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Volume 6 - Opinions of Counsel SBEA No. 84

Opinions of Counsel index

State equalization rates (use in determining full value) - New York State Constitution, Art. XVI, § 2; Real Property Tax Law, §§ 306, 1202:

Dividing the assessed value of each parcel of real property on an assessment roll by the assessing unit’s state equalization rate is not a proper means of arriving at full value within the meaning of section 306 of the Real Property Tax Law.

The issue presented is whether compliance with the full value standard of assessment (Real Property Tax Law, §306) may be attained by merely dividing current assessments for all real property on an assessment roll by the state equalization rate established for that roll.

Section 306 of the Real Property Tax Law requires all real property in the State to be assessed at its full value. Since the Town of Islip was ordered by the Court of Appeals in 1975 to comply with this standard (Hellerstem v. Assessor of the Town of Islip, 37 N.Y.2d 1, 332 N.E.2d 279, 371 N.Y.S.2d 388, mod., 39 N.Y.2d 920, 352 N.E.2d 593, 386 N.Y.S.2d 406), an increasing number of assessing units have been attempting to prepare assessment rolls at full value. Revaluation is an expensive process (see, e.g., Adam v. Bd. of Assessors of Town of Brookhaven, N.O.R., Index #15846-76, dated 2/24/77), particularly the costs associated with inspecting and reappraising each parcel. As of 1977, the State Board estimated that a revaluation could cost as much as thirty dollars per parcel, depending upon variables such as availability of current data, types of properties in the assessing unit, etc.

The proposal has now been made that full value assessments of all parcels could be determined simply by dividing the current assessment for each parcel by the latest state equalization rate.

The State Board annually establishes an equalization rate for every town, city, and village in the State (Real Property Tax Law, §1202). These rates measure the percentage of full value at which parcels in the locality are being assessed. The rate is an average derived from a statistical sampling of various types of property within each assessing unit. The equalization rate does not measure the relationship of assessed value to full value for each parcel in the assessing unit. The Court of Appeals noted this fact in the Hellerstein opinion, stating that the equalization rate “does not purport to measure the ratio of assessed valuation to full value of any individual property [citation omitted] nor is it designed to ensure that assessments are made at a uniform percentage of full value within the taxing unit” (37 N.Y.2d at 9).

Since the equalization rate is merely an average, by definition the relationship of assessed value to full value may be higher than the rate for some parcels and lower for others. In fact, it may be that not a single parcel is assessed at that average. A very simple example may help to explain.

Assume there are four parcels of equal market value ($40,000) in a town. They are assessed, however, at varying percentages of market value, the first at 10% ($4,000), the second at 20% ($8,000), the third at 30% ($12,000) and the last at 40% ($16,000). The average of these ratios of assessed value to market value would be 25% - a percentage which does not match the ratio for any one of the parcels in this sample.

Although this procedure might serve to make more evident the existing inequities among parcels, as can be seen in the example, it would not necessarily produce the correct full value for any parcel. As a result, some properties would be assessed at more than one hundred percent of full value, contrary to section 2 of Article XVI of the New York State Constitution. (In the previous example, if the assessed value of the parcel assessed at $16,000 is divided by the equalization rate of 25%, the computed full value of $64,000 is far in excess of the parcel’s full value.)

It is theoretically possible for the proposed methodology to produce a full value assessment roll. However, this would entail an extremely unusual circumstance, namely one where all real property in the assessing unit was, in fact, uniformly assessed at the ratio as measured by the State equalization rate. The likelihood of this presently being the case is highly unlikely.

Therefore, it is our opinion that the proposed method is not an acceptable procedure for arriving at full value assessments. The Real Property Tax Law mandates certain assessment procedures. Section 306 provides that “[a]ll real property in each assessing unit shall be assessed at the full value thereof.” “Assessment” is defined in section 102(2) as “a determination made by assessors of...the valuation of real property” (emphasis added). Section 500 provides: “On or before the first day of May in each year, the assessors in each city and town shall ascertain by diligent inquiry all the real property located therein and the names of the owners thereof.” Section 302 provides that “All real property shall be assessed...according to its condition and ownership as of [taxable status] date.” Thus, a real property owner is entitled to an annual determination by the assessor of the full valuation of his property according to its current condition.

Simply using the equalization rate to attempt to arrive at a full value for each parcel fails to satisfy these provisions of the Real Property Tax Law by not providing for an annual determination made by an assessor of the value of property according to its condition.

July 12, 1979

Updated: