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<DIV>Jeff,</DIV>
<DIV> </DIV>
<DIV>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.</DIV>
<DIV> </DIV>
<DIV>Dick Schmidt</DIV>
<DIV> </DIV>
<DIV>----- Original Message ----- </DIV>
<BLOCKQUOTE
style="PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
<DIV
style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black"><B>From:</B>
<A title=jeffh@moscow.com href="mailto:jeffh@moscow.com">Jeff Harkins</A>
</DIV>
<DIV style="FONT: 10pt arial"><B>To:</B> <A title=vision2020@moscow.com
href="mailto:vision2020@moscow.com">vision2020@moscow.com</A> </DIV>
<DIV style="FONT: 10pt arial"><B>Sent:</B> Saturday, April 09, 2005 9:10
AM</DIV>
<DIV style="FONT: 10pt arial"><B>Subject:</B> [Vision2020] Assessment of the
Property Tax</DIV>
<DIV><BR></DIV>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.<BR><BR>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:<BR><BR>Required revenues / Total assessed valuation = Tax levy
rate<BR><BR>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 (<A
href="http://tax.idaho.gov/propertytax/pt_ratiostudy.htm" eudora="autourl">
http://tax.idaho.gov/propertytax/pt_ratiostudy.htm</A>):<BR><BR><FONT
face="Courier New, Courier">MEASURING ASSESSMENT UNIFORMITY<BR>Uniformity
determines the quality and inherent equity of property<BR>assessments.
Although both the appraisal and the market transaction<BR>are subject to
distortion on any individual property, if the<BR>magnitude of this distortion
is consistently large, taxes paid by<BR>similar properties in the same area
will differ widely. The goal of<BR>a fair assessment program is to reduce
inequity of this type.<BR>There are two overall types of inequity that can
occur:<BR>1. Inequity between categories.<BR>2. Inequity within a given
category.<BR>In the first case, inequity results when the assessment level
is<BR>lower in one category than another. This situation becomes
apparent<BR>when level indicators from different categories are
compared.<BR>In the second case, the distortion is entirely within one
category<BR>and is not indicated by measurements of level.<BR><BR></FONT>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"
<UL>
<LI>Must maintain an online-realtime system of all real property
transactions
<LI>Must maintain a persistent and consistent real property assessment
system
<LI>Must maintain a means of adjudicating or resolving individual property
assessment complaints
<LI>Must maintain a system of oversight that monitors and assures that the
systems operated by taxing jurisdictions in the State is fair and equitable
</LI></UL>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.<BR><BR>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 - <A
href="http://tax.idaho.gov/propertytax/pt_ratiostudy.htm"
eudora="autourl">http://tax.idaho.gov/propertytax/pt_ratiostudy.htm</A>.<BR><BR>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 (<A
href="http://tax.idaho.gov/propertytax/PTpdfs/rpt_03_county_ratio_study.pdf"
eudora="autourl">
http://tax.idaho.gov/propertytax/PTpdfs/rpt_03_county_ratio_study.pdf</A> )
that Latah stats were generated from 11 sales for that year. A sample
this small can be problematic.<BR><BR>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. <BR><BR>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.<BR><BR>Hope this was
helpful.<BR><BR><BR><BR>
<P>
<HR>
<P></P><BR><BR>No virus found in this outgoing message.<BR>Checked by AVG
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4/7/2005<BR>
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