioning the 41.7 percent figure.

There is now.

There's Been a Mistake

A mistake has been made which substantially affects Fairview's exempt percent for the 2008 fire tax year. In 2007, the Town of Poughkeepsie Assessor's Office contracted with Queens property assessment consulting firm MJW Consulting to assist it in a town-wide reassessment of properties, including most of the Fairview Fire District. At the time, various other municipalities in the Hudson Valley had also contracted with MJW Consulting. The Town of Poughkeepsie and many other municipalities cut ties with MJW Consulting in 2008 following allegations about the firm's performance. But during the contract MJW Consulting reassessed many properties in Fairview, including a property with parcel ID 134689-6162-09-072632-0000. MJW Consulting assessed this parcel, which contained a small house and other structures, at $190,500, apparently ignoring the value of these other structures. What were the “other structures” on this parcel? These other structures were most of the main buildings of the St. Francis Hospital complex, whose market value the previous year was over $140 million. Oops!

Town of Poughkeepsie Assessor Kathleen Taber apparently folded MJW Consulting's assessments into the 2007 assessment roll without running a sanity check on the data. In other words, Taber certified the 2007 assessment roll with most of the assessed value of St. Francis Hospital omitted. For the next assessment roll, Taber found and corrected the blunder. But it was too late to correct the 2007 assessment roll. The blunder only affects analyses of Fairview for the 2008 fire tax year (2007 assessment roll) — both mine and Kathleen Myers'. It certainly makes sense to adjust these analyses to correct for this blunder.

Correcting for the Blunder

According to Kathleen Taber, a reasonable guess for the assessed value of the main St. Francis property for the 2008 fire tax year is around $120 million — more than 600 times the official assessed value for that year. Adjusting my 2008 analysis of Tax Exempt Properties in Fairview using this corrected estimate for the main St. Francis parcel shows that 47.9 percent of Fairview's market value was tax exempt for the 2008 fire tax year. This figure happens to be the same as Fairview's exempt percent for the 2010 fire tax year, and less than half a percent more than Fairview's 2009 figure of 47.5. In summary, Fairview's exempt percent has held remarkably steady in the last three years, ranging from 47.5 to 47.9.

The corrected St. Francis assessment also affects the ranking of the tax exempt institutions in Fairview. My 2008 report Tax Exempt Properties in Fairview listed St. Francis Hospital as the fourth largest not-for-profit institution in Fairview, after Marist College, Dutchess Community College, and Hudson River Psychiatric Center. After correcting for the assessment blunder, St. Francis Hospital easily moves up to second place, with market value substantially greater than that of Dutchess Community College.

My forthcoming report, The Big Three Fire Districts of Dutchess County, provides more details of Fairview's exempt percent and up-to-date ranking figures.

Acknowledgment: I'm grateful to Town of Poughkeepsie Assessor Kathleen Taber for patiently answering a series of email inquiries regarding the main St. Francis parcel.

Ranking of Town Tax Rates

2010-02-17T20:20:00.000-05:00

A recent post displayed the ranking of town tax rate increases in Dutchess County. This post ranks the town tax rates themselves. The tax rate measures how steeply your wealth — as measured by the value of your property — is taxed. Do you know how your town compares with other towns in Dutchess County? Here's the ranking for 2010:

Town of Poughkeepsie

The Town of Poughkeepsie is in first place. Its 2010 tax rate of $3.39 per thousand dollars of market value (for homesteads outside the City of Poughkeepsie) is the highest of all 20 towns in Dutchess County. This means that if you own a home in the Town of Poughkeepsie, your wealth — as measured by the market value of your property — is taxed by the town at a higher rate than if your home were in any other town in Dutchess County. The Town of Poughkeepsie had a tax rate increase of 3.5 percent in 2010, which is lower than for most towns in the county. But already in 2009, Poughkeepsie was safely ahead of the pack. Not only was the Town of Poughkeepsie's 2009 tax rate higher than any other town's 2009 tax rate, but the Town of Poughkeepsie's 2009 tax rate is higher than any other town's 2010 tax rate. In other words, no other town has “achieved” as high a tax rate in 2010 as the Town of Poughkeepsie did in 2009.

Towns of Pine Plains and North East

In 2009, the Town of North East had the second highest tax rate in Dutchess County, just edging out the Town of Pine Plains. But North East is one of only two towns in Dutchess County which did not increase its tax rate this year, while Pine Plains' tax rate went up 9 percent — more than most towns in the county. The Pine Plains “surge” allowed it to “advance” to second place, leaving North East in third position.

Town of Pawling

The Town of Pawling, thanks to having the largest surge of all towns in Dutchess County, has pulled away from a tight cluster of moderately-high-tax-rate towns in 2009, to solidly secure fourth place, with fifth place Hyde Park a distant $0.33 lower.

Towns of Washington, Wappinger, and Fishkill

The towns of Washington, Wappinger, and Fishkill have held the prizes for lowest three town tax rates for at least the last two years. The tax rate in the Town of Poughkeepsie is 3.2 times higher than the lowest tax rate, in the Town of Washington. For the town tax you pay on one property in Poughkeepsie, you could pay the town tax on more than three same-valued properties in the Town of Washington.

Other Towns

Do you know how your town ranks relative to other Dutchess County towns in the tax rate sweepstakes?

Now you do.

Data: The data for this post are from a table I compiled based on tax rate information from the county government's Real Property Tax Service Agency, as explained here. For towns containing villages, I've compiled only the tax rates for outside the villages, marked with suffix “- o”. For towns containing separate homestead and non-homestead (commercial) rates, I've compiled only the homestead rates, marked with suffix “- h”.

For the record, here are the corresponding 2009 town tax rates:

Town of Pawling Tax Rate Increases 28.4 Percent

2010-02-16T22:31:00.000-05:00

The Town of Pawling's 2010 property tax rate increased a whopping 28.4 percent over Pawling's 2009 tax rate. Although all but two towns in Dutchess County increased their tax rates in 2010, Pawling's tax rate increase is by far the largest. The second largest tax rate increase of 19.0 percent, in the Town of Milan, is 9.4 percent lower. Yesterday's post to this blog gives a complete ranking of 2010 town tax rate increases in Dutchess County.

Pawling is adversely affected by a downward trend in property values. Pawling's taxable market value is down 5.1 percent for 2010 property tax bills. But this fact does nothing to explain why Pawling's tax rate increase is higher than in other towns, because every town in Dutchess County has this problem. Indeed, all of Dutchess County's taxable market value is down 5 percent.

The Three Causes of Pawling's Problem

I spoke with Town of Pawling Supervisor David Kelly to learn why Pawling's tax rate has increased so much more than other towns'. My understanding of our conversation is that Pawling's tax rate increase has three causes:

Library Referendum: Voters in the Town of Pawling approved a library referendum last November — before Kelly took office — resulting in an additional tax levy for the town of $270,000 in 2010 (and similar amounts in future years).
2009 Appropriated Fund Balance: At the end of 2008, Pawling had an extra $200,000 unspent. This appropriated fund balance was used to lower the 2009 tax rate. This fortunate circumstance in 2009 has the effect of making the 2010 tax rate increase larger than it would otherwise have been.
Budget Items: The Town of Pawling budgeted various items as needed to support town services.

One way to understand what all this means is with the following bar chart:

If Pawling taxpayers had the same tax rate as last year (no rate increase), the tax levy outside the Village of Pawling would have been $2,669,726, as shown by the bar on left. The actual tax levy of $3,428,060, resulting in a 28.4 percent tax rate increase, is shown by the bar on right. The green and orange portions of the bar on right represent the library referendum and 2009 appropriated fund balance contributions, prorated to exclude the 15.1 percent of these contributions that presumably would be paid by taxpayers in the Village of Pawling.

The Components of Pawling's Tax Rate Increase

The difference between the left and right bars can be seen more clearly in the following pie chart:

The percentages for each component show the contributions to the 28.4 percent tax rate increase. (Rounding causes a small error in the sum.) Comparing the above figures with the chart of 2010 town tax rate increases in my last post allows one to make the following observations:

Even if the library referendum had been rejected by voters, Pawling's tax rate increase would have been 19.9 percent — still the highest of any town in Dutchess County. So one cannot blame the library referendum alone for Pawling's top ranking in the tax increase contest.
If the library referendum had been rejected and the 2009 appropriated fund balance did not exist, Pawling's tax rate increase from budget items alone would have been 13.5 percent — the fifth highest tax rate increase of all 20 towns in Dutchess County. So the budget items alone put Pawling in the top quarter of towns for tax increases.
If Town of Pawling officials had limited 2010 budgetary spending so as to avoid increasing the tax rate; that is, if the above “excess” budget items were zero instead of 13.5 percent, then the remaining library referendum and 2009 appropriated fund balance would still increase Pawling's tax rate by 15.0 percent. In this case, Pawling would still have the fourth highest tax rate increase for towns in Dutchess County, placing Pawling in the top fifth.

