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Survey of Ratio Study Methods Used By the States

SURVEY OF RATIO STUDY METHODS USED BY THE STATES
(September 1995)

STATE OF ALABAMA

Purpose of State's Ratio Study/Frequency Conducted

The assessing function in the State of Alabama is performed by the 67 counties in the state. The state conducts annual ratio studies of county assessment rolls for the purpose of determining whether the counties need to conduct a revaluation. Data Used

The ratio studies use sales only and the assessment calendar year begins on October 1. In studying the 1995 assessment rolls, the state utilizes six months of sales information from April 1 to September 30, 1995. In locations with insufficient sales volume, one year of sale information is collected.

There is no disclosure law in Alabama. Instead, questionnaires regarding sale price and conditions of sale are sent to buyers or sellers by the county assessing unit upon receipt of deed transfer information. The methods vary by which the state receives sales information from county assessors. State employed field agents have the authority to determine which sales are usable for ratio studies with no further validation required.

Ratio Estimation Methodology

The ratio estimation methodology uses the median to test whether the overall level of assessment for a county falls near the statutory requirement of 100% of true value. The acceptable range is between 85% and 105%. A coefficient of dispersion (COD) is also calculated and must be less than 20%. Within a county, properties are stratified by municipality (city or town), then by property class and finally by quality levels within classes. There are about 47 different strata within a county. Class specific ratios are calculated but only the overall ratio is used to judge whether a county is in compliance.

There is no official minimum level of sales required. However, a statistic is not considered reliable when there are fewer than 20 sales within a stratum. There is no special treatment of large valuable properties regardless of whether or not they have sold recently or comprise a significant portion of the roll.

Adjustment/Correction of Assessments

There are neither aggregate nor parcel level adjustments made to values as a result of state ratio studies. By statute, a county must conduct a revaluation once every five years. However, if the state finds an unacceptable county median or COD in its annual ratio study, it can require a county to conduct a revaluation in an intervening year.

Appeal of Ratios

There is no mechanism for counties to appeal the ratio study findings of the state. According to a state official, there is no need for an appeal function because there is general compliance by the counties. Not many interim revaluations are ordered by the state. The state official believes that the state and counties are satisfied with the results of the ratio study methodology.

Program Costs

The ratio studies are conducted by the Ad Valorem Tax Division of the Department of Revenue. The exact cost of the study is not known. However, the budget for the entire agency is between $3 million and $4 million. The single largest component of the ratio study cost is the payment of salaries to approximately 45 field agents who spend a portion of their time in the validation of sales. This expense, combined with indirect costs, was estimated by a Department of Revenue staff person to amount to about 10% of the agency's budget.

STATE OF ARIZONA

Purpose of State's Ratio Study/Frequency Conducted

The assessing function in the State of Arizona is performed by the 15 counties in the state. The state conducts quarterly ratio studies for the purpose of fulfilling the statutory requirement to evaluate each assessor's performance. The quarterly ratio studies are correlated with four phases of the assessment cycle: (1) by January 1, when the pre-notice is due to taxpayers stating their assessed value, (2) by March 31, after the first level of appeals available to taxpayers, (3) by mid-June, after the second level of appeals, (4) by September when final assessed values are due on tax bills.

Data Used

The state uses sales exclusively in its ratio study analysis. There is a statutory requirement for an affidavit of property value to be recorded with all deed transfers. For residential and vacant land, 18 months of usable sales are used. For example, sales from July 1993 to December 1994 are used to test against a 1995 assessment roll. Thirty months of sales are collected for the apartment, commercial and industrial classes. County assessors are responsible for preparation and verification of the data. Assessors follow the International Association of Assessing Officers' (IAAO) list of reasons for sales to be rejected. The state's role is to oversee the process and point out problem areas. Assessors can then follow up with further data verification and corrections.

Ratio Estimation Methodology

The ratio estimation methodology used primarily is a coefficient of dispersion (COD) around the median to test whether the level of assessment falls within the statutory requirement for each class of property. A coefficient of variation around the mean and the weighted mean is also calculated but not heavily used.

There is an 82% statutory level of assessment required for the residential and vacant classes and an 81 % level for the commercial, apartment and industrial classes. In counties considered to be metropolitan in nature, a residential COD of 15% or less is acceptable. Counties determined to be rural must attain a residential COD of 20% or less. For all counties, a COD of 25% or lower is acceptable in the remaining classes. If there are fewer than 30 sales in a class, a COD is calculated but is reported as a weak statistic. A trending of real estate values is done by studying twice sold properties within the 18-month (or 30-month) period and adjusting according to the number of quarters in the period of analysis.

Adjustment/Correction of Assessments

The state has the authority to issue an order to a county to perform a reappraisal in any class in which the COD was higher than allowed. An assessor has the discretion to choose how the assessment roll will be corrected. According to statute, counties may not mail notices to taxpayers if they are not in compliance with the full value standards.

Appeal of Ratios

Both the county assessing jurisdictions and individual property owners have the right to appeal if the state orders are appraisal based upon ratio study findings. However, property owners may only appeal if they feel that they will be adversely affected by the reappraisal order. The first level of appeal is to the State Board of Tax Appeals (now in the process of being renamed as the State Board of Equalization). If not satisfied, the appellant may continue the appeal to the state's tax court. The appeal mechanism is reported to be utilized quite heavily by the affected assessing jurisdictions and by all levels of property owners.

The ratio study methodology is reported to be widely accepted as sound, with statistics being requested by such entities as cities and utilities. However, it was also noted that there is an insufficient enforcement mechanism at the state level and counties are able to ignore the restriction on mailing tax notices when they are not in compliance.

Program Costs

Currently, the cost of the ratio studies performed by the state is estimated to be no more than $250,000 per year with some six people involved in the process.

STATE OF ARKANSAS

Purpose of State's Ratio Study/Frequency Conducted

The assessing function in the State of Arkansas is performed by the 75 counties in the state. The state conducts annual ratio studies of county assessment rolls for the purpose of determining whether the counties are out of compliance with the statutory ratio and thus need to conduct a revaluation.

Data Used

The state's annual ratio study uses a combination of sales and appraisals. The study consists of a comparison of each county's assessments with values for three categories of property. Sales information is used primarily in studying the residential and commercial/industrial classes. However, some appraisals may be done when there are insufficient sales in these two categories. In the agricultural class, sample properties are appraised by the state staff based upon productivity value.

The state utilizes one year of sales which have occurred in the year prior to the roll being evaluated. State personnel are responsible for all phases of data collection and verification. Field staff gets the names of the parties involved in a sale from deeds filed with the county clerks' offices, and they make phone calls to the parties to determine the sale price and conditions of sale. After collection of sales and appraisal information, state field staff go to the assessors' offices to compare this information with the assessed values of the same properties. Assessors have no role in the collection and verification of ratio study information and the state personnel have the sole authority to determine which sales are usable for ratio studies.

Ratio Estimation Methodologies

The ratio estimation methodology uses a weighted mean to test whether the overall level of assessment for a county falls near the statutory requirement of 20% of full value. A confidence interval is constructed to test that the weighted mean is not more than 10% below the required 20% assessment level, i.e. it must not be lower than 18% of full value. Within a county, properties are stratified by political subdivisions, including cities and school districts, then by sub-sets of property classes. The residential class is divided into urban, rural and suburban sub-classes. Neither the commercial/industrial class nor the agricultural class are subdivided.

Class specific ratios are calculated but only the overall ratio is used to judge whether a county is in compliance. The minimum sample size is that which produces at least a 95% confidence interval for the overall ratio (usually between 60 and 150 sales). An attempt is made to choose a random sample of sold properties to represent all properties on the assessment roll. The sample is put into a scatter diagram to determine whether a cross-section of properties is represented, such as high and low valued residential properties and commercial properties. Large, valuable properties are usually removed from the ratio study because they are likely to have an unduly large influence on the results. Not all sub-classes of properties are always represented. In under-represented classes, supplementary appraisals are done to the extent that staffing and budget constraints permit.

Adjustment/Correction of Assessments

There are neither aggregate nor parcel level adjustments made to values as a result of state ratio studies.

However if the state finds an unacceptable county weighted mean in its annual ratio study, it requires that county to conduct a revaluation. There is a monetary penalty as well. The county's state aid is reduced in proportion to the amount by which it is below the acceptable ratio limit. Legislation is now being passed to require all counties to conduct a revaluation once every five years at a minimum.

Appeal of Ratios

Counties may appeal their ratio study findings first with the Assessment Coordination Division, the section of the Public Service Commission which conducts the study. If not satisfied, a county may continue its appeal to the full Commission. According to a state official, these county appeal mechanisms have not been utilized in over ten years. Counties are generally aware when they are out of compliance.

Program Costs

As indicated above, the ratio studies are conducted by the Assessment Coordination Division of the Arkansas Public Service Commission. The budget for the Division is about $2 million. Approximately 20 of the 35 person staff are involved in the collection of ratio study information. The associated personnel expenses combined with indirect costs were estimated to amount to between 60% and 75% of the Division's $2 million budget.

STATE OF COLORADO

Purpose of State's Ratio Study/Frequency Conducted

The assessing function in the State of Colorado is performed by the 63 counties in the state. The state contracts with an independent auditor hired by the legislature to conduct annual ratio studies of assessment rolls for the purpose of determining the equitable distribution of state aid to schools.

