Last Tuesday we wrote about the West Hartford revaluation, focusing on the informal hearings that allow individual property owners to challenge the market values that they received in the mail from the Town.
Today we turn our attention to analyzing the big picture results of the revaluation. Amanda Falcone’s piece in the Thursday’s Hartford Courant quotes West Hartford Assessor Joseph Dakers Sr. as saying the new market values will “likely cause the town’s grand list to decrease by 5.6%, or about $316 million.”
Based on that statement, and a number of additional steady state assumptions detailed below, we’re projecting the new mill rate to end up somewhere between 33 and 34 mills. If accurate, it would represent about a 2% average increase in the tax burden on real property owners, and a 15% decrease taxes on personal property (business equipment) and motor vehicles.
We would expect individual property owners to experience much larger swings in their tax burdens depending on their specific properties. Some will experience larger increases, while others will see their taxes go down. It will all depend on how their individual properties were assessed during each of the two previous revaluations. A ballpark figure for future tax burden can be calculated using the following formula:
Our mill rate is a very rough estimate, but we feel it is an accurate depiction of what is likely to happen if the proposed market values hold and basically everything else stays the same. It analyzes the impact of the revaluation without addressing any other factors that may impact the Town budget.
Please feel free to check our work, which is shown below in detail, and post your thoughts in the comments.
Step 1: Interpreting the Data
The whole calculation is based on the Town Assessor’s statement that $316 million is about 5.6% of Grand List 2010. So:
The context of the quote doesn’t specify exactly what the Assessor means when he says “Grand List.” Is he talking about the market values, Gross Assessment (70% of market value), or the Net Assessment (after all exemptions are subtracted out)? Is it for only Real Property or does it include Personal Property and Motor Vehicles?
Last year I worked with the Assessor a bit when Grand List 2010 was released, modeling the whole system. In comparing the “Grand List” number he seems to be working with now to that spreadsheet, my conclusion is that he is talking about the total Gross Assessment for Real Property. Since the revaluation is focused exclusively on Real Property, this seems like a reasonable conclusion. Below is a summary of the taxes generated last year by Grand List 2010 (Note: Gross Assessment and Exemptions sourced from a report emailed to me by the Town Assessor in February 2010).
These calculations show that the Town would have sent out property tax bills totaling about $197 million. Page F-2 of the 2011-2012 Annual Town Budget shows a table summarizing the Town’s revenues, discussing property taxes, and showing the tax collection rate. It shows Current Property Taxes in the Fiscal Year 2012 Adopted Budget as $195,496,802. So our calculation of the billings is quite close to what the Town expected to receive – a good sign. Our calculation gets even closer to the target when we include their assumed 99% tax collection rate.
Step 2: Defining Assumptions
The agreement of our calculation with the Town Assessor’s quote and the expected revenue provide enough confidence to move on to the next stage of the calculation. But before we can run more numbers, we need to be explicit about our assumptions. Here are the five main assumptions in our forward looking analysis and projections.
1. The Town Assessor was properly quoted in the Courant, and we have properly interpreted what he said. The discussion above provides two independent points of collaboration, which makes us feel good.
2. Personal Property and Motor Vehicle Gross Assessments remain unchanged.
3. Town revenue raised from Property Taxes remains unchanged.
4. All phase-in exemptions are eliminated. We’ve discussed the frozen phase-in elsewhere and will skip over it this time. It’s important, but is not the focus of this analysis.
5. All “normal” exemptions remain unchanged.
Step 3: Projecting Grand List 2011
Now we’re ready to update the table from above to reflect our assumptions for Grand List 2011.
First we calculated the new Gross Assessment for Real Property by subtracting $316 million. Next, we eliminated the Phase-In Exemptions, so everyone is taxed based on the market values determined by this revaluation. Finally, we optimized the Mill Rate so that the total Tax Revenue exactly equals the previous table.
The resulting 33.67 mill rate is more precise that we can reasonably calculate given the rough nature of this estimate, so at the top of the story we said that it would end up somewhere between 33 and 34.
So there it is, our attempt to ballpark the West Hartford mill rate for the tax year starting in July 2012. We have no doubt that there will be factors outside of the revaluation that will impact the Town, and therefore the budget. However, we hope this provides a starting point for understanding how the revaluation will impact property tax revenue.
Again, please feel free to post questions, concerns, and thoughts in the comments section.