[Vision2020] Assessment of the Property Tax

Sat Apr 9 11:11:02 PDT 2005

Hi Jeff,

Yes, CJ's is for sale for 1.3 mil. The assessed value on CJ's building is
based on it's income. Similar to farmland. 

Phil picked up a brochure at the city called,  "Idaho's Forestland Taxation
Law" that I think can answer your other question. Since I do have the
brochure I will quote from it.

We are in Zone 2 also known as Latah County. 
Zone 2 Land Grade is as follows:

For bare land and yield:
Good: $150.00
Med. $94.00
Poor: $48.00

For productivity:
Good: $485.00
Med.: $311.00
Poor: $137.00

In a nutshell:
10 acres of the "primmest" AG/FOREST land goes for $4,850.00 per acre. 
Far cry from $250,000.00.

40 acres of the "primmest" AG/FOREST land goes for $194,000.00 per acre.
Far cry from $1,000,000.00.

Now, if you valuate AG/FOREST land on it's "potential value" with added
infrastructure, not it's current value then the Trail "gifted" land is
easily worth over a million.

Phil is at the meeting and I am home sick and trying to get 2 years of
reading done for Phil on this levy issue. 

Shelley/Phil's wife
Yes Phil will get his own email account shortly. I hope! :) 

-------Original Message-------

From: Dick Schmidt
Date: 04/09/05 09:55:30
To: vision2020 at moscow.com; Jeff Harkins
Subject: Re: [Vision2020] Assessment of the Property Tax

Jeff,

So then for example CJ's is for sale for $1.3 million then his assessment
would be based on that amount using a formula you have worked which probably
has one formula for business and another for residential? In accordance to
the freedom of information law then someone could go in and see what they
are paying in taxes.

Dick Schmidt

----- Original Message ----- 
From: Jeff Harkins 
To: vision2020 at moscow.com 
Sent: Saturday, April 09, 2005 9:10 AM
Subject: [Vision2020] Assessment of the Property Tax

As many of you have commented, the Tax Assessment Rate may not be a good
measure of the tax burden for a particular county.  And yes, you are
absolutely correct.

The real driver for the assessment of property tax on residents of a county
is the level of budgeted expenditures for that county.  As many of you are
aware, the determination of the tax rate is derived by identifying the
amount of revenue needed to fund the budgeted expenditures for the year. 
Then, given the level of assessed valuation subject to the tax, the tax levy
rate is determined by dividing the required revenue (to be funded by
property taxes) by the total assessed valuation or:

Required revenues / Total assessed valuation = Tax levy rate

But as is obvious, while the budgeted expenditures (required revenues) are
driving the amount of taxes that will be assessed on property owners, it is
the assessed valuation that determines the amount of tax that will be paid
by each property owner.  And there are numerous and inherent problems with
the assessment process.  In Idaho, the approach is to attempt to provide 
uniformity" to achieve fairness in the assessment process.  Below is a quote
from the 2004-05 Ratio Assessment Manual ( http://tax.idaho
gov/propertytax/pt_ratiostudy.htm):

MEASURING ASSESSMENT UNIFORMITY
Uniformity determines the quality and inherent equity of property
assessments. Although both the appraisal and the market transaction
are subject to distortion on any individual property, if the
magnitude of this distortion is consistently large, taxes paid by
similar properties in the same area will differ widely. The goal of
a fair assessment program is to reduce inequity of this type.
There are two overall types of inequity that can occur:
1. Inequity between categories.
2. Inequity within a given category.
In the first case, inequity results when the assessment level is
lower in one category than another. This situation becomes apparent
when level indicators from different categories are compared.
In the second case, the distortion is entirely within one category
and is not indicated by measurements of level.

I don't really like the property tax as a vehicle for funding public
programs - not because I don't want to support public programs - but because
the property tax is an extraordinarily difficult tax to administer.  The
overhead necessary to manage an equitable property tax system is enormous. 
Without getting into a diatribe or dissertation on administering a property
tax system, consider the following elements of the system" 
Must maintain an online-realtime system of all real property transactions 
Must maintain a persistent and consistent real property assessment system 
Must maintain a means of adjudicating or resolving individual property
assessment complaints 
Must maintain a system of oversight that monitors and assures that the
systems operated by taxing jurisdictions in the State is fair and equitable 
The property tax is an expensive tax to manage.  For example, in Latah
County, we levied about $5.8 million in property tax for 2003.  Give or take
a few $10's of thousands, the amount spent in Latah County for management of
the Property Tax System was above  $1,000,000 for 2003.  This number is not
readily available from the County's financial statements because the system
is managed across more than one County department (Assessor's Office,
Collector's Office, etc.), but the Revaluation program (administered by the
Assessor's Office) spent $457,011 just on the revaluation program.  From my
memory (always a dubious source) the normal operating cost of the Assessor's
office, in addition to the revaluation program) was about $700,000 for 2003.
 Thus, if these numbers are at all reliable, about $.20 of every dollar
collected in property taxes was spent in administering the tax.  Of course,
this does not include any costs incurred by the tax collectors office nor,
at the state level, for their oversight responsibilities.  Also, my numbers
do not include the cost of having our elected County Commissioners serve as
the local adjudicating body for appeal of property valuations.  If you
scrutinize the agendas for last year, you may be surprised at how much time
was spent hearing tax appeals.

And, by the way, even though we spend a lot of money on trying to assure
that the property tax is fair and equitable, those that received their
property tax assessment notices for 2005 know that the system occasionally
requires significant adjustment.  Again I would refer you to the 2004-05
Ratio Assessment Manual for details about how the assessment oversight works
  Here is that link again - http://tax.idaho.gov/propertytax/pt_ratiostudy
htm.

As you dig into the details of the ratio study and the application of that
technique to properties in Latah County (as well as other counties) you
might want to refresh your statistical analysis tools - especially the
difficulties of small samples.  I noted that for 2003, in the assessment of
Rural Residential properties ( http://tax.idaho
gov/propertytax/PTpdfs/rpt_03_county_ratio_study.pdf ) that Latah stats were
generated from 11 sales for that year.  A sample this small can be
problematic.

This concludes my thoughts on property tax assessment and the tax burden on
Latah residents.  For me, the conclusion is pretty straightforward - our
property taxes are rather high and the level of tax probably influences many
potential businesses and individuals from living here.  The fact that the
Moscow - Lewiston region was the only sector of Idaho that did not report
growth for the year is some indication of that.  

My next post on taxes will address the question of property tax exemptions
and the impact of exemptions on tax receipts, fairness and equity of the tax
exemption, etc.  It will be a few days - I have some yardwork to do.

Hope this was helpful.

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