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STATE TAX COMMISSION RATIO STUDY

STATE TAX COMMISSION RATIO STUDY. Scope/Purpose. The ratio study is the primary tool to measure the accuracy of assessments and the accuracy of the appraisal process. The study should evaluate the level of assessments and the uniformity of assessments in a particular jurisdiction. Uses

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STATE TAX COMMISSION RATIO STUDY

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  1. STATE TAX COMMISSIONRATIO STUDY

  2. Scope/Purpose • The ratio study is the primary tool to measure the accuracy of assessments and the accuracy of the appraisal process. The study should evaluate the level of assessments and the uniformity of assessments in a particular jurisdiction. • Uses 1. Equalization of values 2. Evaluation of the level & uniformity of assessments 3. Identification of appraisal priorities 4. Determination of whether administrative & statutory standards have been realized

  3. A ratio is the relationship between an assessed value as identified in the assessment rolls and the fair market value of the parcel as determined by an appraisal. The ratio utilized in the study is developed by dividing the assessed valuation by the fair market value. Example: Assessed Appraised Parcel #Valuation(Market) ValueRatio 1 $19,000 $100,000 19.0% 2 16,000 90,000 17.8% 3 10,000 50,000 20.0% NOTE: Statutory level for the residential subclass is 19%. What Constitutes a Ratio?

  4. STATE TAX COMMISSION RATIO PROCEDURES • Sampling • Appraisals – Determining Market Value • Appraisal Audit • Statistical Analysis • Evaluation

  5. RATIO PROCEDURESSAMPLING • Computer generated random sampling • Statistically emulating the population • Statistically valid sample sizes

  6. RATIO PROCEDURESAPPRAISALS • Compliant with USPAP • Cost Approach to Value • Market Approach to Value • Sample Appraisal Report Attached

  7. RATIO PROCEDURESSTATISTICAL ANALYSIS • Evaluating Levels of Assessment Mean Median Weighted Mean Confidence Intervals • Measures of Variability Coefficient of Dispersion Price Related Differential Standard Deviation

  8. STATISTICAL ANALYSISEvaluating Levels of Assessment • Mean – Arithmetic Average Parcel No.Assessed ValueAppraised ValueRatio 1 $ 3,840 $ 22,300 17.2197 2 100 500 20.0000 3 5,720 31,800 17.9874 4 3,230 17,400 18.5632 5 11,540 59,100 19.5262 93.2965 Mean Ratio = Total of Ratios / Number of Samples Mean Ratio = 93.2965 / 5 Mean Ratio = 18.6593

  9. STATISTICAL ANALYSISEvaluating Levels of Assessment • Median – Measure of central tendency which is the midpoint in the distribution of ratios Parcel No.Assessed ValueAppraised ValueRatioRanking 1 $ 3,840 $ 22,300 17.2197 1 3 5,720 31,800 17.9874 2 4 3,230 17,400 18.5632 3 5 11,540 59,100 19.5262 4 2 100 500 20.0000 5 Median Ratio Ranking = (Number of Samples + 1) / 2 Median Ratio Ranking = (5 + 1) / 2 Median Ratio Ranking = 3 Median = 18.5632

  10. STATISTICAL ANALYSISEvaluating Levels of Assessment • Weighted Ratio – measure of central tendency that reflects the relationship of the total assessed value to the total market value Parcel No.Assessed ValueAppraised ValueRatio 1 $ 3,840 $ 22,300 17.2197 2 100 500 20.0000 3 5,720 31,800 17.9874 4 3,230 17,400 18.5632 5 11,540 59,100 19.5262 $24,430 $131,100 Weighted Ratio = Total Assessed / Total Appraised Weighted Ratio = $24,430 / $131,100 Weighted Ratio = 18.6346

  11. STATISTICAL ANALYSISEvaluating Levels of AssessmentConfidence Intervals • The State Tax Commission uses confidence intervals that are calculated for the mean, median and weighted mean ratios. • The confidence intervals are calculated at the 95% and 99% level of confidence. This equates to an indication that the true population mean, median and weighted mean would fall within the confidence interval range 95% or 99% of the time. • The State Tax Commission predominately uses the 95% confidence interval around the median to determine the range for measures of assessment level and central tendency.

  12. STATISTICAL ANALYSISMeasures of Variability • Coefficient of Dispersion – COD indicates a percentage relationship by which various individual ratios differ from the measure of central tendency which is the median. The higher the COD, the more variability exists in the assessment process. Parcel No.RatioMedianAbsolute Deviation 1 17.2197 18.5632 1.3435 2 20.0000 18.5632 1.4368 3 17.9874 18.5632 .5758 4 18.5632 18.5632 0.0000 5 19.5262 18.5632 .9630 4.3191 Average Absolute Deviation is 4.3191 / 5 = .86382 Coefficient of Dispersion = (Average Deviation / Median) X 100 Coefficient of Dispersion = (.86382 / 18.5632) X 100 Coefficient of Dispersion = 4.6534

  13. STATISTICAL ANALYSISPrice Related Differential • Price Related Differential – PRD is an index statistic for measuring vertical equity and will reflect whether or not regressivity or progressivity is evident in the assessment process. The PRD is an indication of the degree to which high valued properties are over-assessed or under-assessed relative to lower valued properties. PRD = (Mean Ratio / Weighted Ratio) X 100 PRD = (18.6593 / 18.6346) X 100 PRD = 1.0013 X 100 PRD = 100.13

  14. Sample County

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