To sum up, each of these three pieces of pie is so big that even one of them contributes a significant increase to Pawling's tax rate. Pawling must now eat all three pieces. Property taxpayers will have a stomach ache.

Library Referendum Was a Bad Idea

I'm grateful to Supervisor Kelly for generously sharing his perspective on Pawling's property tax situation with me. Kelly has argued, correctly in my view, that submitting the library proposal to a referendum was a bad idea, because voters approved a large expenditure without seeing the whole fiscal picture. Now the town is stuck with a tax rate increase which is way out of line — probably not what the voters intended. The limited foresight of voters is a general problem with referenda, and a good reason to prefer the more comprehensive vision of the budget process. Indeed, there are numerous reasons to avoid referenda. An extreme case of tax referenda gone wild is the State of California, which has been brought to its knees by Proposition 13 and other unwise ballot initiatives.

Towns Increase Tax Rates

2010-02-15T13:52:00.000-05:00

All but two of the twenty towns in Dutchess County have increased their tax rates in 2010, compared with 2009 rates. This fact is Bad News for property taxpayers, because the tax rate measures how steeply your wealth — as measured by the value of your property — is taxed. Do you know how much your town's tax rate has increased? And do you know how your town stands relative to other towns in Dutchess County? This post compares the town tax rate increases for Dutchess County.

First the Good News: Two towns in Ductchess County held the line on taxes, or even decreased them: The Town of North East has maintained essentially the same tax rate as last year, and the Town of Rhinebeck managed a small (0.4 percent) tax decrease. Well, that's the end of the good news.

Data: Most data for this post are from a table I compiled based on tax rate information from the county government's Real Property Tax Service Agency, as explained here. For towns containing villages, I've compiled only the tax rates for outside the villages, marked with suffix “- o”. For towns containing separate homestead and non-homestead (commercial) rates, I've compiled only the homestead rates, marked with suffix “- h”. For the Towns of Beekman and Red Hook, I've augmented the official tax rate increases to more fairly indicate the effective tax rate increase, as described in detail below.

Now the bad, worse, and worst news: The towns of Wappinger, Red Hook, Stanford, Poughkeepsie, Clinton, and Fishkill have tax rate increases of between 2 and 4 percent. Not too bad. The towns of Dover, Washington, East Fishkill, and Pine Plains have tax rate increases of between 5 and 10 percent. Bad. The towns of Amenia, LaGrange, Hyde Park, and Beekman have tax rate increases of between 12 and 15 percent. Really bad. The towns of Union Vale, Pleasant Valley, and Milan have tax rate increases of between 16 and 20 percent. Worse than bad. But the worst news of all is the Town of Pawling, which wins the bad-news contest with a whopping 28.4 percent tax rate increase. I'll post separately about Pawling's situation. Here are the results in chart form:

Town of Beekman's Cost Shifting

Technically, the Town of Beekman's tax rate has decreased by 0.7 percent, as shown here. However, this figure is misleading from a taxpayer's viewpoint, because beginning in 2010, Beekman has shifted the $319,800 cost of its ambulance service from the Town to the Beekman Fire District. This means that the same taxpayers who paid for the ambulance service through Town taxes in 2009 now pay this cost through fire district taxes. To determine the effective tax rate increase for Beekman's taxpayers, we need to add the $319,800 back into the Town's tax levy. The result is an effective tax rate increase for the Town of Beekman of 14.6 percent, as shown in orange in the above chart.

If I were analyzing tax rate increases for fire districts (which I should probably do, considering the name of this blog), I'd observe that technically, the Beekman Fire District's tax rate has increased by 42.0 percent. However, this figure is misleading from a taxpayer's viewpoint, because the same taxpayers who paid the “extra” $319,800 fire taxes in 2010 paid a similar cost in 2009 through their Town taxes. So to be fair to the Beekman Fire District, the effective fire tax rate change is actually a small (0.7 percent) decrease.

Town of Red Hook's Cost Shifting

Technically, the Town of Red Hook's tax rate has decreased by 10.5 percent, as shown here. However, this figure is misleading from a taxpayer's viewpoint, because beginning in 2010, Red Hook has shifted the $145,000 cost of the Red Hook Library and the $125,00 cost of the Tivoli Library from the Town to two new library line items on the tax bill. All property taxpayers in the Town of Red Hook pay both of these new library line items in addition to the Town line item, regardless of where in the Town they live. You read that right. (Just to confuse things further, these two new library line items are in addition to yet another Red Hook Library line item associated with the Rhinebeck School District. The Rhinebeck school district library line item has been paid by all Red Hook property taxpayers since 2005, along with their school taxes.)

This cost shifting means that the same taxpayers who paid for the Red Hook and Tivoli libraries through Town taxes in 2009 now pay this cost through separate line items on their tax bills. To determine the effective tax rate increase for Town of Red Hook taxpayers, we need to add the two new library tax levies back into the Town's tax levy (after prorating to account for the villages). The result is an effective tax rate increase for the Town of Red Hook of 2.4 percent, as shown in orange in the above chart.

Other Misleading Tax Rate Increases?

It's entirely possible that towns other than Beekman and Red Hook have their own cost shifting stories which make their nominal tax rate increases misleading. I have not examined the situations in most towns. Readers are encouraged to bring such situations to my attention.

Poughkeepsie Journal's Tax Rate Increase Table Is Flawed

To the Poughkeepsie Journal's credit, it published a feature story on January 11-th tabulating the tax rate increases of all Dutchess County towns. Unfortunately, numerous mistakes in this tabulation, documented here, here, and here, make the Journal's tabulation unreliable. This post attempts to correct the record.

Why are property taxes going up?

Thoughtful observers will probably not even be asking this question. The 2008 economic meltdown was global and comprehensive. It has worsened economic life in 97 different ways for taxpayers, workers, businesses, and, yes, local governments. As I see it, local governments are just additional victims of the 2008 economic meltdown.

Poughkeepsie Journal's Mistakes in Gathering Tax Data

2010-01-31T18:16:00.000-05:00

This is the third of three blog posts on the Poughkeepsie Journal's January 11 feature story Most cities, towns cut spending, raise taxes to balance the books by reporter John Davis. That story contained a city/town tax table and sidebar (in the print edition only, unfortunately) with mistakes in each of these three steps:

Get accurate data.
Determine the correct way to analyze the data.
Do the arithmetic correctly.

My first blog post, Poughkeepsie Journal's Incorrect Tax Rate Analysis, discussed a serious error in Item 2 — Determining the correct way to analyze the data. My second post discussed mistakes in Item 3 — Doing the arithmetic correctly. This post discusses mistakes in Item 1 — Getting accurate data.

What Is the Most Authoritative Source for Property Tax Data?

According to the Dutchess County Charter, the county government's Real Property Tax Service Agency (RPTSA) is responsible for preparing tax rates for the county, towns, and special districts. RPTSA also prepares property tax bills and tax rolls. The fact that the RPTSA prepares all these documents means that the tax data published each year by the RPTSA corresponds exactly to the taxes paid by property owners. So if you want the tax rate increases actually paid by property owners in any Dutchess County town or city, you use the RPTSA data.

Town/City Tax Rates Using RPTSA Data

I've used the RPTSA data to compile a table of tax rate changes for towns and cities in Dutchess County. My table is here. It wasn't hard to make. You can easily make one yourself, or use the RPTSA website to check my work. Here's what I did:

I copied the 2009 and 2010 tax levy, assessed value, and equalization rate data (orange column headings) from the RPTSA tax rate pamphlets.
I calculated each tax rate per $K of assessed value by dividing the tax levy by the assessed value. Next, I calculated the tax rate per $K of market value by multiplying the tax rate per $K of assessed value by the equalization rate. Finally, I calculated the percent change in tax rate from the 2009 and 2010 tax rates per $K of market value. All my calculations (grey column headings) are to 15 significant figures, but results are displayed to only 3 or 4 significant figures for presentation.
I copied the Poughkeepsie Journal's tax rate increase (blue column heading) from their table.
I calculated the difference between my tax rate increase and the Poughkeepsie Journal's (grey column heading).

Note that I did not copy the tax rates from the RPTSA tax rate pamphlets, because the pamphlets only display these rates to the nearest cent. By recalculating the tax rates from tax levies and assessed values, I got the high-precision tax rates necessary for accurate tax rate increases (and also necessary for accurate tax bills!).

Eight towns in Dutchess County contain villages with separate tax rates. I've followed the Poughkeepsie Journal's lead in showing only the rates for outside the villages, marked with suffix “- o”. (The Journal has only marked two of them.) Two towns and two cities have separate tax rates for homestead and non-homestead (commercial) properties. I've shown only the homestead rates, marked with suffix “- h”.

Poughkeepsie Journal's Tax Data Is at Variance with RPTSA

There is little in common between the Poughkeepsie Journal's figures and the RPTSA figures. The Journal's tax levy figures fail to match the RPTSA tax levy figures in all but two towns (Pine Plains and Stanford). More importantly, the Journal's tax rate figures differ noticeably from the RPTSA tax rate figures in all but five towns (Beekman, Fishkill, LaGrange, North East, and Poughkeepsie).

It should be noted that the RPTSA had not yet published the 2010 tax rate pamphlet before the Poughkeepsie Journal's January 11 story was written. However, the RPTSA had published the 2010 tax rolls, which contain the same high-precision 2010 tax rates. So the essential data was available.

What Were the Sources of the Poughkeepsie Journal's Tax Data?

As noted in my previous two posts on this story, I have not been able to determine for sure where the Poughkeepsie Journal got its data, because Journal management has denied my request to speak with whoever prepared the story's tax table. But the fact that there's so little in common between the Poughkeepsie Journal's table and the RPTSA's figures leads one to suspect that the Journal used other sources.

Other sources may include the websites of towns, which sometimes display property tax data. In my experience, this data tends to be different from the RPTSA data, sometimes markedly. There can be many legitimate reasons for these differences. As just one example, the RPTSA sometimes must adjust tax levies submitted by towns to account for tax delinquencies from the previous year.

Cost Shifting

For a few towns, a formal comparison between 2009 and 2010 tax rates, as in my table, is misleading, because of cost shifting between town budgets and other government budgets. When looking at tax rate increases, it makes more sense to take this cost shifting into account. To the Poughkeepsie Journal's credit, its figures appear to take this cost shifting into account for the Town of Red Hook. However, the Town of Beekman also has a significant cost shifting issue, which the Journal does not seem to have taken into account.

Summary of My Critiques

The Poughkeepsie Journal's January 11 feature story provided a table of tax rate and tax rate change information for all 20 of Dutchess County's towns as well as the cities of Beacon and Poughkeepsie (in the print edition only). It's great that the Poughkeepsie Journal seeks to focus so much attention on these parameters, which are key to informing property taxpayers and government officials about what's happening with their taxes. Unfortunately, the story's tax table is deeply flawed, so that the figures in the tax table cannot be relied upon. My three posts about this story describe three different kinds of flaws. This post describes the Poughkeepsie Journal's failure to start with authoritative tax data, my first post describes its failure to take into account changes in equalization rate, and my second post describes its failure to use high-precision arithmetic. The cumulative effect of these mistakes is that almost every tax rate change in the Poughkeepsie Journal's story is inaccurate, in many cases by a large amount. A different Poughkeepsie Journal reporter also failed to use high-precision arithmetic in a story a month earlier, as noted in this blog. There would seem to be a need to improve the oversight of property tax reporting at the Poughkeepsie Journal. I would certainly like to encourage this outcome.

Fairview Fire District Granted $45K for Consolidation Study

2010-01-26T15:11:00.000-05:00

New York Secretary of State Lorraine Cortés-Vázquez today announced that the Fairview Fire District has been awarded a $45,000 Local Government Efficiency grant to study the feasibility of potential consolidation, merger, or cooperative agreement with one or more of its adjacent fire districts. This grant is the latest in a series of initiatives at the state level in recent years designed to streamline local governments and reduce property taxes. Cortés-Vázquez concurrently announced similar grants to four other local governments, none of which are fire districts.

Recent History of State Initiatives on Improving Local Governments

The recent state initiatives began in April 2007 with the creation of the New York State Commission on Local Government Efficiency and Competitiveness by Gov. Eliot Spitzer. The final report of this Commision, in April 2008, emphasized local government consolidation as a principal means to improve efficiency and reduce costs. New York State law at that time made it almost impossible for local governments to consolidate. Since then, New York State Attorney General Andrew Cuomo began promoting changes to state law to facilitate consolidation and dissolution of local governments. Last summer, a new state law — the New N.Y. Government Reorganization and Citizen Empowerment Act — was enacted, making it substantially easier for fire districts like Fairview to consolidate or dissolve. This law goes into effect in March 21, 2010.

Good News for Fairview Taxpayers

Today's announcement is good news for the Fairview Fire District, which has the highest fire tax rate in Dutchess County, and possibly the highest fire tax rate in New York State. Many Fairview officials and taxpayers have been receptive to the idea of consolidation and improved efficiency. The study which this grant will support is a necessary and significant step towards achieving some kind of restructuring that could significantly lower fire taxes for Fairview property owners.

Many thanks to Virginia Buechele for alerting me to today's announcement.

Poughkeepsie Journal Commits Roundoff Error — Again

2010-01-25T17:06:00.000-05:00

This is the second of three blog posts on the Poughkeepsie Journal's January 11 feature story Most cities, towns cut spending, raise taxes to balance the books by reporter John Davis. That story contained a tax table and sidebar (in the print edition only, unfortunately) with mistakes in each of these three steps:

Get accurate data.
Determine the correct way to analyze the data.
Do the arithmetic correctly.

My first blog post, Poughkeepsie Journal's Incorrect Tax Rate Analysis, discussed a serious error in Item 2 — Determining the correct way to analyze the data. This post discusses a mistake in Item 3 — Doing the arithmetic correctly. A third post on Item 1 — Getting accurate data — is in preparation.

Round-Off Error

The last column of the story's tax table lists the percent change in the tax rate of Towns and Cities from 2009 to 2010. The percent change in the tax rate is the key measure of whether taxpayers' property is being taxed at a higher or lower rate, and by how much. For example, in the Town of Fishkill, the Poughkeepsie Journal's story lists the tax rate increase as 4.13 percent. Unfortunately, this figure is inaccurate because the Poughkeepsie Journal calculated the tax rate increase using the rounded tax rates of $1.21 and $1.26 per thousand for 2009 and 2010. If they'd used the more precise tax rates of $1.213139 and $1.260599 per thousand — the rates used to compute individual tax bills, they would have found the tax rate increase for the Town of Fishkill to be “only” 3.91 percent. The small difference between 4.13 and 3.91 probably matters to Fishkill government officials, who might prefer to say that the tax increase is “only 3.9 percent”, rather than “over 4 percent”.

Round-off errors like this appear not just for the Town of Fishkill, but appear systematically for every one of the 25 towns and cities in the story's table. The round-off errors are random in direction, and can just as well understate the tax rate increase as overstate it.

Last Two Significant Figures are Garbage

Another way to characterize the Poughkeepsie Journal's mistake is to say that the table displayed more significant figures for tax rate changes than can be supported by their input data. The table displayed tax rate changes to one hundredth of a percent, while the accuracy of the tax rates only supports tax rate changes to the nearest percent. In other words, the last two digits in the table's display of tax rate change are garbage.

This Is Not the First Time

This is not the first time the Poughkeepsie Journal has used rounded tax rates to calculate inaccurate tax rate changes, and not the first time I've written about it. On December 11 — one month to the day before the towns-and-cities story — the Journal published a story on the Dutchess County tax rate stating that the tax rate increase was 14.6 percent, when it was actually 14.3 percent. Reporter Jenny Lee-Adrian confirmed that her calculation used rounded tax rates. My post Poughkeepsie Journal Gets It Almost Right discussed the problem of using rounded tax rates, and described two ways the mistake could be avoided in the future.

Restricted Contact with Poughkeepsie Journal

Every tax rate change listed in the Journal's table is consistent with the interpretation that it was calculated using the rounded tax rates displayed in the table. However, I haven't been able to confirm with the Journal exactly what they did. As noted in my previous post, Poughkeepsie Journal management stands by their figures, and has denied my request to speak with whoever prepared the story's tax table. Without direct confirmation, there is always the risk that my interpretation of the Poughkeepsie Journal's table is incorrect. I'm frankly surprised and disappointed that the Poughkeepsie Journal would choose such an oppositional response. I would have much preferred a collaborative dialog in which all parties focus on how best to inform property taxpayers and residents about tax issues.

Poughkeepsie Journal's Incorrect Tax Rate Analysis

2010-01-12T20:45:00.000-05:00

I hoped last month that my series of posts on Truth-in-Taxing was finished. However, yesterday's front page feature story in the Poughkeepsie Journal, Most cities, towns cut spending, raise taxes to balance the books, by reporter John Davis, grabbed my attention for two opposing reasons:

First, the positive reason: This story clearly shows that property taxes in most Dutchess County communities are going up significantly, even as spending is decreasing. A table on the page 2 continuation lists every city and town in Dutchess County (and even three towns in Ulster County), and shows that most 2010 budgets are going down compared with 2009, while most tax rates are going up. The “At a glance” sidebar scorecard on page 1 states that only 4 communities in Dutchess will have decreasing tax rates, 16 will increase, and 2 will be unchanged. It’s great to see this comprehensive town-by-town listing, and to show the dire trend that I predicted months ago. (Note to web surfers: Unfortunately, the table and sidebar appear only in the story’s print edition – not on the Journal’s website.)