Data Used

The ratio studies use a combination of sales and appraisals. There is a statutory requirement for all sales to be recorded on a Real Property Transfer Declaration. The declaration must be filled out by the grantor or grantee under penalty of a fine of approximately $25. This sales reporting form is filed with the county clerk and given to the county assessor. The assessor is responsible for preparation and verification of the data. The information on the form is used to adjust the sale price to reflect the cost of real property only and to discard transactions between related parties.

In the case of commercial and industrial transactions, the assessor always supplements the declaration form with a confirmation letter sent to one of the involved parties. A letter of confirmation may also be sent if there is questionable information on a residential or vacant land transfer declaration. There is an eighteen-month period of sales data collected for a ratio study. For example, 1995 assessed values are compared with sales occurring between January 1, 1993 and June 30,1994 with prices adjusted to the end of the eighteen month period. The formula for checking the sale price adjustment employs a weighted monthly median sales ratio regression analysis.

Appraisals are required to be done by the independent auditor in certain cases. By contractual requirement, appraisals are conducted in a county whenever the number of verified arms-length transactions is less than one percent of the number of properties in a particular class or subclass. The number of appraisals must be sufficient to supplement the number of bona fide sales in order to satisfy the one percent minimum required. Some examples of sub-classes in the residential class include single family, two to three-family, four to eight-family, and above eight-family residences.

Ratio Estimation Methodology

The ratio estimation methodology uses the median to test whether the level of assessment falls between 95% and 105% of the statutory requirement for each class of property. There is a 10.36% statutory level of assessment required for the residential class and a 29% level for the remaining classes. The weighted mean is only used to test for the price related differential (also known as the index of regressivity). In the development of the ratio study, parcels are stratified into property classes. Property classes are further stratified into levels of sub-classes. For example, the residential class is broken down into the different size family units previously mentioned, and it is further subdivided into neighborhoods, with collections of neighborhoods forming economic areas.

The coefficient of dispersion (COD) is the statistical test used by the state to determine whether the average variation of a county's ratios from the median is within the acceptable range. The COD must be less than 16% for the residential class and less than 21% for all other classes.

Adjustment/Correction of Assessments

Counties are required to do a revaluation every other year (in the odd years). If the COD is too high in a given class, a county must do a revaluation in the next (even) year in that class. The county must reimburse the state for any excess aid given.

Appeal of Ratios

Counties may appeal to the state if they dispute the state's finding of non -compliance. The appeal is heard at the state district court (trial de novo). Such appeals are not frequent, however, since counties seldom prevail. According to a state official, the county appeals process is effective and is equitable.

Program Costs

Currently, the cost of the contract with the private auditor runs between $800,000 and $900,000 annually.

The budget for the entire Division of Property Taxation is about $4 million. However, the supervisory costs for the portion dealing with assessment administration is nominal. This is so, according to a state official, because the counties are becoming more competent.

STATE OF CONNECTICUT

Purpose of State's Ratio Study/Frequency Conducted

The assessing function in the State of Connecticut is performed by the 169 cities and towns in the state. The state conducts annual ratio studies of these municipalities' assessment rolls for the purpose of determining the equitable distribution of various types of state aid.

Data Used

The annual ratio study uses sales only and follows the assessment calendar year. For example, in studying the 1995 assessment rolls, the state utilizes sales information from October 1, 1995 to September 30, l996.

Following each real property sale, the town clerk receives a copy of the property deed. The state receives sales information monthly from assessors and enters information onto a data file. Each assessor determines which sales are usable for ratio studies with no further validation required. If the state has reason to question a sale, however, it must show evidence in support of such reason in order to override the assessor's determination.

Ratio Estimation Methodology

The ratio estimation methodology uses the median to test the level of assessment. The statutory requirement is 70% of true value in each town. A coefficient of dispersion gives an estimate of the percent of difference from the mean level. A price related differential is also calculated. Properties are stratified by class and ratios are calculated for several classes: Residential (1-4 family), Apartment, and Vacant and Commercial/Industrial. All valid sales are used. The state requires a minimum of three sales to calculate a statistic in a property class.

Adjustment/Correction of Assessments

By statute, revaluations should by conducted every ten years. However, there are no penalties and some towns have gone twenty years without a revaluation. The state reports the findings of its ratio studies to each of the towns but it has no authority to enforce adjustments or revaluations for non-compliance.

Appeal of Ratios

Municipalities may appeal to the state if they dispute the state's ratio study findings. A formal appeal can be heard at the state agency (Office of Policy and Management) and then in court. Such appeals are not frequent and matters are usually handled informally between the state and local officials. According to a state official, there are only two or three agency hearings per year and only two court cases in 18 years with mixed results as to whether the state or local government opinion prevails.

Program Costs

The cost of the ratio study is minimal with no appraisals and no sales collection costs. The budget for this function is about $200,000 annually.

STATE OF FLORIDA

Purpose of State's Ratio Study/Frequency Conducted

The assessing function in the State of Florida is performed at the county level, except for railroad and private car line property which is assessed by the Department of Revenue. The state conducts two levels of testing in its annual ratio studies of the 67 county assessment rolls. Each year the state calculates the level of assessing from assessment/sales ratios for each county when the assessment rolls are received to determine whether the counties are assessing within the permissible range of market value. The state then does an "in-depth review" across counties every other year to determine the equitable distribution of state aid to schools. Many, counties routinely calculate their own ratio prior to sending their rolls to the state in order to ascertain whether they are in compliance with mandated standards.

Data Used

The "in depth" ratio studies use a combination of sales and appraisals. All sales information is received as part of the assessment roll data received from the county property appraisal offices on electronic tape. Counties record every sale and qualify each one according to the conditions of sale. The state verifies the information via a required affidavit from the buyer or seller. The state then removes non-arms length sales from the ratio process. There is a twelve-month period of sales data used in a ratio study. For example, 1995 assessed values are compared with sales occurring during 1994 and valued as of January 1, 1995. Supplemental appraisals are done by state appraisers whenever there is insufficient sales volume in a class.

Ratio Estimation Methodology

Florida calculates the mean, the median and primarily the weighted mean to test whether the level of assessment is within 90% of each county's "just" property value, i.e. market value, for each class of property. The state also calculates the price related differential (the index of regressivity). In the development of the ratio study, parcels are stratified into property classes. A sample size of 50 is used for each property class. If there is an insufficient number of sales in a class, the state supplements that class with appraisals. The state also appraises large, valuable properties when they comprise a significant portion of the county's wealth. Property classes are further stratified into levels of sub-strata according to value ranges. Class ratios are calculated as well as a single county equalization rate. A coefficient of dispersion and a 95% confidence interval are used to test whether the county has met state standards.

Adjustment/Correction of Assessments

Counties are required to provide a new assessment roll every year and must visit each property once within each three-year period. The state sends a notice to each county every year based upon its ratio study findings. If a property class ratio is out of compliance and the county's roll is rejected, then the budgetary process is stopped until the roll is resubmitted and approved. A county has 30 days to recalculate the values of the parcels in that class. This is often done electronically. If the roll cannot meet requirements and is disapproved, the prior year's roll may be used. This causes many complications as well as loss of time and finances for the county affected.

Appeal of Ratios

Counties may sue the state in court if they dispute the state's finding of noncompliance. The appeal can be heard up to the state district court. Such appeals are reported to be infrequent. According to a state official, the ratio study and assessment appeal process generally accomplish the functions for which they were designed.

Program Costs

In Florida, the ratio study is conducted by the Property Tax Assessment Program Section within the Department of Revenue. The budget for this section is $8.3 million. There are between 70 and 100 appraisers employed. Other functions carried out within this budget include aerial photography, a refund section for tax collection, and a tangible personal property tax section.

STATE OF GEORGIA 

Purpose of State's Ratio Study/Frequency Conducted

The assessing function in the State of Georgia is performed by the 159 counties in the state. Two departments of state government each conduct tests of assessment digests (rolls) using the state's annual ratio study data. The Sales Ratio Division of the Audit Department conducts its test using annual ratio study data solely for the purpose of equalizing the distribution of state aid to schools. The Property Tax Division of the Department of Revenue uses ratio study data in order to evaluate whether each county's digest is maintained at the statutory limit of 40% of true market value. It tests for uniformity among parcels' assessments as well as equalization among counties.

Data Used

Both tests based on the ratio study data use a combination of sales and appraisals. All sales are recorded on real estate tax transfer forms at each of the county clerk's offices. Copies of the transfer forms are sent to the Department of Revenue and the Audit Department.

For ratio study statistics released in 1995, the Audit Department compares 1993 sales with the assessed values on the 1993 assessment rolls of all counties. These annual studies utilize all sales determined to be arms length. The Sales Ratio Division director selects an additional 6000 to 7000 parcels to be appraised by department personnel. The appraisals are done in 1994, whether sales are scarce in a property class or not, in order to check that counties are not "chasing sales." Sales data verification is the responsibility of the Sales Ratio Division. Sales are not included in this test if there are no taxes due on the sold property, since this is an indication of several forms of non-arms length conditions. The state appraisers review all other sales and ask county personnel to offer possible reasons for correction. The state Audit Department makes the final decision concerning which sales are to be used.

The Department of Revenue staff looks at a portion of one year's sales and appraisals in their test. For example, to test the 1995 assessment roll, they include a few hundred of the roughly 200,000 sales from 1994 as well as appraisals done in 1994 by the Audit Department. Appraisers from the Property Tax Division of the Department of Revenue are responsible for checking the reliability of data which they use. Such review of sales reliability at the county level, for example, includes tasks such as getting sales histories and copies of maps.

Ratio Estimation Methodology

The two Georgia departments which conduct tests using the ratio study data each use their own methodology.

