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Estimating Taxable Value Oakland County Equalization David Hieber

Estimating Taxable Value Oakland County Equalization David Hieber. Revenue Update: Challenges and Options. Agenda. For more info on Proposal “A” . . . http://www.oakgov.com/equal/info_pub/. Understanding Your Tax Base The need for early estimates Current market conditions

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Estimating Taxable Value Oakland County Equalization David Hieber

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  1. Estimating Taxable Value Oakland County Equalization David Hieber Revenue Update: Challenges and Options

  2. Agenda For more info on Proposal “A” . . . http://www.oakgov.com/equal/info_pub/ • Understanding Your Tax Base • The need for early estimates • Current market conditions • Understanding trends for future estimates • Making reasonable assumptions • Making modifications as more data is available

  3. The ESTIMATE: Step by Step TAXABLE VALUE ESTIMATE Other Factors Impacting TV

  4. Market analysis • History of Oakland County’s Values • Sales Study Timeframe • 1 year sales study • Market conditions: Sales of properties • 2010 Inflation Rate Multiplier (IRM) or (CPI) = -0.3% • Most properties will have reduced Taxable Values. • Exceptions: New construction and uncappings (pop-ups) • Sherriff Deeds: Foreclosure Crisis • State Tax Commission Bulletin 6 of 2007

  5. Market analysis: Budget purposes $ Oakland County Parcel Count: 478,169 57% of Oakland County’s general fund/general purpose budget relies on property taxes.

  6. Market analysis: History Oakland County, MI: Percentage Change in Assessed and Taxable Values * ** ** * 2010 Taxable and Assessed Percentages Estimated. ** 2011&2012 Taxable and Assessed Percentages Estimated by the Oakland County Budget Task Force.

  7. 1 Year Study – (used in declining markets) Market analysis: 2010 Sales studies 10-1-2008 9-30-2009 • Establishes 2010 Taxable Value for 2010 July and December levy. • Sales Study Timeframes are determined by the State Tax Commission.

  8. Market analysis: Residential Market Y-12-36-151-012 08-19-36-177-018 20-23-27-328-014 Valid Sale Sold 7-19-2006 $270,000 Sold 9-2-2009 $130,000 Value Change -$140,000 Percentage Change -51.9% Valid Sale Sold 1-29-2002 $712,000 Sold 9-22-2009 $351,000 Value Change -$361,000 Percentage Change -50.7% Valid Sale Sold 11-22-2002 $181,000 Sold 10-16-2009 $125,000 Value Change -$56,000 Percentage Change -30.9%

  9. Market analysis: Preliminary 2010 RESIDENTIAL Assessed Value

  10. TAXABLE VALUE ESTIMATE: 2010 Sales 2010 Sales Study

  11. Market analysis: Commercial Market 72-25-14-127-060 20-23-34-355-002 88-20-17-200-026 Valid Sale Sold 11-29-2004 $220,000 Sold 9-30-2009 $145,000 Value Change -$75,000 Percentage Change -34.1% Valid Sale Sold 5-22-2002 $4,100,000 Sold 3-22-2008 $3,000,000 Value Change -$1,100,000 Percentage Change -26.8% Valid Sale Sold 11-22-1996 $16,000,000 Sold 4-24-2009 $12,300,000 Value Change -$3,700,000 Percentage Change -23.1%

  12. Market analysis: Preliminary 2010 COMMERCIAL Assessed Value

  13. Market analysis: Industrial Market 02-14-35-228-014 02-14-23-327-015 96-22-08-200-034 Valid Sale Sold 7-14-2004 $1,400,000 Sold 5-1-2008 $978,350 Value Change -$421,650 Percentage Change -30.1% Valid Sale Sold 12-10-2003 $4,852,000 Sold 12-5-2008 $1,800,000 Value Change -$3,052,000 Percentage Change -62.9% Valid Sale Sold 4-1-1998 $941,000 Sold 2-28-2008 $575,000 Value Change -$366,000 Percentage Change -38.9%

  14. Market analysis: Preliminary 2010 INDUSTRIAL Assessed Value

  15. Market analysis: Taxable reduction 2007 Taxable Value $209,540 2007 Property Taxes $6,289 2010 Taxable Value $132,610 2010 Property Taxes $3,978 Change in Property Taxes-$2,311 Change in County Revenue -$325 2010 Taxable Values Estimated.