Now the negative reason: The story is marred by a series of mistakes in collecting and analyzing the tax data. The most serious of these mistakes causes the tax rate increases in seven towns to be substantially understated. In other words, the situation for taxpayers is even worse than the Poughkeepsie Journal claims.

Mistakes? What Mistakes?

There are three steps to compiling a table such as the one in this story:

Get accurate data.
Determine the correct way to analyze the data.
Do the arithmetic correctly.

Unfortunately, the Poughkeepsie Journal seems to have made mistakes in all three of these steps. This post will limit itself to discussing the most serious of these mistakes – Item 2 – Determining the correct way to analyze the data. In a subsequent post I’ll discuss mistakes in Items 1 and 3.

The Analytical Mistake

In order to compare two tax rates, such as for example the Town of Clinton’s 2009 and 2010 tax rates, the two tax rates must first be expressed in comparable units. When tax rates are expressed in dollars per thousand dollars of assessed value, as they are in the story’s table, the units are comparable only if the equalization rates corresponding to the two tax years are the same. For the Town of Clinton, and for six other towns in Dutchess County, the equalization rates changed (in fact, all went up) from 2009 to 2010. For these seven towns, the tax rates first need to be converted to comparable units (typically, dollars per thousand dollars of market value) by multiplying them by their respective equalization rates. Only then does it make sense to calculate the percent change between the two tax rates. The Poughkeepsie Journal failed to make this necessary conversion. Therefore, the table's tax rate changes for these towns are too small, by an amount proportional to the equalization rate change.

Tax Rate Increases

The following table lists the seven Dutchess County towns for which the equalization rate changed from 2009 to 2010, together with the tax rate increases calculated by the Poughkeepsie Journal, and by my analysis:

Town	Pok. Journal	My Analysis
Clinton	-37.32%	3.8%
Dover	0.00%	5.6%
Hyde Park	9.77%	12.2%
Pawling (Out)	22.82%	28.4%
Pine Plains	6.49%	9.0%
Pleasant Valley	8.29%	17.2%
Stanford	-0.88%	3.1%

In the most extreme case, the Poughkeepsie Journal reported a very unlikely 37 percent tax rate decrease for the Town of Clinton, whereas the actual change was an almost 4 percent tax rate increase. Similarly, the actual tax rate increase in the Town of Pleasant Valley is more than twice what the Poughkeepsie Journal reported. More generally, two tax rate changes reported as negative, and one as zero, are all actually positive. Thus, the scorecard for Dutchess County is that only 2 communities in Dutchess have decreasing tax rates, 19 have increases, and 1 remains unchanged.

Poughkeepsie Journal's Response

In preparing this post, I attempted to check first with the Poughkeepsie Journal regarding my findings. My hope was to be able to report here that the Poughkeepsie Journal acknowledged their mistake, and will presumably avoid it in the future. Unfortunately, Poughkeepsie Journal management stands by their figures, and has denied my request to speak with whoever prepared the story's tax table.

Acknowledgment

Many thanks to the excellent staff at the Dutchess County Real Property Tax Service Agency for assistance in this investigation.

Apology to Poughkeepsie Journal

2009-12-31T23:31:00.002-05:00

I’ve written three blog posts this month critical of Poughkeepsie Journal reporter Jenny Lee-Adrian's coverage of the 2010 Dutchess County budget. These three posts were in response to Lee-Adrian’s stories of December 10, 11, and 17. The last of my three posts, Poughkeepsie Journal's Fuzzy Math, accused Lee-Adrian of imprecise arithmetic resulting in the publication of inaccurate tax rate increases. It turns out that the math in the December 17 story was not fuzzy, and the numbers in the December 17 story are accurate after all. I'm truly sorry to have mistakenly accused the Journal and Lee-Adrian of these errors.

How Did My Mistake Happen?

Short answer: Faulty assumptions and failure to check them; a chance editorial simplification.
Long answer: Keep reading.

December 10 Story

The first of my three posts, County Legislature Increases Tax Rate 14.3 Percent, criticized Lee-Adrian’s December 10 story because it didn’t mention tax rates or tax rate increases at all. This post was very similar to half a dozen earlier posts I'd written on other local government jurisdictions, advocating for prominent coverage of tax rate increases by the Poughkeepsie Journal.

December 11 Story

Lee-Adrian’s December 11 story included tax rates and the tax rate increase for the December 8 amendments by the Dutchess County Legislature. The second of my three posts, Poughkeepsie Journal Gets It Almost Right, criticized this story because the included 14.6 percent tax rate increase was inaccurate. Lee-Adrian had used rounded tax rates for her calculation of the tax rate increase, thus introducing errors. In my conversation with Lee-Adrian before writing my second post, I suggested that she should use high precision tax data for her rate calculations, and to only round off for presentation, in order to avoid inaccuracies. My suggestion was not accepted, and our conversation ended awkwardly.

Authoritative Source for Tax Levy

It’s worth noting that Lee-Adrian and I had both obtained the tax levy related to the legislative amendments from the same source: Fred Knapp, assistant to Legislative Chairman Roger Higgins. Knapp is keeper of the numbers for the Legislature, according to Higgins. In other words, our source for the tax levy was the key staff person designated by the Legislative Chairman as maintaining the tax data for the legislative branch of Dutchess County Government. Since the tax levy pertains to the legislative amendments, for which the legislature is presumably the final arbiter, I assumed that the County Legislature is the most authoritative official source for the tax levy resulting from the legislative amendments.

My assumption was faulty. The budget office in the executive branch of county government is much better equipped than the legislature to account for the detailed implications of legislative amendments to the budget. It turns out the tax levy increase given to me by Knapp, though expressed to the exact dollar, was actually inaccurate by about $400,000, or 5 percent. This fact comes into play in act three.

December 17 Story

Lee-Adrian’s December 17 story included tax levy and the tax rate increase for the December 8 legislative amendments, just as did the December 11 story, but there were some obvious differences in the numbers. While the December 11 story stated the tax rate increase as being 14.6 percent, the December 17 story stated that the increase was 13.9 percent. While the December 11 story gave the tax levy as “$103.4 million”, the December 17 story gave the tax levy as “103 million”.

My Incorrect Assumptions

Upon reviewing the December 17 story before writing the third of my three posts, Poughkeepsie Journal's Fuzzy Math, I assumed that Lee-Adrian was continuing to use rounded arithmetic on the same tax levy we’d both obtained from Knapp. All the numbers in her December 17 story seemed consistent with these assumptions. For example, I assumed that the “$103 million” tax levy was just Knapp’s $103,412,049 rounded to three significant figures.

My assumptions were wrong, despite the fact that they yielded a self-consistent explanation of Lee-Adrian’s December 17 story. Lee-Adrian was no longer using the tax levy of $103,412,049 with which we’d both started, but a more authoritative tax levy of $102,996,772 provided by the budget office a few days earlier. She also used high precision arithmetic on this new data.

The new tax levy displayed to four significant figures would have been “$103.0 million”. If it had been displayed this way, I would have seen right away that she was using a different tax levy than the “$103.4 million” of her previous story. This would have completely changed my understanding of what Lee-Adrian was doing. It wasn’t until Lee-Adrian published a follow-up story on December 19 with the exact tax levy that I learned of my mistaken assumptions. But it’s understandable that “$103.0 million” could have been edited to read “$103 million”. The chance for such an editorial simplification arises only once in ten times.

Lessons Learned

I should have attempted to check my assumptions with Lee-Adrian before posting my incorrect analysis of her December 17 story. I should not have allowed my discomfort with our earlier conversation to govern my decision to bypass this important step.
The budget office is a more authoritative source for county tax levy information than the county legislature.

Time to Declare Victory?

2009-12-26T17:13:00.000-05:00

I've written over a dozen posts since September on the subject of Truth in Taxing, arguing that from the viewpoint of property taxpayers and other members of the public, the most important measure of property taxes is the tax rate and changes in the tax rate. In this time of declining property values, government officials will strenuously avoid mentioning tax rates, because changes in the tax rate would show their budgets in the worst possible light. I've suggested that news sources such as the Poughkeepsie Journal should make the importance of tax rate changes clear to their readers. This can be accomplished by putting the tax rate increase in the headline, in the lead sentence, and in the sidebar information — not burying it in the tenth paragraph, or omitting it entirely.

Noticeable Improvement in Poughkeepsie Journal's Coverage

When I wrote Poughkeepsie Journal Fails Truth-in-Taxing Test two months ago, most recent Poughkeepsie Journal stories related to property taxes had not provided truth in taxing disclosures. Since then, there's been a noticeable improvement. Two weeks ago, reporter Jenny Lee-Adrian's stories on the Dutchess County's budget began to prominently mention tax rates and changes in tax rates. Yesterday, reporter Michael Woyton's story, “Beacon tax rate up by 10% despite cuts in spending”, makes the tax rate increase the main story. Even readers who just glance at these two stories can't miss the fact that taxes for Dutchess County and City of Beacon are going up. My hearty congratulations to the Poughkeepsie Journal, Lee-Adrian, and Woyton for doing a great job of informing the public about what's really happening with property taxes. I'm very pleased to see what's looking like a trend of significantly improved coverage.