The ratio estimation methodology of the Department of Revenue uses the median to test whether the level of assessment is near the statutory requirement of 40% of fair market value for all property classes. A coefficient of dispersion (COD) and a price related differential (PRD) are calculated to test for equity within a county. Until the present time, residential property had to have a COD of 20% or less. All other property classes needed to be at or below 25%. These standards are currently being changed to 15% and 20% respectively. The acceptable PRD is between 95% and 110%. In the development of the test, parcels are stratified into four property classes: residential, agricultural, commercial and industrial. The last two are often combined when sample size is small.

There is no weighting of the data. A minimum sample size is determined by reaching a pre-determined coefficient of variation. The agency has the authority to use older sales and appraisals to supplement a small sample but this method is not often used. Large, valuable properties, which may skew the results, are removed from the sample if they comprise more than 10% of the value of all sale prices.

The methodology of the Audit Department is more simplified. It uses the weighted mean to calculate the estimated ratio, which should be 40% of market value. However, whatever ratio is calculated is the one which is reported and converted to its equivalent 100% full value. This resulting value is used to determine the apportionment of school aid. The Audit Department performs no further statistical tests, requires no minimum sample size, and does not determine class ratios.

Adjustment/Correction of Assessments

Neither the Department of Revenue nor the Audit Department do any adjusting of aggregate or parcel level values nor do they order a revaluation based on the results of their ratio study tests. A state official reported that most of the 159 counties have done a revaluation since 1989. Some do annual revaluations, while others have not done one in ten years. The Department of Revenue may choose to impose a penalty of $5/parcel if it finds the same deficiency in two consecutive years. It also assesses a quarter mil penalty upon the county's share of state tax recovery every year that the COD does not meet standards.

Appeal of Ratios

Counties may appeal to the Department of Revenue if they dispute its finding of non-compliance. A hearing officer is appointed by the state equalization attorney according to congressional district. About ten to fifteen of these appeals occur per year. The county boards of equalization and the school districts have 30 days from the release of the Audit Department study results to appeal to the director of the Sales Ratio Division of the state Audit Department. Three arbitrators are selected: one by the county, one by the state, and the third jointly. If the county and state cannot agree on the third, one is selected by the supreme court judge. The decision of the arbitrators is binding.

Program Costs

Neither person interviewed could estimate the amount of the agencies' budgets spent on their portion of the ratio study. However, the Department of Revenue employs thirteen people to evaluate each county's property digest compliance. The Audit Department has a staff of sixteen involved with determining equalization for school aid.

STATE OF IDAHO

Purpose of State's Ratio Study/Frequency Conducted

The assessing function in the State of Idaho is performed by the 44 counties in the state. The state conducts two separate tests using its annual ratio study. One test reviews the assessment rolls by school district for the purpose of determining school aid distribution. The second reviews the entire assessment roll of each county to adjust locally determined values. Some counties do their own ratio studies although these are not mandated.

Data Used

The state ratio study uses sales primarily and only rarely includes appraisals. In its ratio study tests, the state compares usable sales from October 1 to September 30 with those parcels' assessed values at a worth as of January l. For example, sales from October l994 to September 1995, time adjusted to January 1, 1995, are compared with assessments on the 1995 assessment roll. There is neither a disclosure law nor a recordation requirement in Idaho. It is each county's responsibility to send letters to buyers and sellers to determine the sales information and to give reasons, if any, for rejecting sales. State staff reviews the sales data and have the final authority to drop or add sales (or to extend the time to collect sales, although this option is seldom taken).

Ratio Estimation Methodology

Each of the two tests of the ratio study use different estimation methodologies to determine whether the overall level of assessment for each county and school district falls near the statutory requirement of 100% of true value. The tests include all property classes combined except farmland. Farmland is kept out of the ratio study because it is considered to be assessed based upon its productivity value.

For the school district test, a weighted mean is calculated if the ratios are thought to be normally distributed. If not, the median is used as the measure of central tendency. This more rigorous test uses a confidence interval to test for a statistical probability that assessments are at 100% of market value. The statistics used vary according to the sample size: the direct binomial test for a sample of 25 or less, a binomial approximation for a sample between 26 and 99, and a chi-square for samples of over 99. Within a school district, properties are stratified by property class.

For the countywide component of the study, the mean is used to test for equity if a normal distribution is assumed; otherwise a median is calculated. This less rigorous test allows the mean ratio to be within plus or minus 10% of full value. There are about ten strata of property classes. If county or state staff detect the presence of bad data, International Association of Assessing Officers (IAAO) trimming rules are followed to eliminate up to 5% of the sales from the tails of the list.

For uniformity standards, a coefficient of dispersion (COD), coefficient of variation (COV) and price related differential (PRD) are calculated. A Mann-Whitney test may soon be added. The COD must be 15% or less for improved residential property and 20% or less for the remaining classes. The acceptable PRD range is between .98 and 1.03. The minimum sample size is five sales ratios per class. No attempt is made to set up an unbiased sample. If the number of sales is sufficiently large, it is assumed that the sample distribution will be approximately normal. If the sample is clearly unrepresentative, with too many sales in one class, some of the over-represented sales may be excluded. A large, valuable property is only included if such a property has sold.

Adjustment/Correction of Assessments

For the school district portion of the ratio study only, the state may adjust aggregate values as a result of its findings. When a county's estimated ratio falls outside of the acceptable statistical range as a result of a county level statistic, the state may require the county to adjust parcel values on the assessment roll. Such adjustments have not been ordered in a few years, however about l2 counties had to make adjustments in the early 1980s. The required cycle for counties to conduct a revaluation is once every five years.

Appeal of Ratios

Counties may appeal their ratio study findings to the Idaho State Tax Commission. If not satisfied with the results, a county may continue its appeal to the state supreme court. The state official interviewed felt there was general satisfaction with the results of the ratio study methodology, but indicated that there is an urgent need for the adoption of disclosure and recordation laws.

Program Costs

The ratio studies are conducted by the Idaho State Tax Commission. The cost for the state to conduct the ratio study was estimated to be about $100,000. However, it was explained that the majority of the work and expense of data collection and verification is carried by the counties.

STATE OF ILLINOIS

Purpose of State's Ratio Study/Frequency Conducted

The assessing function in the State of Illinois is performed by the 102 counties in the state. Many counties have township assessors but assessment information is pooled at the county level. Nevertheless, the state lists 969 assessing units. The state conducts annual assessment/sales ratio studies for the purpose of determining whether the counties have met the level of assessment required by state law. Some counties voluntarily do their own local ratio studies, which are carried out to a greater degree of stratification than the state study.

Data Used

The state ratio studies use sales only. In its ratio studies, the state follows the calendar year and compares all usable sales from one year with those parcels' assessed values on the prior year's assessment roll. There is a disclosure law in Illinois. The parties involved in the sale list on the disclosure form both sale price and conditions of sale to the state. County assessors receive the forms and supply assessment information for the sold parcels. It is also the county's task to check the sales information and to give reasons for rejecting a sale and, in some cases, documentation to verify the reason. The state staff does some verification of assessments supplied by the counties.

Ratio Estimation Methodology

The ratio estimation methodology uses the median to test whether the overall level of assessment for all counties (except Cook County) falls near the statutory requirement of 33.3% of market value for all property classes except farmland. Farmland is kept out of the ratio study because it is considered to be assessed based upon its productivity value. However, compliance checks of assessed values on farmland are made by state staff. Cook County, which contains the City of Chicago and has a population of over 200,000, is permitted to have class-specific ratios. For example, vacant property is assessed at 22% of value while the ratio for residential property is 16%.

For the ratio study, both a coefficient of dispersion and a coefficient of concentration are calculated. The coefficient of concentration gives the percent of ratios which fall within a given range around the median. For example, if 50% of the ratios fall within plus or minus 10% of the median, the coefficient of concentration is 50. The sampling procedure includes al I usable sales in the ratio study. Within a county, properties are stratified by township but not by property type. If there are fewer than 25 sales within a township, the sample is considered too small. All townships with unacceptably small samples are combined into one strata. However, only the overall ratio is used to judge whether a county is in compliance for all counties.

Adjustment/Correction of Assessments

The only ratio adjustment made as a result of the state's study is one at the aggregate level if a county is out of compliance. When a county's estimated ratio falls outside of the acceptable statistical range, an equalization factor is calculated which brings the ratio to 33.3% of full value. The normal cycle for counties to conduct a revaluation is once every four years. An aggregate adjustment is made to a county's ratio if a revaluation has been conducted subsequent to the calculation of that ratio.

Appeal of Ratios

Counties may appeal their tentative equalization factor calculated by the state. According to a state official, a county may appeal to the Department of Revenue and to the state circuit court. However, such appeals are infrequent. The state official felt there was general satisfaction with the results of the ratio study methodology, but indicated there was a shortage of personnel to do adequate data verification.

Program Costs

The ratio studies are conducted by the Equalization and Review Section of the Department of Revenue. The annual cost of the study could not be estimated by the person interviewed.

STATE OF IOWA

Purpose of State's Ratio Study/Frequency Conducted

The assessing function in the State of Iowa is performed by the 99 counties and 8 large cities in the state. The state conducts its ratio studies for two purposes. The first purpose is to annually examine equity among assessing jurisdictions and property classes. The second purpose is to biennially equalize property classes in every assessing jurisdiction to the statutory level of 100% of true value. Some cities and counties do their own ratio studies although these are not mandated.

Data Used

The annual study uses sales only. The biennial study uses both sales and appraisals. In its ratio studies, the state compares usable sales from January 1 to December 31 of one year with those parcels' assessed values found on the year's assessment roll.