  16. Market analysis: Taxable reduction 2009 Taxable Value $134,740 2009 Property Taxes $4,042 2010 Taxable Value $134,330 2010 Property Taxes $4,029 Change in Property Taxes-$13 Change in County Revenue -$1 2010 IRM of -0.3% will cause properties similar to this example to lower the Taxable Value even if there is a gap between SEV and TV. 2010 Taxable Values Estimated.

  17. Market analysis: Taxable reduction 2007 Taxable Value $ 275,950 2007 Property Taxes $13,797 2010 Taxable Value $199,360 2010 Property Taxes $9,968 Change in Property Taxes-$3,829 Change in County Revenue -$543 2010 Taxable Values Estimated.

  18. Market analysis: Taxable reduction 2009 Taxable Value $988,910 2009 Property Taxes $49,445 2010 Taxable Value $985,940 2010 Property Taxes $49,297 Change in Property Taxes-$148 Change in County Revenue -$21 2010 IRM of -0.3% will cause properties similar to this example to lower the Taxable Value even if there is a gap between SEV and TV. 2010 Taxable Values Estimated.

  19. Market analysis: Sheriff Deeds 11-18-09 Oakland County 1 in 51 1,192% increase in the number of Sheriff Deeds from 1998-2008 1 in 60 1 in 62 1 in 97 1 in 174 1 in 212 1 in 225 1 in 253 2009 Totals Estimated As of 10-31-09 1 in 377 1 in 597 1 in 539 1 in 532

  20. Market analysis: Sheriff Deeds

  21. Market analysis: 2009 Sheriff Deeds Community Sheriff Deed totals estimated as of 11-18-09.

  22. Market analysis: 2009 Sheriff Deeds Bulletin 6 of 2007 Guidelines for Foreclosure Sales Sheriff deeds are never included in sale studies. Bank sales to private individuals are to reviewed in accordance to these guidelines. http://www.michigan.gov/documents/treasury/Bulletin6of2007_205860_7.pdf

  23. Inflation Rate Multiplier: Estimating Can be accurately estimated by May Median Method 2010 Actual IRM: -0.3% or 0.997 (IRM) Inflation Rate Multiplier = For property tax year 2010, the inflation rate multiplier is equal to the ratio of fiscal year 2009 average consumer price index divided by the fiscal year 2008 average consumer price index.

  24. Inflation Rate Multiplier: 2010 Actual

  25. IRM ESTIMATING: MEDIAN METHOD Taxable Value Calculations are derived by using IRM/CPI percentages. This has been mandated with the introduction of proposal “A” of 1994. IRM/CPI is calculated by the US Department of Labor. http://www.bls.gov/cpi

  26. 1995 2.6% 1996 2.8% 1997 2.8% 1998 2.7% 1999 1.6% 2000 1.9% 2001 3.2% 2002 3.2% 2003 1.5% 2004 2.3% 2005 2.3% 2006 3.3% 2007 3.7% 2008 2.3% 2009 4.4% 2010 -0.3% IRM Estimating: History Taxable Value Calculations are derived by using IRM/CPI percentages. This has been mandated with the introduction of proposal “A” of 1994. IRM/CPI is calculated by the US Department of Labor. http://www.bls.gov/cpi

  27. The excel worksheet: Purpose • SEV TV Analysis • Oakland County 2008 SEV $74,491,081,562 • Oakland County 2008 TV $64,745,976,336 • Oakland County 2009 SEV $67,858,986,149 • Oakland County 2009 TV $62,416,676,895 Misconception – a 8% gap between 2009 SEV and 2009 TV will allow TV to increase by at least IRM. • Explanation • Analysis can not be performed as a total. SEV and TV calculation must be performed on a parcel by parcel basis.

  28. The excel worksheet A worksheet with current State Equalized Value (SEV) and Taxable Values (TV) for every parcel in community/county. A simple export of the data out of the BSA Assessing software will provide all the needed starting values. Approximately 95% of the communities in Michigan use BSA Assessing. Create columns on worksheet with simple formulas to mimic the forces of Proposal “A” on a single parcel’s SEV by classification (i.e. Residential, Commercial, Industrial, etc…)

  29. The excel worksheet: formulas Est. 2010 Commercial Change: -14.0% or .86 Est. 2010 IRM: -.3% or .997 (1) 2010 AV = 2009 SEV multiplied by Estimated SEV Change for 2010. (2) 2010 TV = 2009 TV multiplied by Estimated IRM for 2010. (3) 2010 Final TV = IF/THEN: If the 2010 AV is less than the 2010 TV , use the 2010 AV. If (1)>(2), then chose (2), otherwise chose (1). 61,580 X 0.997 = 61,395 125,090 X 0.86 = 107465 (1) (2) (3)

  30. The excel worksheet: layout Exported Exported Exported Exported Create Create Create

  31. The excel worksheet: Summary

  32. The excel worksheet: Summary

  33. TAXABLE VALUE ESTIMATE: 2010 65% of the Res parcels SEV=TV may lose an average SEV of 15%. Prop “A” forces these parcels to also lose an average TV of -15%. Commercial and Industrial may lose an average of -14.5%. 35% of the Res parcels are required to decrease in TV by the IRM. IRM for 2010 is -0.3%. -13% EST TV change for 2010 *2010 Residential Values estimated at -15% and the Commercial and Industrial Values are estimated at -14.5%. Oakland County Parcels where SEV=TV • In 2008 for 2009 45% of the County’s Res Parcels • In 2009 for 2010 65% of the County’s Res Parcels • In 2010 for 2011 80% of the County’s Res Parcels (Estimated)

  34. Other factors Affecting current and future years taxable values • 480% Increase in Taxable Value (totaling $2.8Billion) under appeal at the Michigan Tax Tribunal from 2008 to 2009. • Currently there is $11.4 million in total tax dollars under appeal against the county operating millage (Major Appeals). • Personal Property has seen a -5.5% decrease in Taxable Value between the years of 2005 to 2009. • The number of building permits issued between the years of 2005 to 2009 have fallen by -95%.

  35. TAXABLE VALUE ESTIMATE: Accuracy • 2008 Estimate of Taxable Value was $64,467,600,000 • 2008 Actual Taxable Value is $64,745,976,336 • 2009 Estimate of Taxable Value was $62,479,867,000 • 2009 Actual Taxable Value is $62,416,676,895 • 2010 Estimate of Taxable Value is $54,302,508,000 • Tax Tribunals will reduce this Taxable Value difference further during the course of 2009 and 2010.

  36. Taxable Value estimate: 2011 & 2012 • 12-1-2009 • 1 Year Sales Study Period for 2011 • 10-1-2009 • 9-30-2010 • When comparing sales prices on the current sales, we discovered that the market is still dropping at a similar rate compared to last year at this time. We will continue to analyze the market conditions monthly and make modification to our Taxable Value estimate accordingly. Residential Sales between 10-1-09 to 11-20-09 426 Sales: 54.77 ratio (-9.1%) against proposed 2010 values.

  37. TAXABLE VALUE ESTIMATE: 2011 & 2012 2011 Sales Study

  38. TAXABLE VALUE ESTIMATE: 2011 & 2012 Oakland County Parcels where SEV=TV • In 2008 for 2009 45% of the County’s Res Parcels • In 2009 for 2010 65% of the County’s Res Parcels • In 2010 for 2011 80% of the County’s Res Parcels (Estimated) 80% of the Res parcels SEV=TV may lose an average SEV of -15%. Prop “A” forces these parcels to also lose an average TV of -15%. Commercial and Industrial may lose an average of -20%. 20% of the Res parcels have the ability for the parcels to increase in TV by IRM. IRM for 2010 is 2.3%.** -12.5% EST TV change for 2011 *2011 Residential Values estimated at -15% and the Commercial and Industrial Values are estimated at -20% CPI estimated at 2.3%. ** IRM was generated by averaging the IRM from 1995-2009. The actual 2011 IRM can not be calculated due to lack of data. • Oakland County Budget Task Force estimates -5% in Taxable Value for 2012 (subject to modification based on changing market conditions).

  39. 2007 Countywide True Cash Value $154.6 Billion 2009 Countywide True Cash Value $135.7 Billion Change in TCV -$19 Billion TAXABLE VALUE ESTIMATE: Big picture 2011 Countywide True Cash Value Estimated $96.3 Billion Change from 2007 to 2011 Change in TCV -$58.3 Billion or -37.69%

  40. Overview • All communities should have access to this data in their assessing system for creating this estimate. • Reviewing market trends is crucial in predicting future tax base (declining sales, increasing foreclosures, etc…) • Modification to estimate as more data becomes available. • 2010 Oakland County Taxable Value = -13% • 2011 Oakland County Taxable Value = -12.5% • 2012 Oakland County Taxable Value = -5%* *2012 Taxable Value estimate assumes we have hit the bottom of the real estate market in 2011.

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