Minor Criticism

Just one small criticism of Woyton's story: Some readers may be puzzled that the Beacon tax rate could be going up while spending is down. If the story had mentioned the fact that property values are going down, these readers might have understood better.

Should I Take Credit for Poughkeepsie Journal's Improved Coverage?

Short answer: I haven't the faintest idea.
Long answer: I wouldn't even be asking this question, except that I received a serious inquiry about this. I have had a relatively small amount of direct communication with some Poughkeepsie Journal reporters. Most of their responses to my critiques of the Journal's coverage were ambivalent at best. I certainly haven't received any indication that my arguments would affect their reporting.

My view is that this is not an important question to answer. To me, the important thing is that the Poughkeepsie Journal seems to have made a significant improvement in coverage of property tax matters. Although this occurred after many of my blog posts, correlation does not imply causation.

Do I Owe the Poughkeepsie Journal an Apology?

My most recent post, Poughkeepsie Journal's Fuzzy Math, accused reporter Jenny Lee-Adrian of using a rounded tax levy to calculate an inaccurate tax rate and tax rate increase in a December 17 story on the County budget. It turns out that the math was not fuzzy, and the numbers in this story may be accurate after all. So I owe the Poughkeepsie Journal (and Lee-Adrian) an apology, right?

Maybe. Like most things in life, the reality is more complicated than these simple facts would suggest. I'm currently investigating how it happened that I got it wrong. I will post an explanation to this blog as soon as possible. Hopefully, that will be the last post I'll be moved to write on the subject of Truth in Taxing.

Poughkeepsie Journal's Fuzzy Math

2009-12-17T21:44:00.001-05:00

The criticisms of the Poughkeepsie Journal and of reporter Jenny Lee-Adrian in this post are incorrect, and are hereby retracted. For details, see Apology to Poughkeepsie Journal.

Be careful what you wish for.

These words came to mind when I read today's front page story by Jenny Lee-Adrian in the Poughkeepsie Journal, “Steinhaus, Legislature plans differ on tax rates” (Online headline differs from print edition.) There it is, right on the front page! Everything I've been advocating for! Tax rates in the headline. Tax rate increase in the lead sentence. And tax rates even in the caption of a photo of Dutchess County Executive William Steinhaus, the caption informing readers that property tax would increase even under his original budget. Best of all, the print edition includes a large table comparing the Legislature's amended budget with the result of recent Steinhaus vetoes. The column titles feature the tax rate increases in huge typefont, so they can't be missed, even by the casual reader. You can hardly pick up the paper without seeing “13.9%” and “9.2%”.

This is just what I've been advocating for many months now in this blog (and in direct communications with Poughkeepsie Journal reporters). The tax rate and the tax rate increase is the story, and I'm very glad that the Poughkeepsie Journal finally gets it.

Lee-Adrian's Calculations Are Inaccurate — Again

I wish I could stop here, with congratulations to the Poughkeepsie Journal, and drinks all around. Unfortunately, the story is marred by inaccurate tax rate calculations by the Poughkeepsie Journal. When I advocated for reporting on tax rate increases, it never occurred to me to say, “And by the way, when you publish those tax rate increases, consider publishing accurate ones.” But I guess I should have.

Actually, I did. I had a long telephone conversation on December 14 with Lee-Adrian regarding her December 11 story containing an amended county tax rate increase of 14.6 percent. This rate increase is inaccurate because she used rounded tax rates. I encouraged Lee-Adrian to use high precision tax data for her rate calculations, and to only round off for presentation, in order to avoid inaccuracies. My recent post Poughkeepsie Journal Gets It Almost Right documents my analysis in more detail.

For today's story, Lee-Adrian apparently decided to recalculate the amended tax information already published. This time, instead of using rounded tax rates, she used a rounded tax levy of $103,000,000, instead of the actual value of $103,412,049. This made matters worse than before.

The thing is, when you start your calculation with rounded values, you introduce an error proportional to the difference between the rounded value and the unrounded value. In this particular case, the rounded tax levy is nearly half a percent different from the exact value, thus introducing considerable inaccuracy. Lee-Adrian's calculations using the rounded tax levy resulted in the following inaccuracies, all of which appear in today's story:

“The Legislature budget's property tax levy would increase 8.9 percent.” The correct value is 9.3 percent.
“Under that budget, the property tax rate could increase 13.9 percent in 2010 ...” The correct value is 14.3 percent, as I stated in this blog a week ago.
“... to $2.89 per $1,000 of assessed value.” The correct value is $2.91. Lee-Adrian had already published this correct value in her December 11 story. Why did she think she should change it?

Today's Story Gets Some Tax Information Right — By Accident

Today's story also contains corresponding tax information regarding the effect of the Steinhaus vetoes, culminating in the statement that “the property tax rate could increase 9.2 percent”. Are all these numbers inaccurate also? No. Although Lee-Adrian presumably used the rounded tax levy of $98.8 million, it just so happens that the rounded tax levy differs from the true tax levy in this case by less than one part in ten thousand. This good luck allows all the published results regarding the Steinhaus vetoes to be correct.

Who Is Responsible For the Calculated Tax Information?

The December 11 story stated that the (inaccurate) 14.6 percent tax rate increase was provided by the Legislative staff, but Lee-Adrian confirmed to me that she calculated it herself. Today's story states the following:

The Journal calculated the 2010 property-tax rates for the Legislature budget and a budget with vetoes based on numbers Steinhaus released Tuesday. Legislature staff confirmed the 2010 tax rates were correct. The County Executive's Office did not respond.

I spoke today with Fred Knapp, assistant to Legislative Chairman Roger Higgins. My understanding of our conversation is that Knapp had indeed spoken with Lee-Adrian about these tax numbers, but that he did not confirm the correctness of her calculations. Knapp seemed to be well aware of the necessity of preserving precision in tax rate calculations, and he graciously provided me with the exact tax levy changes needed to perform the high-precision calculations.

Credibility Gap

It hardly needs saying that the credibility of the Poughkeepsie Journal suffers if it publishes two different tax rate increases (14.6 percent and 13.9 percent) for the same amended budget, and both numbers are wrong. This is especially true since it just isn't that hard to get it right. I'm extremely pleased to see that the Poughkeepsie Journal has finally published the County tax rate increase information. But is it too much to ask that they publish the correct numbers?

Poughkeepsie Journal Gets It Almost Right

2009-12-14T20:41:00.000-05:00

A front-page story in the December 11-th Poughkeepsie Journal by reporter Jenny Lee-Adrian, headlined “Taxpayers fume over planned rate hike,” on property taxes for Dutchess County Government, focuses attention where it belongs: On the tax rate and the tax rate increase. This story is a marked improvement over most of the Poughkeepsie Journal's past coverage of local property tax issues, of which I have been highly critical. In my post Poughkeepsie Journal Fails Truth-in-Taxing Test, I state:

Readers of the Poughkeepsie Journal need the tax rate and change in tax rate in order to understand the essence of what's happening. This means they need the change in the tax rate in the headline itself, in the lead sentence, and possibly also in the sidebar information — not buried in the tenth paragraph, or omitted entirely.

Lee-Adrian's story comes closer to meeting this standard than any other local property tax story I've seen in the Poughkeepsie Journal in recent months, though there is still some room for improvement.

The headline alludes to the fact that the planned tax rate would increase. Good. Even better would be to mention the amount (percent) of tax rate increase in the headline.
The lead sentence is, “Amid an economy in crisis, Dutchess County residents are outraged their county property tax rate would increase by 14.6 percent next year.” [emphasis added] Lee-Adrian gets full credit for stating the tax rate increase in the lead sentence. Unfortunately for readers, the actual percent increase is 14.3. Although her story claims that the 14.6 value was provided by “the Legislative staff,” Lee-Adrian has confirmed that she calculated the percent increase herself, and that she used rounded tax rates. Using rounded tax rates introduces noticeable inaccuracies. This is why the tax rate increase in her story is inaccurate. My calculation uses the high-precision tax rates that would be used to compute individual tax bills.
The sidebar information (in the print edition) displays the property tax rates, not only for 2009 and the amended 2010 tax years, but even for tax years going back to 2006. It even displays the budgets and property tax levies for all years. Good, and good. Even better would be to display the tax rate increases (percents) from one year to the next. In my view, the tax rate increases are more important than, for example, the tax levy information that is included in the sidebar.
The story mentions the fact that the original Steinhaus budget increases the tax rate “... from $2.54 in 2009 to $2.66 per $1,000 of assessed value in 2010.” This is a key piece of information when comparing to the county legislature's amendments, and it's good that it appears in the story. Unfortunately, this quote is buried in the 14-th paragraph of the story, on the second page continuation in both the print and web editions. Even more important than this quote is the fact that the Steinhaus budget represents a 4.6 percent increase in the tax rate. This crucial fact appears nowhere in this story (and as far as I know, in no other Poughkeepsie Journal story). In my view, readers should have been informed upfront that while the legislative amendments yield a tax rate increase of 14.3 percent, Steinhaus' original budget yields a tax rate increase of 4.6 percent.