For example, sales from l994 are compared with assessments on the 1994 assessment roll. The biennial study uses ratios for just the most recently completed year. In 1995, for example, sales and appraisals from 1994 are used to equalize 1995 assessments.

According to law, for each sale of real property a full disclosure form must be filled out and recorded with each county with a copy of the form sent to the state. State staff reviews the sales data and verify a sample of the sales for ratio reliability. Local assessors may offer their comments regarding sales reliability but the state has the final authority to drop sales.

Ratio Estimation Methodology

The median is the statistic used for both purposes of the ratio studies. The annual study includes all property classes for both deeds and contracts. The biennial study focuses on deed sales of the residential and commercial classes and excludes farm land sales. Farmland is treated separately because it is considered to be assessed based upon its productivity value. The annual study uses sales only. The biennial study uses sales for residential and commercial properties and supplements with appraisals of additional commercial parcels. There is no attempt to weight the sales, however, a random sample is used in selecting parcels in the appraisal categories. Class specific ratios are calculated for both study purposes.

A coefficient of dispersion (COD) and a regression index are calculated. The COD must be 20% or less for all classes although this level is allowed to vary informally depending upon economic conditions. The minimum sample size is 2% of the parcels in a class or a minimum of 15 sales ratios per class. There is no special treatment of large valuable properties.

Adjustment/Correction of Assessments

For the portion of the ratio study which equalizes property classes to 100% of true value, the state adjusts aggregate values if a class ratio is off by more or less than 5%. There is no requirement for a periodic revaluation but the state may require a county to conduct a revaluation if a COD is greater than 20%. The level at which a revaluation is ordered may vary informally according to economic conditions. If the county does not undertake the revaluation, the state will do it at the county's expense. The state has a reassessment expense fund from which money can be loaned to counties. Most assessing jurisdictions do not take advantage of the fund because it must be repaid and there are state reporting requirements which limit home rule.

Appeal of Ratios

Local assessors may appeal their tentative ratios informally to the Iowa Department of Revenue and Finance. If not satisfied with their final ratios, assessors may continue their appeal to the state's Board of Tax Review. This appeal process has not been used often since the mid l980s. At that time, the state prevailed in a series of ratio appeals before the state's Board of Tax Review, the district courts and the state supreme court. The state official who was interviewed commented that the state fought its battles in the past and now the system is running well. He indicated that assessors are appointed and have a high level of competence and that the International Association of Assessing Officers (IAAO) has stated that Iowa has one of the best sales ratio systems in the country. There is a high degree of satisfaction at the state level with the results of the ratio study.

Program Costs

The cost for the state to conduct the ratio study was estimated to be about $1 million. This is primarily spent on a field and office staff of about 20 to 25 people.

STATE OF KANSAS

Purpose of State's Ratio Study/Frequency Conducted

The primary purpose of the state's annual ratio study is to determine whether the 150 county assessing units are in compliance with both statutory level and assessment uniformity standards. The ratio study is not used for equalization purposes, since Kansas does not equalize among the counties.

Data Used

The state uses both sales and appraisals in its study. The ratio study is issued in the spring or early summer of each year, and reflects sales and appraisals collected on sample properties in the residential and commercial classes in the previous calendar year. Sale prices and appraised values are adjusted for time to January 1 of the year analyzed in those cases where market trends have been identified and documented by the county. Thus the study released in 1995 uses sales and appraisal data in 1994, adjusted back to a January 1, 1994 valuation date. In some rural counties it is necessary to supplement sales with appraisals to meet the minimum of eight valid sales per county per year. By contrast, a random sample of 400 residential sales are typically used in larger counties (those having over 15,000 parcels).

State law requires that an official real estate sales validation questionnaire be completed by buyer or seller, and filed with the deed. The assessor receives a copy of the completed questionnaire, but both the state and the county appraiser often telephone the grantee to clarify unusual terms or conditions of sale. The state appraiser currently follows up with telephone inquiries in at least 50% of residential sales, and in 100% of commercial sales, in order to decide on the sales' validity for the ratio study. County appraisers can informally appeal on sales, and field staff team leaders have authority to exclude questionable sales if documentation is sufficient and compelling.

Ratio Estimation Methodology

The state calculates the median ratios of both residential and commercial classes of property to ascertain whether assessments are between 90% and 110% of market value. Assessments are classified, but the appraised (full) value must also appear on the roll. It is this full value that the ratio studies are based upon. For those assessing units whose median ratios fall outside the prescribed range, a confidence level test is required (at the 95% level). The technique used is known as "bootstrapping," a Monte Carlo simulation technique to prepare numerous iterations (up to 20,000) of the same size as the original sample. If the class ratio falls within the confidence interval, the appraisal unit will not be out of compliance.

Outliers are trimmed by an interquartile range formula. In counties having more than 20 sales, 5% to 10% are trimmed. In counties having less than 20 sales, approximately 10% to 15% are trimmed. If there are insufficient sales to reach the minimum required, the sales period is extended back one year at a time (for up to four years) until enough sales can be found. If sales volume is still insufficient, then supplemental appraisals will be prepared.

For larger counties, where sample sizes exceed 40, the chi-square test is used to check for normality. If the criteria are not met, the chi-square test is aborted, and the Kolmogorov-Smirnov test is substituted. In addition, ratios are calculated on other property types, but only the ratios on residential and industrial/commercial classes are critical for measuring assessment performance. In the 1993 sales ratio study, there were only 20 supplemental appraisals, all of which were in the commercial/industrial category.

The state also has statutory authority to measure assessment uniformity, as counties must have a coefficient of dispersion (COD) under 15% for the residential class, and under 20% for the commercial/industrial class. (The COD for vacant lots is 20%, but there is less weight placed on this class.) Appraisal units are not out of compliance if a confidence interval test indicates that the suggested range includes the maximum acceptable COD prescribed for the class at the 95% confidence level. Counties must also have price related differentials between .98 and 1.03. The state applies confidence level testing to both of these statistical measures.

More detailed information on this state's methodology is available in the 1993 Kansas Real Estate Ratio Study, and also in Building a More Powerful Ratio Study with Fewer Resources, written by Peter Davis, Superintendent of the Ratio Studies Section.

Adjustment/Correction of Assessments

The state publishes the ratios annually, and also county assessment practices scores that include the result of audits of assessment office procedures. Each ratio study counts 50 points in a 100 point assessment practices test, for which a passing score is 75 (the other 50 points is based on a procedural compliance review, ranging from appraisal maintenance plans to cadastral mapping). Counties that fail to pass this test are required to submit plans for rectifying noncompliance, and may be subject to an audit. Reimbursement funds for such counties are placed in a special training fund until corrective action is taken. Repeated noncompliance in the same sub-class triggers a full audit, and the state has the authority to initiate proceedings against the county appraiser in the State Board of Tax Appeals. The state may also take action if a subclass (age or price by neighborhood) is out of compliance, but reimbursement funds are not withheld in such instances. Counties are required to update their rolls annually, and the state provides limited financial assistance.

Appeal of Ratios

A mid-term report is available to county appraisers to informally appeal preliminary results. Following completion of ratios, county appraisers have two months to informally examine results. Once released, appraisers have 15 days to appeal to the State Board of Appeal. The Board has 30 days from receipt of appeal to conduct a hearing and another 30 days to rule on the ratios. Further appeal can be made to the District Court. The present methodology has won acceptance from both the legislature and the county appraisers. In fact, this methodology was the result of successful court action brought by many counties in the early 1990s with the assistance of the International Association of Assessing Officers. Appeals filed by county appraisers have declined since the new program has been implemented.

Program Costs

It is estimated that the program costs $300,000 to administer. As in other states, there is strong pressure to keep personnel costs down. At present, the work force is being reduced from 14 to 8 personnel, who are involved in other duties beside ratio analysis. In the future, there will be less emphasis placed on labor-intensive sales verification activities and supplemental appraisals, and more emphasis placed on using PC-based statistical simulation models.

STATE OF KENTUCKY

Purpose of State's Ratio Study/Frequency Conducted

The state performs annual ratio studies on each of the 120 county assessing units. These studies are undertaken both for state aid distribution and for measuring local assessment performance. Assessed value per pupil is an important component in the school aid formula. The counties are urged to conduct their own ratio studies, but such studies are not statutorily required.

Data Used

The State uses both sales and supplemental appraisals for three major types of property (agricultural, residential, and commercial/industrial), with randomly selected performance audits of assessment procedures. The ratio study for 1995, with evaluation date of January 1, 1995, uses 1993 assessed values and sales and appraisals taken from a six-month period, July 1, 1993 through December 3l, 1993. Sales information is contained in deeds in county court houses, which by law must list stamps containing the consideration. There is no disclosure form involved, but county assessors generally investigate terms of sale, and will make corrections in their own records. Screening of sales is generally done at the local level, and it is up to the local assessor to "tag" unusable sales, based on state -set criteria. Sales data are transmitted to the state for computation of ratios.

Ratio Estimation Methodology

The state computes the median in its ratio study, stratified by price range, neighborhood, and property type in more populous and urban counties. In smaller and more sparsely settled counties, unweighted sales data are used, often supplemented with appraisals in all classes of property. Separate ratios are reported on residential and commercial properties only where there are at least 20 usable sales. If there are less than 20 usable sales in an assessing unit in all classes combined, appraisals are substituted in their place. In larger counties, 15 to 30 residential samples are used per neighborhood, but often there are less than five in smaller counties.

