Tuesday, July 9, 2019

How to Run a Successful (Property) Re-assessment – Preemptively

1. Ideally, Residential and Commercial Re-assessments should not be Conducted Concurrently – When they are run concurrently, local governments are empowered to shift tax burdens across property groups (depending on the impact study). If it is statutorily required, the taxpayer watch groups must fight the statute to decouple them, thus making the re-assessment a truly transparent, as well as a fair and equitable exercise. If it is run concurrently, the watch group must hire an independent consultant to review the impact study, both inter (across property groups) and intra (within the group). Should they find any inconsistency, they must share the results with the local media.

2.  Hire an Econometric Consulting Firm to Run a Pilot – This is one area where private and public sectors tend to part ways. For example, instead of rushing into a full-scale (and expensive) marketing campaign, private companies will run a meaningful pilot (i.e., proper sampling, etc.) first, leading to the main campaign (assuming, of course, pilot results exceed expectations | FYI…just meeting expectations could force the project back into the mix of alternatives). Though the idea of pilot projects is not common in local governments, they must get into the practice of running pilots, to avoid having to spend too much money at the back-end on damage control. Since a well-constructed and properly run pilot is as representative as the main event, a good econometric consulting firm is a must to do justice to the pilot, paving the way for a meaningful and significant pilot and a reliable impact study.    

3. Recollect the Exterior Data for the Pilot Project as if it were the Main Event – Before publishing the data collection manual, the consulting firm must undertake a local market significance study, thus zeroing in on the variables that significantly impact valuations in that particular market. Then, with the assistance of the consulting firm (e.g., arriving at the actual sample, variable types, extent and use of technology, etc.) the assessing staff must recollect the exterior data pertaining to the pilot. In constructing the sample, all incomplete and on-going physical changes must be ignored. Similarly, the interior data collection is virtually meaningless for re-assessment as they represent mostly lifestyle fixtures/personal properties, not real properties. While significant interior renovations and improvements must be captured and reflected via the “Overall Condition” variable, new indoor pools, porches, etc. should be separately coded to ease valuation (only if they show up in the study as significant market variables). The data collection process must be thoroughly documented so the process could be precisely duplicated during the main event.

4. Publish the Pilot Results, Emphasizing the Potential Tax Impact – Considering this is not the actual re-assessment, the results could be published immediately, with a series of outreach seminars to educate taxpayers of the potential impact of the future re-assessment. Even the taxpayers facing tax increases would be less hostile at this point as they would be allowed a major voice in reshaping the final outcome. If the residential and commercial pilots are run concurrently, watch groups must scrutinize the study carefully, ensuring that the tax burdens are not being irrationally shifted from one group to the other, especially “inter” meaning from the commercial to the residential. Of course, they must also study the equity within the group. And that, of course, is the advantage of a meaningful front-ended pilot, providing a platform for all brainstorming before the fact.  

5. Jurisdictions with Unfair Statutory Limitations must work on Removing the Statute before Undertaking any Major Re-assessment – Hypothetically, if the state mandates that the county must reimburse its taxing districts (e.g., towns) the amount that is refunded to homeowners due to inaccurate property assessments, it would be prudent for the county administration to work with the state to remove this unfair mandate (or at least reduce the burden to a manageable annual limit graduating to a total phase-out) before embarking on any major re-assessment. Should this legislative effort fail, the county should seriously consider a de-centralized assessment system, to avoid having to take on monumental unwarranted liability. In this example, under the de-centralized system, towns would be responsible for their own assessments while the county would continue to provide the technical assistance, thus relieving the county of any potential refund liability.

Again, a front-ended pilot will do immense good before the full-scale plunge.

Disclaimer - The author is not offering this presentation as professional services advice in any shape, form or manner whatsoever. Every institution is different, so seek the advice of a competent professional before making any changes to your existing program(s).

Thank you.

Sid Som MBA, MIM
President, Homequant, Inc.

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