How To Encourage Publication of Tax Rate Increases?

A possible outcome of my criticism of Lee-Adrian's tax rate increase calculation (Item 2 above) is that Poughkeepsie Journal reporters (if they read my blog) will be discouraged from publishing property tax rate increases. This would achieve the exact opposite of my purpose. I can think of two obvious ways to avoid this outcome:

Reporters can calculate tax rate increases correctly, just by using high-precision tax rates. A high-precision tax rate is simply the exact tax levy divided by the exact market value. And be sure to retain all significant figures in the quotient!
Reporters can request public officials to do this calculation for them. However, reporters should be prepared for significant resistance on the part of public officials, because the officials know that tax rate information puts the tax situation in the most unfavorable light in a time of decreasing property values. Officials much prefer to focus on tax levies and typical tax bills, which make the tax situation seem not as bad as it really is.

My hope is that the Poughkeepsie Journal will employ some combination of the above methods to provide its readers with tax rate increase data essential to an informed public.

County Legislature Increases Tax Rate 14.3 Percent

2009-12-10T16:44:00.000-05:00

A front-page story in today's Poughkeepsie Journal by reporter Jenny Lee-Adrian, headlined “Legislature OKs Budget, Raises Property Tax Levy”, features a prominent diagram (in the print edition) with the following contents:

What Steinhaus Proposed: 0% property tax levy increase
What County Legislature Changed: 9.4% property tax levy increase

So why does the title of this post say “14.3 percent”? If you've been following this blog the last few months, you already know the answer. It's because the Poughkeepsie Journal (and Steinhaus, and the legislators) are talking about tax levy, and I'm talking about tax rate. As I've argued repeatedly in this blog, the most important thing for taxpayers is the tax rate. The tax levy is just smoke, designed to make the increase seem smaller than it really is. If I were writing this news story, my diagram would say:

What Steinhaus Proposed: 4.6% property tax rate increase
What County Legislature Changed: 14.3% property tax rate increase

Both property tax rate increases are with respect to the 2009 tax rate of $2.54 per thousand dollars of market value. Steinhaus' proposed 2010 tax rate is $2.66, and the legislature's is $2.91. These numbers are easy to compute from the property tax levies mentioned in the story. As I mentioned in my earlier post on this subject, the reason the tax rates increase more than the tax levies is that the market value of Dutchess County has decreased by four and a half percent in the last year.

One can hardly blame the politicians for trying to put the best face on a bad situation, but the Poughkeepsie Journal could do a better job of informing its readers. Property taxpayers are in for a lot worse news than they'd think by reading the Poughkeepsie Journal.

Gephard Elected Fairview Fire Commissioner

2009-12-08T23:59:00.039-05:00

The election held today for commissioner in the Fairview Fire District was officially uncontested, in the sense that only one name was on the ballot (Bob Gephard). However, there have been persistent rumors of a secret write-in campaign, and the results appear to validate this rumor: Of the 141 votes cast, Gephard received 110 votes, or 78 percent, and write-in “candidate” John Anspach received 29 votes, or 21 percent. Of the remaining 2 votes, one was blank and the other was written in as “Robert L. Rogers”. I obtained these results this evening as an official poll watcher for Gephard.

In my view, what is significant about these results is the large number of votes cast in an uncontested election, and the relatively large percentage of the votes for a single write-in “candidate”. To better understand these results, it's necessary to know the recent history of the Fairview Fire District.

2008 Election

Fire district elections typically have very small turnouts, and the Fairview Fire District has been no exception — until 2008. In early 2008, an advocacy group called Fairness for Fairview formed, and became instrumental in bringing over 400 angry residents and taxpayers to the April 24, 2008, Fairview Fire Commissioners meeting. Most of these residents and taxpayers had no previous knowledge about fire district governance. All they knew was that their taxes were sky high. (I was one of these residents/taxpayers.) In the months following the April 24 meeting, some of the more outspoken residents and taxpayers continued to show up at commissioners meetings. These newly interested residents/taxpayers continued to challenge the commissioners, who were all veterans with years or decades of experience running the fire district. These challenges culminated in the 2008 election between incumbent Dick Martineau and resident/taxpayer Jill Line. Line was seen as representing “newcomers” to Fairview Fire District (FFD) governance, that is, residents not previously associated with FFD.

To put the 2008 election into perspective, you need to understand that in 2007, Fairview had an uncontested election in which only 22 voters turned out. These voters tended to be the 5 commissioners and many of the firefighters and officers of the district. In the 2008 election, incumbent Martineau received 79 votes — more than three and a half times the entire voter turnout the previous year. Martineau's total represented a concerted effort by supporters of the veteran commissioners to prevent a shift in power to the newcomers. But Martineau's support was no match for the wrath of the newcomers. A massive outpouring of voters gave Line 190 votes, or 70 percent of all votes cast. Line's total almost certainly would have been even greater, except for the fact that dozens of voters turned away upon encountering long lines. Many who stayed to vote stood on line for an hour or more.

2009 Election

In my view, the 2009 election shows a continuation of the conflicts between supporters of veteran commissioners and supporters of the newcomers. Gephard is seen as representing the newcomers, while Anspach is seen as representing the veterans. Indeed, Anspach has served on the board of fire commissioners for 30 years, including at least the last 5 as chairman. For me and many others who've come to learn about FFD only recently, Anspach represents the heart and soul of the old guard, for better or for worse, depending on your point of view. With Anspach leaving the board, there will be a significant power vacuum. (Anspach plans to continue his dedicated service as Fairview volunteer and chief safety officer.)

Some may theorize from the election results that Anspach has attempted to engineer a secret campaign to win reelection. This theory makes no sense to me. In the first place, if Anspach had wanted to continue as commissioner, the first thing he would have done would have been to get on the ballot. As incumbent chairman of the board, he would have had a much better chance of reelection than as a write-in candidate. In the second place, Anspach has consistently stated throughout the campaign that he will not challenge Gephard. And in the third place, Anspach told me after the polls closed that he did not vote for himself! Case closed. In effect, Anspach has given Gephard his blessing to take over as a commissioner.

Still, the 29 votes for Anspach as a write-in candidate demands an explanation. This number of votes is considerably more than the total number of votes in the uncontested 2007 election. In my view, these votes come from the same supporters of the veteran commissioners who attempted to reelect Martineau last year, and who fear the shift in power to the newcomers. These supporters of the status quo agreed to write in Anspach's name despite his non-candidacy. They could reasonably have hoped that with so many votes for Anspach, Gephard could fail to gain a majority. After all, it is this group which controlled the election until 2008.

Gephard had the political sense to be wary that he might lose this election even though he was the only candidate on the ballot. In my view, it is only because Gephard conducted an aggressive campaign, distributing fliers to most Fairview residents, and working hard to get out the vote, that he assured himself of victory. I can believe that many of those who showed up to vote for Gephard today didn't know that the election was “uncontested”. Considering the secret write-in campaign, maybe it wasn't.

2010 Election

In the contest between the veterans and the newcomers, the handwriting is on the wall. In the last two elections, it's newcomers 2, veterans 0. Next year, Commissioner Tom Ashline's term expires. If Ashline seeks reelection and is challenged by a newcomer, he might have a difficult time winning, simply because he will be seen as representing the veterans. His best strategy may be to show voters now that he represents their interests, in hopes that no newcomer will become a candidate to challenge him.

Proposed County Budget Increases Tax Rate 4.6 Percent

2009-12-07T18:06:00.000-05:00

If you've been following reports about the Dutchess County 2010 Tentative Budget, you probably know that Dutchess County Executive William Steinhaus' plan freezes the 2010 property tax levy at the 2009 level. This plan makes it sound as though taxes won't be going up. Great news for property taxpayers in these difficult economic times, right?

Wrong! In reality, the plan calls for a 4.6 percent increase in the property tax rate, from $2.54 to $2.66 per thousand dollars of market value. And the tax rate is all that matters. You can verify the 2009 and projected 2010 tax rates yourself from the County's table, Property Tax Levy & Rate. (For details, see below.) The tax rate increase occurs because even though the tax levy holds steady, the market value of Dutchess County has fallen four and a half percent in the last year.

Why haven't you heard about the Dutchess County tax rate increase before? Because government officials don't want to talk about it. Better to talk about the tax levy, or the typical tax bill, since they make the tax hike sound smaller than it really is. It's just one more example of the dirty little secret of property taxes. I've written about this secret so many times in this blog that I've lost count. For a summary of how the Poughkeepsie Journal has failed to pick up on this story in half a dozen local jurisdictions (each of which I've blogged about separately), see Poughkeepsie Journal Fails Truth-in-Taxing Test.