The ratio is calculated for each of three classes (agricultural, commercial/ industrial, and residential), and counties are out of compliance if the ratio is not at 100% of fair cash value (using a 95% confidence interval). It is expected that the state will soon relax the requirements, so that ratios will be in compliance if they fall between 90% and 110% of the statutory level. The state uses the coefficient of dispersion to measure horizontal assessment uniformity, and the maximum acceptable level of dispersion on all properties is 30%. However, it is expected that this standard will be lowered to 25% in 1996. No measure of vertical uniformity is calculated.

Adjustment/Correction of Assessments

The state has the authority to equalize property assessments among the counties each year. The state may adjust aggregate assessed values by the factor necessary to equalize assessments in each class. Blanket adjustments on residential values were ordered in 13 counties in 1994. The state has also taken direct responsibility for assessing in 25 "emergency" counties, where assessment practices have chronically produced inequitable assessments. Continued failure to meet assessment standards, as measured in succeeding ratio studies may result in an uncertified county tax roll, loss of state financial assessing assistance, county tax roll, loss of state financial assessing assistance, and cessation of salaries to assessors (they are paid by the state). Properties are required to be revalued each year, and to be physically inspected every four years. In many instances informal contacts with assessors resolve problems about sales used in ratio studies.

Appeal of Ratios

Counties can appeal equalization changes to the Kentucky Board of Tax Appeals. This body also hears appeals of taxpayer grievances submitted to county boards of assessment review. However, individual property appeals occur before equalization, not after, making it difficult to correctly identify assessment inequities. Local assessors regard current standards as too strict, and the state has recently contracted to have its own program evaluated. The final report of the contractors (Final Report Review of Ratio Study and Certification Procedures, published in March 1995) makes several recommendations. This report analyzes Kentucky's program in the context of an ideal model of assessment supervision.

Program Costs

No information was available about costs.

STATE OF LOUISIANA

Purpose of State's Ratio Study/Frequency Conducted

The purpose of Louisiana's ratio study is to equalize assessments among its 70 assessing units (63 parishes plus seven districts in Orleans Parish). The study is conducted annually, but each study focuses on only one class of property. All types of properties (except those assessed at use value) are included in a study every four years.

Data Used

The state uses both sales and appraisals of all but property valued in use, such as agricultural land, and state-assessed public service utility property. Appraisals (using mostly the cost approach) are applied in commercial classes and to residential classes in rural parishes where sales are scarce. Each ratio study is valued to a base year established every four years. The ratio study for 1994 is valued to January 1, 1991, and is applied to the 1995 rolls. However, the 1995 study is valued to a January 1, 1995 base (along with studies in 1996,1997, and 1998), and will be applied to the 1996 rolls. Sales and appraisals used in the study consist of one year's worth of data ending June 30 of the study year. Thus the 1995 study uses sales and appraisals collected between July 1, 1994 and June 30,1995. Sales data are drawn from recorded acts of sale. Field staff collecting these sales discuss sales with parish assessors for screening out unusable sales.

In a four-year period, annual ratio studies are dedicated to only one type of property. The following groups of property are examined in this period: full residential (both land value and improvement value), vacant residential land, full commercial properties (land and improvement values), and vacant commercial land.

Ratio Estimation Methodology

The state uses both the unweighted mean and median as central tendency measures in its ratio studies, with the far greater emphasis on the median. Parishes are required to have measured class ratios fall within 10% of the percentage of fair market valuation of the respective property class. The median must be between 9% and 11% on residential improvements and land (10% statutory level), and between 13.5% and 16.5% in commercial improvements, including railroad property (15% statutory level). In each ratio study the sample size will depend upon the size of the parish. A desirable minimum database per parish is 40 sales and supplemental appraisals. This amount is generally higher in more populous parishes. The state also uses a coefficient of dispersion standard of 20% as the maximum acceptable level for both major groups of property.

Adjustment/Correction of Assessments

The state can order a reappraisal in the property class within one year if a parish is not in compliance. If the parish in question fails to act, the state will not certify the assessment roll for taxable purposes. Parishes are required to reassess their properties every four years, without financial assistance from the state.

Appeal of Ratios

Tax Commission staff meet with parish assessors at informal meetings to discuss ratios. Assessors may formally appeal first to the local Parish Tax Commission body, then to the State Tax Commission, and then to the Supreme Court, if necessary. Overall, the ratio study methodology is accepted, with few appeals filed. However, the state officials interviewed indicated that they would conduct a universal ratio study each year if resources were available.

Program Costs

The estimated ratio program costs to the state are $500,000, with 16 people involved in the ratio studies. Before budget cuts, 25 people were involved in this process.

STATE OF MAINE

Purpose of State's Ratio Study/Frequency Conducted

Maine conducts an annual ratio study primarily for state aid distribution and for cross- district apportionment of taxes on assessment rolls prepared by 488 governmental units. The study is the basis for certifying assessment rolls for taxable purposes as of April 1 of each year. The studies are published by February 1 of the following year.

Data Used

The ratio studies use sales primarily, but may include appraisals in all property classes except vacant and undeveloped land. Sales and appraisals are drawn from the prior calendar year. No adjustments are made on sales used in ratio studies. In many instances it will be necessary to extend the time period for collecting sales, up to 18 or 24 months for municipalities where data are scarce. If sales data are still insufficient, then the state will supplement with appraisals. Property grantees fill out a sales declaration of value, which is audited against state income tax declarations. This declaration is then sent to local assessors for verification and for editing/screening. A preliminary run is made on returned declarations. Anomalies are field inspected and corrected or eliminated for the second and final run of data.

Ratio Estimation Methodology

The ratio estimation methodology uses the mean as a measure of central tendency, but the highest and lowest 15% of the observations are trimmed in the analysis. This measure is used, because properties used in the samples are occasionally atypical or mis-classified at the local level, and anomalous ratios can result with an unedited sample group. This statistic is used to determine whether an assessing unit is assessing property between 70% and 110% of market value. Binomial tests are also run to check for normality of the data.

For assessment uniformity purposes, assessing units must have a coefficient of dispersion under 20% on a composite ratio of all property types. Data samples are stratified where sufficient data are available, especially between waterfront and non-waterfront property. The minimum size sample is normally 12 per municipality in all properties, but the state can omit sales in over-represented classes, and supplement under-represented classes with appraisals. The state also analyzes ratios for four property classes, and can detect potential problems that could later develop in units that meet the current overall standard.

Adjustment/Correction of Assessments

The state has no authority to adjust local values of those assessing units whose ratios fall outside the acceptable test range, however, the affected these local assessors are advised by letter to correct practices. In units outside the acceptable range, the state has the authority to delay reimbursement payments for forestland assessed at use value. In extreme cases, the state can hire a firm to revalue and bill the municipality. There is no mandatory revaluation cycle, and many municipalities have not reassessed in several years.

Assessors meet with state officials to discuss ratio studies before they become official. If not satisfied, assessing units may appeal to the State Board of Property Tax Review. Of the 488 governmental units, only 8 appealed their official ratio study results last year. Overall, assessing units are satisfied with the ratio study methodology. The state is also satisfied, given that resources for ratio study analysis are scarce.

Program Costs

It is estimated that ratio studies involve seven people and cost between $300,000 and $400,000 total. Appraisals cost between $40 and $60 per parcel, depending on the type of property being appraised.

STATE OF MASSACHUSETTS

Purpose of State's Ratio Study/Frequency Conducted

The state conducts its ratio study for two purposes: one (biennially) for equalization among towns for local aid; and the other (triennially) certifying full and fair value. Whenever these purposes coincide in one year, the certification purpose takes precedence, and its results are also used for the equalization purpose. Assessing units (351 cities and towns) are on staggered cycles for certification purposes.

Data Used

For purposes of certification, residential sales plus an audit of other properties are used. Sales are used from a 12-month period, but may be drawn from a 24-month period if sales volume is insufficient. Appraisals are not used for purposes of certification, however, the state obtains supplemental appraisals in the commercial/industrial class for equalization purposes. The time period for appraisals can extend as far back as three years.

Sales information is drawn from sales reports screened by the assessors. These sales are field audited by the state for certification purposes. Sales are verified by telephone audits with local assessors for equalization purposes. It is essentially the local assessor's task to edit and verify sales.

Ratio Estimation Methodology

The state uses the median for certification purposes, and assessing units must be within 10% of the statutory level of assessment for the residential and commercial/industrial classes. The aggregate (unweighted) mean is used for equalization purposes (100% of full and fair cash value since Proposition 2 1/2 took effect in 1981). The state stratifies its study by price quartile, date quartile, and neighborhood within each class. There are 7 residential substrata, plus commercial and industrial property classes. Price and data quartiles cannot exceed 5% of the overall median in either of the two main classes. As a test of uniformity, a coefficient of dispersion is determined and distinct standards are applied by class (residential, 10%; apartment, 12%; land, 20%; and commercial/ industrial, 15%). For informational purposes, the state also produces an aggregate ratio for all property classes.

The minimum sample size is 20 per property class, or two percent of the population, whichever is greater. This minimum is regularly achieved in the residential class, but not in the commercial/industrial class, even if the time period is extended to 24 months. In such instances, where the minimum is not met, the state relies on whatever usable sales are available. For equalization purposes a ratio of 1.0 is assigned to a class for which data are either scarce or unreliable in an assessing unit. As a check on its sampling, the average assessed value of sales samples are compared with the average assessed values of the population of sales; the maximum acceptable deviation is 10%.

Adjustment/Correction of Assessments

For the purpose of certification, the state cannot adjust values, but it can require revaluation based on non-compliance. For the purpose of equalization, the state adjusts values on the roll, by major class equalization ratios.

Appeal of Ratios

There is essentially no appeal of the certification ratios. The equalization ratios can be adjusted by the state with informal hearings. If not satisfied with its equalization ratio, a municipality may file an appeal with the State Appellate Tax Board. Municipalities are fairly satisfied with ratio studies procedures, although the price and date quartile standards are regarded as very exacting by local assessors.

Program Costs

It is estimated that the annual cost of ratio studies is $500,000, and 12 people are involved.

STATE OF MICHIGAN

Purpose of State's Ratio Study/Frequency Conducted

The state conducts an annual ratio study for equalizing values among the 1,527 city and township assessing units, and also for purposes of state aid distribution. The state's 83 counties also conduct their own ratio studies for purposes of equalizing among their respective assessing units. Both state and county ratio studies have limited effectiveness, however, since the legislature has imposed a limit on the amount by which assessments can be adjusted to conform with statutory standards.

Data Used

The state's ratio studies use sales of all types, and appraisals are used as supplements for industrial and commercial properties. These ratio studies are used in calculating state equalized value (SEV) factors for the taxable status date of December 31 in a given year, based on a valuation date of December 31 of the previous year. Each ratio study includes data from a 24-month period. As an example, SEV factors applied to the assessment rolls as of December 31,1994 are based on a ratio study valuation date of December 31, 1993 using sales occurring between April 1992 and March 1994. Michigan has recently enacted legislation requiring completion of a sales disclosure form by the grantee indicating sale price, and the terms of sale. This form is the principal source for sales information, and the state screens the data for usability. Local assessors have the opportunity to provide additional information and comments on sales.

Ratio Estimation Methodology

The state uses the mean in its ratio studies, weighted by value and adjusted for each year to avoid downward bias in ratios. Sales are stratified into six property categories, but there is no sampling in these subgroups. There is no tolerance of error from the statutory assessment standard of 50% of true cash value. Deviations from this standard are rectified through application of SEV factors. The state does test for uniformity of residential assessing, but it is not statutorily required and International Association of Assessing Officers standards are applied. Ratios are produced for each property class and are applied after reviewing equalization factors developed by the counties.

Adjustment/Correction of Assessments

The state adjusts assessments on all properties, by the application of SEV factors for each of the six categories. These factors are designed to adjust assessed values to 50% of true cash value, without necessitating local reappraisal activity. No reassessment cycle is in statute, but the state prefers that municipalities update when assessments are more than five years old.

Appeal of Ratios

There are no appeals on SEV factors. However counties can file SEV factor related appeals on the grounds of errors of law or on capricious assessments. Towns may appeal the results of county equalization by taking their case to the Michigan Tax Tribunal within 30 days of public release of values.

The state is generally displeased with the current ratio program. At present there are only 22 personnel involved in the state equalization process and for checking county equalization efforts. Furthermore, the state currently lacks resources to effectively appraise properties of large corporations. Although the problem is ameliorated by sharing data from county-paid appraisers, industrial property still does not get an adequate amount of scrutiny.

The most vexing problem cited by the state official interviewed, is that the SEV factors cannot be applied to parcels that have sold more than two years prior to the valuation date of the study. Adjustments to assessments on such parcels are limited by indices developed by the legislature. The result is a "welcome stranger" equalization process. Under this procedure areas of comparatively active real estate sales, especially on residential property, will ultimately acquire an increasing burden of property taxation, compared to areas and property classes (i.e., commercial and industrial) that are less likely to sell. County assessors are also disgruntled about the limitations on assessment adjustments.

Program Costs

It is estimated that the state ratio process costs $3 million annually, involving 22 personnel. Resources are shared with counties to help complete ratio studies on time.

STATE OF MINNESOTA

Purpose of State's Ratio Study/Frequency Conducted

Minnesota conducts annual ratio studies for the purposes of state aid distribution, especially to school districts, and equalization of values used for apportionment of levies among the 2,713 cities, townships, and counties in Minnesota. By law, this later function resides with county boards of equalization (except for the cities of Minneapolis, Duluth, and St. Cloud, which require state equalization). Some of the counties conduct their own ratio studies, however many counties lack the resources to do annual ratio studies and thus rely on the state to perform this function.

Data Used

The state uses only sales in its ratio studies of all types of property. Ratio studies are completed in June of each year, and for equalization purposes reflect sales of all types collected from a 12-month period ending September 30th of the calendar year immediately preceding the year of issue. For example, the ratio study released in June 1995 is based on sales data collected between October 1, 1993 and September 30,1994. For school aid purposes, sales are drawn over a longer period, encompassing 21 months (school aid ratios for 1995 are based on sales occurring between January 1, 1993 and September 30, 1994).

The state obtains sales data from disclosure forms, which are filed by the grantees and first sent to the local assessor for entering all pertinent assessment information. The form contains a section in which sales can be rejected for ratio study purposes, in conformance with the International Association of Assessing Officers' criteria. The state sends letters to grantees verifying the reported data. State field staff then meet with assessors to review sales for suitability in the ratio studies. Sale price adjustments are made for special terms of sale, such as favorable financing.

Ratio Estimation Methodology

The state uses the mean in its methodology for school aid purposes, weighted by value in each class of property. For equalization purposes the median is used. No minimum assessment standard is used for school aid purposes, however for equalization studies assessing units must have assessment study ratios between 90% and 100% of full market value. Advisory but non-statutory assessment uniformity standards are measured by the coefficient of dispersion (COD) and price related differential (PRD). The residential maximum COD is 15% and for other property 20%. The acceptable range for the PRD is 0.98 to 1.03.

For equalization purposes, the ratio study incorporates data samples stratified by property type and the sample size minimum is six per strata. Where there are insufficient numbers of sales in a class, the countywide ratio for that class is substituted. For school aid purposes, the study involves augmentation of sample sizes with commercial sales, which are verified and inspected. For each of the study purposes, the final output is ratios in each of seven classes (vacant land is excluded in the ratio study for school aid purposes).

Adjustment/Correction of Assessments

The state has the authority to adjust parcel values in any class that has failed to meet state equalization ratio requirements. Before that occurs, however, assessors have the right to review sales used in the analysis for equalization purposes. Assessing units are required to reassess on a four-year cycle, and must budget for these reassessments.

Appeal of Ratios

For purposes of school aid allocation, school districts can appeal the results of the ratio study to the Tax Commission, and if necessary to Tax Court. No appeal can be made by assessing units for purposes of equalization, but taxpayers can use ratio study results to appeal assessments of their property. In general, the ratio studies program has been accepted, and the incidence of appeal has been scant. The only complaint about the state's ratio program is the length of time taken in releasing results.

Program Costs

It is estimated that the annual budget for the sales ratio study is approximately $1 million, involving 16 personnel (includes field staff). This estimate includes only direct costs.

STATE OF MISSISSIPPI

Purpose of State's Ratio Study/Frequency Conducted

The state conducts ratio studies annually for equalizing among Mississippi's 82 county assessing units. Ratio studies are issued in August of each year and reflect sales in all categories drawn from the twelve months of the preceding calendar year. Counties are free to conduct their own ratio studies to insure fair distribution of tax levies within counties, but such studies are not required in statute.

Data Used

The state uses only sales in its study. Although it does not use appraisals, the state will audit county assessment records to insure that property inventories are correct, especially on commercial/industrial properties. No sales disclosure form is used in obtaining data; instead, the state sends letter questionnaires to grantees and grantors of record. The resulting sales information is then screened with county assessors. Once screened, valid sales are used. Sales are available for ratio analysis.

Ratio Estimation Methodology

The state uses the median as a measure of central tendency for computing ratios in each of two classes: Class I (residential), and Class II (all other real property except utility). Ratios must be within 20% of the assessment standard for Class I (10% of full value), and within 25% for Class II (15% of full value). The minimum sample size is 10 per class, but this is often not achieved in the more rural counties. In such instances, the actual number of sales is adjusted for time in those instances when inflationary pressures are strong in the year in which sales are collected.

The state also computes the coefficient of dispersion (COD), and the standard for uniformity is 25% for both property classes. In addition, the state computes a price related differential and the acceptable range is .92 to 1.08. This measure is confirmed with the Spearman Rank test.

Adjustment/Correction of Assessments

Where standards are not met, the state has the authority to order updates to the entire roll, and the updated roll must be completed within 18 months of an issued order. Such updated rolls must meet tighter standards than those for counties in compliance. The ratios for counties ordered to update must fall within 15% of the standard for Class I property, and 20% of the standard for Class II property. Furthermore, the updated roll must yield COD's of no greater than 15% on Class I property, and 20% on Class II property.

The penalty for failure to comply with an ordered update is the sequestration of a discretionary mil of taxation allowed by the state to the county, which is not returned until the county is in compliance. These delinquent assessing units also lose reimbursement for the partial exemption granted on homestead properties. There is currently no prescribed reassessment cycle, however, counties are required to keep rolls in compliance with assessment standards each year.

Appeal of Ratios

Before the ratio study results are made public, state staff informally discusses results with assessors. State staff has authority to drop sales, and recompute their findings. Upon release of official results, counties have 30 days to appeal before the Mississippi Tax Commission. Such formal appeals have not been filed very often.

The state believes that it expends too many resources in gathering sales from deeds, and not enough on true appraising. The state would like to see its staff concentrate more on land value studies, with use of the Honeycutt cost system for improvements (i.e., the state would move away from a market value assessment system). It would also prefer to conduct record audits rather than rely solely on ratio studies.

Program Costs

It is estimated that the state ratio study program costs $250,000 annually, involving 13 employees of the Property Tax Bureau.

STATE OF MISSOURI

Purpose of State's Ratio Study/Frequency Conducted

The state conducts biennial ratio studies for maintaining the uniform distribution of taxable property wealth within and among the 115 city and county assessing units. The ratio studies are the basis for equitably distributing state aid to school districts. Counties have the option of analyzing available sales data for monitoring their assessing, but such studies are not linked to enforcement of statutes pertaining to state aid distribution or to enforcement of assessment standards.

Data Used

The ratio study uses appraisals. Sales are collected, but only for use as comparable properties to develop the appraisals. Appraisals are made on all property types except on mineral rights, properties under appeal to the state, and on exempt properties. Appraisals are relied on because, with the exception of three counties in the St. Louis area, there is no sales disclosure law in Missouri. Counties send out letters to buyers to verify conditions of sale, and the state uses this sales information along with that obtained from real estate lists. Sales that do not indicate market value are not used.

Appraisals are based on a valuation date of January 1 of the odd-numbered year. For example, the current biennial ratio study is based on a valuation date of January 1, 1993, with appraisals conducted between June 1993 and December 1994. About 30% of the counties are analyzed on assessment practices between June of the odd-numbered year and March of the following year (e.g., June 1993 - March 1994), and the remaining 70% are analyzed between April and March in the second year of the cycle (i.e., April 1994 to March 1995). Appraisals commencing in June 1995 are part of the next biennial study, with a January 1, 1995 valuation date. Sales used as comparables are edited at the county level, including inventory, but the state conducts its own appraisals, including data collection and inspection of all properties.

Ratio Estimation Methodology

The state uses the median to determine whether property in each assessing unit is valued to within 10% of the statutory level of assessment in each of the three classes of property: agricultural (12%), residential (19%), and commercial/industrial (32%). A county may not be in compliance in one of the three ratios, but for school aid purposes it will accept a compliance rate of within 5% on a composite ratio, weighted by the percentage market value in each class. For assessment uniformity purposes, the state coefficient of dispersion standard is a maximum of 25% for residential property, and 30% for commercial/ industrial property. The state also calculates price related differentials (PRD), which should range from 0.95 to 1.05. However, compliance with this PRD standard is not required.

Assessments are randomly sampled in each of the three classes in each county, with a minimum sample size of 30 per class. In general, 40 appraisals are chosen, to allow for some loss due to deletion of samples that meet pre-established deletion criteria. To test for sample reliability, the state uses confidence testing (at the 95% level) on its ratio studies, and Spearman Rank correlation on the PRD (the latter for internal use only). No adjustments are made in the appraisals used, but sale prices of comparables are adjusted to the appraisal valuation date.

Adjustment/Correction of Assessments

Counties failing to comply with the ratio standards must develop and submit a plan of action to the Tax Commission. Failure to carry out the plan of action results in a loss of state funds for assessment operations and state funding to local schools. The state reimburses 50% of assessment costs for most counties.

Appeal of Ratios

There are informal reviews of the appraisals that are used, and if field reviews find evidence of errors, including the comparables used in appraisals, the individual sample values can be recalculated. There is no judicial appeal on the appraisal values, although appeal is available on the methodology. The methodology was last contested in 1990, and has been upheld by the Missouri Supreme Court.

County units have not felt comfortable with the power and authority the state has in ratio studies. The state claims it is hindered by the lack of a statewide sales disclosure law, which would make obtaining comparables much easier. Sometimes counties are not fully forthcoming with respect to sales information, and state staff does not have the time and resources to fully research sales used in preparation of their appraisals.

Program Costs

Appraisals generally cost $55 each, with 12,000 conducted per year. This totals to over $650,000 in direct costs. It is estimated that other costs total approximately $250,000. Forty-one staff are involved in ratio analysis.

STATE OF NEBRASKA

Purpose of State's Ratio Study/Frequency Conducted

Nebraska conducts an annual ratio study to equalize among the 93 counties that serve as assessing units. A secondary function of the study is for purposes of distributing state aid. Counties may conduct ratio studies on their own to insure equitable distribution of levies occurring within their boundaries.

Data Used

The data used in ratio studies (issued in July of each year) are drawn from an 18-month period for residential and commercial/industrial sales, and a 36-month period for agricultural sales. The study released in 1995 will be based on residential and commercial/industrial sales collected throughout 1994 and the last half of 1993, and on agricultural sales from 1992 through 1994. Sales data are drawn from disclosure forms and verified in county offices. The state reviews all sales to guard against an excessive number of sales being rejected. Appraisals are used to supplement sales in property types and areas where sales are scarce, and such appraisals are contracted out to vendors. The state also performs random audits of assessments before each ratio study commences.

Ratio Estimation Methodology

The state uses the median in its ratio study. Median county ratios for both residential and commercial/industrial property classes must fall between 92% and 100% of market value. The standard for agricultural property is between 74% and 80%. There are no requirements for assessment uniformity, although the price related differential and residential coefficient of dispersion are computed for internal use. The state uses a 2% sample size for each class of property, supplemented with appraisals. The state adjusts sales price data for time, according to benchmarks within the study period.

Adjustment/Correction of Assessments

The state has the authority to adjust aggregate values by property class for counties that fail to comply with the above listed standards, for purposes of equalization among the counties and for distributing state aid to school districts. Before such adjustments are made, affected units, including school districts, can challenge the state's findings at informal hearings. There is currently no statutory reassessment cycle.

Appeal of Ratios

School districts as well as counties may file appeals on the ratios. Appellants go first to the county tax commission, then to the state courts. The methodology is accepted by the counties and school districts, but the official interviewed indicated that the public does not fully understand the procedure.

Program Costs

The state's ratio study program is estimated to cost $450,000 annually, excluding costs of contracting for necessary appraisals. There are currently 14 state staff involved in ratio studies.

STATE OF NEVADA

Purpose of State's Ratio Study/Frequency Conducted

Nevada conducts an assessment ratio study each year in order to measure assessment equality. Each ratio study addresses approximately half of Nevada's 17 counties, with each county studied every other year.

Data Used

The state uses statistically valid samples for each class of property in each county's reappraisal area. Property classes include vacant, residential, multi-family, commercial, and vacant and improved agricultural land. The state selects an adequate number of sample properties to statistically represent the population in each of these classes of property.

Department of Taxation appraisers visit the sample property and perform appraisals. Taxable values are compared to the locally assessed values to determine the ratios. Land sales that are used are verified whenever possible; the majority of these sales are verified. Taxable values of real property are comprised of the improvement's replacement cost new and the market value of land based on the use to which improvements are put.

Ratio Estimation Methodology

Nevada statutes require that all property subject to taxation be assessed at 35% of taxable value, known as the assessment ratio. For this state's assessment ratio study purposes, the Department of Taxation calculates the ratio using the computed taxable values of appraisal properties in the sample.

An assessment level is calculated to determine how closely property assessments fall within the legal assessment ratio range, which is between 32% and 36%. The ratio study involves the determination of assessment levels by computing the central tendencies (mean, median, and aggregate ratios) of assessment ratios. Nevada law specifies the use of the median ratio, the aggregate ratio, and the coefficient of dispersion (COD) of the median to evaluate both the total property assessments and the assessments of each major property class within each county.

Adjustment/Correction of Assessments

The published ratio study details the following features: (a) the use of specific statistical measures, such as mean, median, and COD, (b) a comparison of statewide assessment ratios for each type of property class, (c) an evaluation of assessment procedures, (d) the actions assessors must take to correct discrepancies.

Appeal of Ratios

Once each year counties involved in the ratio study meet with the Nevada Tax Commission (NTC) at a public meeting to discuss ratio study findings. If the NTC finds that a particular class was assessed at a greater or lesser percentage than that required, it may specify a percentage increase or decrease in assessed value of property on the next assessment roll. It the ratios of improvements or land are outside the acceptable assessment ratio range, the NTC may order the county to hire qualified appraisers to determine the nature and extent of the problem.

Program Costs

Program costs have not been calculated individually. Seven people participate in the ratio study each year, while also assuming responsibility for various other tasks relating to assessment standards, equalization, and property taxation.

STATE OF NEW HAMPSHIRE

Purpose of State's Ratio Study/Frequency Conducted

The primary purpose of the state's annual ratio study is to equalize funding for state aid among the 259 city and town assessing units. Its secondary purpose is for cross-district apportionment of county taxes.

Data Used

The state uses only sales in the ratio study. The state purchases sales information from a private company that gathers the information from the various registers of deeds. Once obtained, the state then verifies the sales information through questionnaires mailed to grantees. Grantees are asked to supply information about special circumstances involved in each sale selected. Local assessors are not involved with the questionnaires, but instead supply assessed values and tax map references for properties sold. A sales ratio study released for a given year measures assessed values of the previous year, using sales that occurred in a twelve-month period ending September 30 of the study year. For example, the 1995 ratio study measures sales ratios for the 1994 assessed values of properties that sold between October 1, 1993 and September 30, 1994.

Ratio Estimation Methodology

The state calculates the mean, median and aggregate ratio for each municipality, but the median is typically emphasized. The state reserves the right to use one or both of the other two measures if the median ratio is not justified. The statutory level measured in the study is full and fair value (100%).

In fact that level is often not met, as revaluations have not taken place for several years in many municipalities. There are no minimum standards to be met, either in reference to the assessment level or to assessing uniformity, as measured by the coefficient of dispersion (COD) and price related differential (PRD).

