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Volume 5 - Opinions of Counsel SBEA No. 19

Opinions of Counsel index

State equalization rates (generally) (method of establishment) (restrictions on changes) - Real Property Tax Law, Article 12:

A state equalization rate is a measurement of the percentage of full value at which taxable real property in an assessing unit is assessed. Any restriction concerning the extent to which a given equalization rate may decrease would result in a distortion of full value, thereby destroying the uniform standard required for the apportionment of taxes and state aid.

Our opinion has been requested as to whether anything can be done to stabilize the equalization rate for a particular assessing unit. In 1974 the equalization rate there was 21 percent; in 1975 a tentative equalization rate of 16 percent was established although the final state equalization rate was determined to be 14 percent.

Subdivision 19 of section 102 of the Real Property Tax Law defines “State equalization rate” as “the percentage of full value at which taxable real property in a county, city, town or village is assessed as determined by the state board.”

This determination by the State Board is based upon market value surveys which it conducts pursuant to Article 12 of the Real Property Tax Law. Stated very simply, the assessment roll of each town is classified according to the various types of real property listed thereon; classes of property representing at least 80 percent of the taxable assessed valuation on the assessment roll are selected for sampling purposes; properties are selected at random in each of such classes and are appraised by the State Board staff; all sales which are confirmed as to selling price are also included in the sample; a comparison of the appraised values and selling prices with the assessed valuation of the properties sampled indicates the percentage of full value at which such properties are being assessed.

The State Board conducted market value surveys in 1970 and 1973. The state equalization rate for the assessment roll of this assessing unit which was finally completed and filed in 1973 was based upon our 1970 market value survey. It was determined that taxable real property on the 1973 assessment roll was being assessed at 21 percent of 1970 market values. The state equalization rate for the assessment roll finally completed and filed in 1974 was based upon our 1970 and 1973 market value surveys with double weight given to the 1973 survey. On May 19, 1975, we established a tentative state equalization rate of 14.68 percent and a hearing was scheduled for June 12, 1975 and on July 3, 1975 a final state equalization rate of 14.68 percent was established. This means that we have determined on the basis of our surveys; that taxable real property on the 1974 assessment roll was being assessed at 14.68 percent of 1972 market values. Including the 1970 survey in determining the state equalization rate for the 1974 assessment roll provided some measure of stability. In other words, our 1973 survey indicated that property values in this assessing unit had increased and, apparently, assessments were not adjusted to reflect such increase. The state equalization rate would have been even lower had it been determined on the basis of the 1973 survey alone.

One of the major functions of the state equalization rate is to convert the taxable assessed valuation of an assessment roll to its full value in order to provide a uniform standard for the apportionment of school district taxes and state aid.

Accordingly, in the first instance, the percentage of full value at which property is assessed is determined by the assessor. The purpose of our survey is merely to determine what the assessor has done. Therefore, if an assessor is aware that market values are increasing in his town and he desires to maintain a certain level of assessment, he must necessarily increase assessments since, if assessments remain static in an increasing market, the level of assessment will decrease and such decrease will be reflected in the state equalization rate.

However, except as hereinafter explained, had the assessor kept pace with the increase in market value and thereby maintained a 21 percent level of assessment, such fact would not have changed the school tax liability of taxable real property in the town or state aid to be received by the town. In other words, his changing the level of assessment to keep pace with the market would not have changed the total full value of taxable real property in the town. Any restriction concerning the extent to which any given equalization rate may decrease would result in a distortion of full value and destroy the uniform standard which is required for the apportionment of taxes and state aid.

The primary advantage in a high as opposed to a low state equalization rate is that partial exemptions have less of an effect on the tax base on a municipality as the rate increases. For example, many veterans having a $5,000 exemption are totally exempt from town taxes in towns with very low State equalization rates. In a town which assesses real property at 10 percent of full value, a $50,000 parcel of property should be assessed at $5,000 and such property could be totally exempt if owned by such a veteran. However, if such town were to assess property at 50 percent of full value, the assessment would be $25,000 which would result in a taxable assessed valuation of $20,000.

August 26, 1975

NOTE: It is to be noted that in Hellerstein v. Assessor, Town of Islip, 37 N.Y.2d 1, 332 N.E.2d 279, 371 N.Y.S.2d 388, the Court of Appeals ordered Islip to begin assessing real property at full market value by December 31, 1976 pursuant to the statutory standard contained in Real Property Tax Law, section 306.

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