Steinhaus Press Release Misleads

It's understandable that Steinhaus would not want to mention the 4.6 percent tax rate increase in his budget. But it's disingenuous for him to introduce tax rates into a misleading characterization of opponents' proposals. In a December 4 press release, Steinhaus is quoted as saying:

County legislators must now make the final choice either to focus on satisfying requests for more spending from special interest groups and raise county property taxes nearly 22 percent to fund all of these programs, or they can choose to control spending to keep property taxes flat.

This statement is more than a little misleading. The 22 percent number is correct only if it refers to the total increase in the property tax rate from 2009, including both the 4.6 percent increase in the Steinhaus budget and the legislators' additions, which alone comprise only a 16 percent increase. The “keep property taxes flat” cannot refer to any tax rate, because the tax rate is not flat under Steinhaus' budget. So it's not 22 versus zero. It's either 22 versus 4.6, or 16 versus zero. Take your pick.

The Steinhaus press release concludes with the following statement:

Last year, the Democrat Majority adopted a budget that raised county property taxes an unprecedented 11% to respond to special interest demands. County property taxpayers simply cannot afford a 22% tax increase again this year.

One can determine from the Property Tax Levy & Rate that the county property tax rate increased 11 percent from 2008 to 2009. Whether county taxpayers can afford a 22 percent tax (rate) increase again this year is debatable. However, Steinhaus apparently thinks they can afford a 4.6 percent tax rate increase, because that's what he's proposing.

Verifying the Tax Rate Increase: In the table, Property Tax Levy & Rate, note that “True Value Assessments” is another name for “market value”. The property tax rate is simply the property tax levy divided by the market value and multiplied by $1,000. The property tax rates in this table are measured in dollars per thousand dollars of market value. You should ignore the misleading note at the bottom of this table,

Comparisons of rates from year to year are not valid because of equalization rate adjustments.

Comparisons of these county property tax rates from year to year are perfectly valid. Furthermore, equalization rate adjustments have no effect on any of the numbers in this table. I have determined that this misleading statement has appeared in County budget documents for many years, unchallenged until my conversations today with County officials. I am happy to report that Dutchess County Director of Real Property Tax Service Agency Kathy Myers has assured me she will work with the Budget Office to “clarify” this statement in future years.

Fairview Fire Tax Dollars at Work

2009-11-18T23:58:00.008-05:00

The Fairview Firefighters Union, IAFF Local 2623, invited me to participate in a live fire training drill at the Dutchess County Fire Training Center on November 12. I had the opportunity to go into a burning building to rescue a victim (fortunately, a dummy), and to fight the fire. A respirator — and very close supervision by Fairview's finest — kept my body and soul together. I also got to climb the Department's 100 foot ladder. The photo shows me flanked by my two excellent guides, Fire Captain Chris Maeder and Union President Rob Ridley.

Safety and Risk

Although I felt pretty safe in the controlled training situation, it was obvious that firefighters could be at significant risk in a real emergency. For me, the training session was only an adventure, but for firefighters, it's a way to lower their risk and increase their effectiveness when on a call. Participating in these exercises increased my respect for the dangerous job firefighters do every day.

What Does All This Have To Do With Fire Taxes?

Two things:

Fairview firefighters are highly trained professionals (or in some cases highly trained volunteers). Their compensation is the main component of the fire tax levy in predominantly career fire districts such as Fairview. Our fire tax dollars primarily pay the people who save our lives and property.
Fairview firefighters use a great deal of specialized equipment to fight fires, to rescue victims, and to keep firefighters safe. On any given call, only a small fraction of this equipment is used, but different calls will use different equipment. The effectiveness of the fire department on a given call depends in part on having the right tool for the job at hand, as well as knowing how to use it. These tools cost money. Most of this money comes from the local fire tax levy, although some expensive equipment, such as the “jaws of life”, is paid by other sources, such as federal or state grants.

House Fire

By chance, I happened to witness a Fairview Fire Department team responding to a house fire last evening. It took only 3 minutes after dispatch for this team to appear at the house with a fire truck, and only a few more minutes to get the fire under control. This rapid response prevented major damage to the residence. The rapid response was possible only because the team was already at the fire house, ready to go. In other words, it was only because of Fairview's 24x7 career (paid) staff that this house incurred minor damage. If it were necessary to wait for volunteers to arrive from other locations, this house would most likely have suffered major damage.

What Do Our Fire Tax Dollars Buy?

Fire tax is a hopelessly dry and geeky topic. It's just a bunch of numbers on a piece of paper, or in cyberspace. My report advocating consolidation shows dramatic differences in fire tax rates among fire districts in Dutchess County, with Fairview having the highest fire tax rate. But what do the dramatically different fire tax rates buy? Do higher fire tax rates tend to provide better protection than lower ones? How much better? What does “better protection” really mean? The training drill and the house fire allowed me to touch and feel what the Fairview fire tax dollars buy: Fairview fire taxes buy the ability to contain some fires in their early stages, limiting the threat to human life and the damage to property.

Based on what I've seen and experienced, it is quite plausible to me that fire districts with low tax rates (typically staffed predominantly by volunteers) may tend to have longer response times to emergencies, and therefore less favorable outcomes. In other words, you get what you pay for. Is the high level of service in Fairview worth the high cost? Undoubtedly, different taxpayers will answer this question differently. This is the beginning of a new aspect of learning about fire districts for me. I would like to see how things work in a predominantly volunteer fire district, in order to compare and contrast.

Beekman Taxpayers Face 10 Percent Tax Rate Increase

2009-10-30T22:52:00.001-04:00

Q: What tax rate increase can Beekman taxpayers expect to see in 2010?
Short Answer: Just read the title of this post.
Long Answer: Read this whole post.

The answer is complicated by the fact that the Town of Beekman has proposed to transfer its $319,800 ambulance contract to the Beekman Fire District. This cost-shifting makes the Town of Beekman tax rate increase smaller than it would otherwise be, and it makes the Beekman Fire District tax rate increase larger than it would otherwise be. From the taxpayer's viewpoint, what matters is the combined effect of the Town's rate increase and the Fire District's rate increase. That's because, as I've written so many times before, the tax rate is all that matters.

One cannot simply add the two rate increases, because they pertain to different tax levies. Instead, one must first sum the tax levies, then calculate a combined tax rate, and then compare these rates for 2009 and 2010. Two factors make it even more complicated to compute the overall Beekman tax rate increase:

The tax base for the Town of Beekman is approximately 4 percent smaller than that for the Beekman Fire District, because of special exemptions (such as for veterans) that apply only to the Town tax. This means that about 4 percent of Beekman's assessed value pays only fire tax, no town tax.
The Beekman Fire District's tentative 2010 budget has very recently been modified to reduce the fire tax levy by $107,000, as I learned today from Beekman Town Supervisor John Adams.

Beekman Tax Bills

Taking all the above into account, Beekman property taxpayers can expect to see the following on their 2010 property tax bills:

Town of Beekman tax rate of $1.32 per thousand dollars of assessed valuation, representing a 0.7 percent decrease from 2009. This 0.7 percent decrease represents a correction of the blunder I reported yesterday, and which Adams has graciously confirmed.
Beekman Fire District tax rate of $0.65 per thousand dollars of assessed valuation, representing a 42.0 percent increase from 2009. (Without the recent $107,000 tax levy reduction, the tax rate increase would have been 56.3 percent.)
The combined effect of the above two taxes is an effective tax rate of $1.97 per thousand dollars of assessed valuation, representing a 10.2 percent increase from 2009. (Without the recent $107,000 fire tax levy reduction, the tax rate increase would have been 14.0 percent. None of the numbers in this item will appear explicitly on the tax bill.)
Possible additional taxes for properties in Pawling Lake Estates and Dover Ridge (water/sewer). These additional taxes are separate from the Town and Fire District taxes, and are not considered in this analysis.

The key number from the taxpayer's viewpoint is the 10.2 percent effective tax rate increase, combining the Town of Beekman tax and the Beekman Fire District tax. (Item 3) This number gives the best measure of how much more heavily each taxpayer's wealth — as measured by the market value of his property — is being taxed by the Town of Beekman and the Beekman Fire District.

Response from Beekman Town Supervisor

I'm pleased that Adams has added a comment to my previous Beekman post, and that we now agree about the effective Beekman tax rate increase. I'm also glad that Adams has chosen to publicly state the effective tax rate increase for Beekman. As I've said many times before in this blog, from the taxpayer viewpoint the tax rate is all that matters. On the other hand, Adams couldn't resist adding:

Keep in mind that the valuation of the Town dropped by about 6% so the effective change in dollars paid will be about 4%.

Although these are true facts, taxpayers are advised to disregard them. The main purpose of such statements is to make tax increases sound not as bad as they really are. I've written about this extensively in The Dirty Little Secret of Property Taxes.

Disclaimer: All of the above numbers are based on proposed budgets, and are subject to final approval of these budgets by the Town of Beekman and the Beekman Fire District.

Acknowledgments: My thanks to Beekman Town Supervisor John Adams, Beekman Town Budget Officer William Brady, and Beekman Town Councilman Daniel French for graciously providing information essential to this analysis.

Town of Beekman Blunder Overstates Tax Rate Increase

2009-10-29T11:19:00.002-04:00

A blunder has caused Town of Beekman Supervisor John Adams to significantly overstate the proposed 2010 Town tax rate increase. A letter from Adams to Beekman Town Clerk Virginia Ward on October 19 includes figures indicating that the projected 2010 Town of Beekman property tax rate would increase 10.09 percent. Also, a Poughkeepsie Journal story on October 14 states that Adams is proposing a 10 percent tax rate increase. In reality, the projected 2010 Town of Beekman property tax rate would decrease 0.7 percent.

Town of Beekman Budget Officer William Brady has confirmed this blunder, which I discovered by examining Beekman's preliminary budget. The blunder was caused by mistakenly comparing the projected tax rate with the corresponding 2008 tax rate. The comparison should have been made with the 2009 tax rate, which is substantially higher. The net size of the tax rate error is 10.8 percent.

Effect on Property Taxpayers

Beekman property taxpayers will presumably be glad to know that their Town of Beekman taxes will decrease slightly, rather than increasing significantly. The bad news is that the Town of Beekman has held down its tax rate only by transferring a $319,000 ambulence-contract cost to the Beekman Fire District, thus raising the Beekman Fire District tax rate by a whopping 56 percent, from $0.46 per thousand dollars of assessed valuation to $0.72. Thus, the same taxpayers will be paying higher taxes out of another pocket. The dirty little secret of property taxes strikes again.

Poughkeepsie Journal Fails Truth-in-Taxing Test

2009-10-24T16:14:00.001-04:00

The Poughkeepsie Journal has failed, in its recent stories about property taxes, to properly inform the public about what's really going on. Most readers of the Journal stories on property taxes in the City of Poughkeepsie and the Town of East Fishkill likely think that projected 2010 property taxes are going down substantially. The truth is that they're projected to go up from 5 to 9 percent. Most readers of the Journal stories on property taxes in the Town of LaGrange, the Town of Poughkeepsie, and the Arlington School District likely think that projected 2010 property taxes are going up by single-digit percentages. The truth is that they're projected to go up by double-digit percentages. The only recent Poughkeepsie Journal story that gets it pretty-much right is the one on the Town of Red Hook, where property taxes are projected to increase 25 percent.

Poughkeepsie Journal Parrots Government PR

In every one of these stories, the Poughkeepsie Journal has done nothing more than to rephrase the press releases and statements of government officials, even when those statements are deliberately misleading. None of the Journal stories has given any hint that there might be a different interpretation of the property tax situation than the government spin. The only reason the Town of Red Hook story is not misleading is that the government officials themselves were candid enough to provide the tax rate and tax rate increase.

The Tax Rate is All That Matters

From the viewpoint of property taxpayers and other members of the public (who pay property taxes indirectly through their rent), the most important measure of property taxes is the tax rate, and changes in the tax rate. In today's declining real estate market, property tax assessments are trending downward by single-digit or in some cases even double-digit percentages. In other words, the wealth of property owners — as measured by the market value of their properties — has diminished by these percentages. Under these conditions, property tax rates will tend to rise, even if the tax levy does not. And if the tax levy does rise, the tax rate will tend to rise even more. This is exactly what's been happening.

The Big Story is Being Missed

An increase in the tax rate is Really Bad News, because it means that our wealth is being taxed at a higher rate. Furthermore, it's likely that local governments will find it difficult to lower this rate to “normal” levels in the future, when the real estate market improves. In other words, the current dramatic increases in local property tax rates may result in permanent increases in the rate at which our wealth is taxed. This is a big story, and it's being played out in almost every local government jurisdiction. But you'd never know it from reading the Poughkeepsie Journal.

Government Officials are Just Doing Their Jobs

You won't hear this story from most government officials. When government officials discuss property tax issues in today's economic climate, it is to their advantage to deemphasize — or even omit — the tax rate and the change in the tax rate. Instead, they focus on the tax levy and/or the typical tax bill. In today's declining real estate market, increases in the tax levy and in the typical tax bill will be smaller than increases in the tax rate. By focusing on tax levies and typical tax bills, officials can make the tax situation seem not as bad as it really is, without actually lying. Putting the best face on a bad situation is what any good politician needs to do.

Truth in Taxing

Prominent disclosure of the tax rate and the change in tax rate is what I call truth-in-taxing. We cannot expect government officials to provide truth in taxing, because of their obvious conflict of interest. However, news sources such as the Poughkeepsie Journal have as a key purpose to inform the public about the workings of government. For stories related to property tax, such reporting means going beyond simply parroting the PR of government officials, especially when it is known that this PR is deliberately misleading. In property tax stories, the key issue is the tax rate and changes in the tax rate. This is always what the story is about, whether government officials wish to talk about it or not. Readers of the Poughkeepsie Journal need the tax rate and change in tax rate in order to understand the essence of what's happening. This means they need the change in the tax rate in the headline itself, in the lead sentence, and possibly also in the sidebar information — not buried in the tenth paragraph, or omitted entirely. The change in the tax rate is the story. Most recent Poughkeepsie Journal stories related to property taxes have failed to provide truth in taxing disclosures. I would very much like truth in taxing to become standard policy in the Poughkeepsie Journal's property tax reporting.

Truth in Taxing

2009-10-18T21:12:00.001-04:00

Before 1968, consumers had very little protection in credit transactions. Lenders often used misleading figures to describe loan offers, so that it was impossible for most consumers to know whether a loan offer was good, bad, or indifferent, or to compare different loan offers. Lenders were not required to clearly disclose the cost of a loan. The truth in lending act, which became a federal law in 1968, changed all that. Now, lenders are required by law to disclose the annual percentage rate, or APR. The APR gives a standard measure of the cost of a loan, and allows direct comparison among loan offers.

In a sense, property taxpayers live in a pre-1968 world. Government officials often use misleading figures to describe property taxes, so that it is impossible for most property taxpayers to know whether a proposed property tax is good, bad, or indifferent, or to compare property taxes from one year to the next, or among municipal jurisdictions.

Truth in Taxing

Property taxpayers need something like truth in lending. I call it truth in taxing. And just as truth in lending has the APR, a standard measure of how much a loan costs you, truth in taxing has the tax rate as a standard measure of how steeply your wealth, measured by the market value of your property, is being taxed. For example, a tax rate of $2.00 per thousand dollars of market value means that you get to pay $2.00 for every $1,000 of market value of your property. If your property is worth $100,000 in the market (as determined by the tax assessor), then your tax is $200. If your property tax rate last year was $2.00 per thousand dollars of market value, and this year it's $2.20 per thousand dollars of market value, then your tax rate has increased $0.20, or 10 percent. Truth-in-taxing means that changes in property taxes are expressed as percentage changes in the tax rate. Other measures of changes such as changes in the tax levy or changes in the the average tax bill may be of some interest (no pun intended), but do not directly disclose how heavily a property owner's wealth is taxed. Only the tax rate expresses directly how heavily a property owner's wealth is taxed, and only changes in the tax rate measure how much more heavily (or less heavily) that wealth is taxed.

Your Property Tax Bill Implements Truth-in-Taxing

Under New York State law, property tax bills are required to display truth-in-taxing information, or at least come pretty close to displaying it. This fact indicates to me that New York State law recognizes the utility of the truth-in-taxing concept. Tax bills are required to display:

The tax rate for each taxing purpose (such as town tax, county tax, fire tax, etc.). Unfortunately, the tax rate is given in dollars per thousand dollars of assessed value, rather than of market value. More on this below.
The market value of your property.
The equalization rate, confusingly called the uniform percentage of value on your bill.

When the equalization rate is 100 percent, all assessed value numbers are the same as market value numbers. For example, tax rates per thousand dollars of assessed value are numerically equal to tax rates per thousand dollars of market value. In this case, your tax bill directly displays the tax rates determining how steeply your wealth is taxed.

When the equalization rate is not 100 percent, one can convert tax rate in dollars per thousand dollars of assessed valuation to dollars per thousand dollars of market value simply by multiplying the former by the equalization rate.

Who Should Be Responsible for Truth-in-Taxing Disclosures?

I'm not suggesting that truth in taxing should be a law, as truth in lending is. I'm just suggesting that truth-in-taxing is a convenient label for disclosures which clearly state the meaning of property taxes for taxpayers. It would be asking too much of government officials to focus their press releases on truth-in-taxing. They simply have too strong a conflicting interest in obscuring this information, especially in a declining real estate market. But news sources intending to inform the public about property tax matters, rather than to promote a partisan view, would do well to focus on tax rate as the key component of truth-in-taxing. More on this in a subsequent post.