Stratified ratios (by property class) are calculated for those municipalities requesting them (mainly larger-sized municipalities), but only the overall ratio is used for equalization purposes. Except for larger-sized municipalities, all valid sales will be used without stratification. Utilities are typically excluded from sales ratio studies. The state computes both the COD's and the PRD's for its own internal purposes.

Adjustment/Correction of Assessments

The Department of Revenue Administration has no authority to require towns to revalue their properties, nor is there a revaluation cycle. However, the State Board of Tax and Land Appeal can use ratio studies to order towns to revalue properties. Town citizens can also petition this agency or are valuation order, and can use ratio study evidence to support their petitions. Typically three or four towns per year are required to revalue. If a revaluation is undertaken, the town must budget for the full expense of the project.

Appeal of Ratios

Cities and towns may appeal total equalized valuations of individual properties (the value calculated using the ratio) to the State Board of Tax and Land Appeal (this body is also used to appeal local denials of property owner grievances). Further appeal can be made to Superior Court. Only a small number of municipalities have appealed equalized values. Such appeals have pertained only to the state's utility valuations, which although not part of the ratio study, are nevertheless used in the equalization process. There is overall satisfaction with the results of the ratio study, given the meager resources the state has.

Program Costs

It is estimated that the sales ratio Program costs $100,000 annually, involving three employees who are also involved in other duties.

STATE OF NEW JERSEY

Purpose of State's Ratio Study/Frequency Conducted

The state's annual ratio study is used for distribution of state aid, especially for education, and for apportioning shared budgets among the 567 assessing units (towns, boroughs, and cities) within the state's 21 counties. County tax commissions have the option of conducting their own ratio studies.

Data Used

The state uses only sales in its ratio studies. Sales information is drawn from disclosure forms indicating recorded acts of sale, which are filled out by grantees. Assessors complete information regarding inventory, assessed value, and sale validity before sending forms to county tax commissions, which in turn are dispatched to the state. The assessor has the option of making comments about a given sale's validity, but the state makes the final decision to include or reject the sale, based on research by its own field staff. Sales ratios are issued by October 1 of each year, based on a valuation date of the previous January 1. Sales data are drawn from a one-year period that begins six months prior to the valuation date. The ratio study to be released in October 1, 1995 will measure assessed values as of January 1, 1995, based on sales that occurred from July 1, l994 through June 30, l995. Counties are required to consider the results of the ratio study for developing intra-county equalization rates.

Ratio Estimation Methodology

In its ratio study the state uses a two-year weighted mean, which includes sales data from the immediately preceding study period. This is done to ameliorate sudden market changes, which occurred in the l980s. All assessing units within a county are required to assess at the same fraction of full market value: from 20% to 100%, at intervals of 10%. At present, all county tax commissions have adopted a 100% standard. In practice this standard is not met, because the state's ratio study does not require compliance to a standard, nor are municipalities required to periodically reassess properties. The state computes an overall ratio for equalization purposes, but unofficial rates are computed by class and are available for use by county tax commissions for ordering their own reappraisals.

No sampling is used; the universe of valid sales is used. Whenever sales are missing or deficient in a property class, the residential class ratio is used in its place. Field staff investigate inventories of properties in classes that are under-represented. No adjustments are made to sale prices in ratios. The state computes the coefficient of dispersion (COD), where the maximum acceptable level of dispersion is 15%. The price related differential is not calculated.

Adjustments/Correction of Assessments

The state cannot adjust values; however, county tax commissions generally require assessing units in their respective jurisdictions to have ratios indicating at least 85 % of full value, and to have COD's not greater than 15%. Repeated failure to comply can result in the county commission's order for the delinquent assessing unit to reassess all parcels.

Appeal of Ratios

Assessing units have a 45-day period to appeal tentative rates to county tax courts. Assessors may also appeal the other equalization rates in their county. Further appeal can be made to the New Jersey Supreme Court. Last year 12 of 567 assessing units appealed to county tax commissions.

The state is dissatisfied with a lack of a statutory standard for assessing units in its ratio studies, and also its fiscal inability to appraise in property categories that seldom sell. Furthermore, county tax commissions may not necessarily take actions against delinquent municipalities, because of political pressure. In fact some municipalities have been successful in persuading the legislature to grant them moratoriums from reassessment.

Program Costs

The New Jersey Property Division employs 35-40 personnel in its ratio studies program, but their work typically involves other tasks. Costs are unknown.

STATE OF NEW MEXICO

Purpose of State's Ratio Study/Frequency Conducted

The primary purpose of the state's annual ratio study is to measure the soundness of the assessing among the state's 33 county assessing units. State aid distribution does not figure into the ratio study.

Data Used

The state primarily uses sales in the ratio study, but occasionally uses appraisals. Properties that infrequently sell, such as utilities, are not included in the study. In addition to the study the state randomly audits assessing units on their practices. Ratio studies released during a given year reflect sales of the prior calendar year. The valuation dates are changed every two years, so sales used in one year may have a valuation date of January 1 of the prior year. As an example, the ratio report issued in 1995 will measure 1994 sales with a valuation date of January 1, 1993. The ratio report issued in 1996, however, will measure 1995 sales with a valuation date of January 1, 1995.

There is no sales disclosure law in New Mexico. In order to verify terms of sale, county assessors send questionnaires to grantors and grantees. The return rate is only 40%. The state supplements this base with its own sales inquiries to owners. The state also audits sale prices through an investigation of federal income tax data. However, such data are two years old and are "after the fact" as far as ratio studies are concerned. The local assessors screen out unusable sales, based on 12 questions grantees are asked about sales.

Ratio Estimation Methodology

The state uses the median to determine whether or not counties are assessing at the statutory level: one-third of full value for all property types. The state expects the more densely populated areas (such as Albuquerque and Santa Fe) to have ratios within 90%-95% of the statutory requirements, but rural counties frequently fail to comply. Rural areas are permitted more leniency (out of concern that populous counties would object if this relaxed standard for rural counties were made a matter of public policy). Overall ratios are produced, along with separate ratios by property class. In more populous counties, sales are stratified by sale date, neighborhood, and value range. Sample sizes in these select counties vary, but are generally established according to the total number of properties in each stratum. In rural areas sampling is unfeasible -- the state uses all valid sales, and will sometimes supplement the data with as much as three years worth of sales. For assessment uniformity, the state has set a maximum of 30% for the overall coefficient of dispersion. This is easily attainable in urban counties, but questionable in others. The state computes the price related differential for its own internal use.

Adjustment/Correction of Assessments

The state does not have the authority to take action on noncompliant assessing units. However, tax consultants are beginning to use these ratio results as evidence in grievances filed by local taxpayers. The state has a two-year reassessment cycle, with no adjustment required in the off year. The state has a revaluation fund, from which needy counties can obtain loans. Counties also have the option of levying a one percent sales tax that is used as an assessment administration fee.

Appeal of Ratios

There is no formal county appeal of the ratios to the state. Informal discussions with county assessors take place before ratios are publicly released. The state has difficulty with the short reassessment cycle, and would like to change it to three or four years. Also, the lack of a sales disclosure law hinders collection of valid sales. It is expected that the legislature will soon pass a bill that allows disclosure of sale prices for real estate transactions. Approval of the bill by the governor is expected.

Program Costs

This is not known; costs and personnel are intertwined with other activities.

STATE OF NEW YORK

Purpose of State's Ratio Study/Frequency Conducted

New York State conducts two separate ratio studies. The first (and major) study uses state appraisals of a sample of properties and is used for a variety of purposes including estimating full value for purposes of distributing state aid, establishing constitutional tax debt limits, and for allocating the levies of tax districts that are comprised of more than one assessing unit (true of over 75 percent of all taxing districts in the state). Special full value estimates are made for: (1) certain school districts located in Nassau and Suffolk Counties; (2) portions of certain cities or towns within taxing jurisdictions that are school districts, special districts, or villages that are not assessing units, and which are located in two or more municipalities; and (3) municipalities within the state's two county assessing units. At this time, the full value estimation study is conducted biennially.

The second study compares sale prices with assessed values on primarily residential properties and is performed annually for each assessing unit, except in those years in which reassessments are occurring or where the number of valid sales is deemed insufficient. This study is used for two purposes: (1) determining the level of assessment on residential property in each assessing unit, information which may be used by taxpayers to grieve assessments; and (2) testing for equity within municipalities that are seeking financial aid for maintaining equitable assessment practices.

Data Used

The state uses appraisals in its full value estimation study, using sales only indirectly (as appraisal data). Appraised values are compared to assessments on a roll prepared two or three years earlier.

In the last few years, the survey has shifted from a triennial to a biennial project. In addition, there have been "update" surveys that trend the same appraisal data to obtain inter-survey value estimates. Appraisal parcels are selected bases on a stratified random sample of the roll used. The strata used are property type and assessed value interval. About 70,000 appraisals are made in each survey.

In its sales-based ratio study, New York uses one year's worth of sales, except where there are less than five arm's length sales or where a reassessment has occurred, to determine the median residential ratio. The sales data originate from disclosure forms which must be completed and signed by the grantee, grantor, or attorney of record. Copies of the reports are filed with local assessors, county directors of real property tax services, and the state. The state edits and screens the sales data to identify those sales which are unusable for ratio purposes.

Assessors are also required to correct errors and supply information on the transfer reports. If they contest the use of a sale either on the basis of a questionable sale price or conditions of sale, they are required to supply documentation to support such changes.

Ratio Estimation Methodology

By law, each assessing unit must assess all properties at a uniform percentage of full value within, except two special assessing units, which must assess uniformly within each class of property (New York City and Nassau County). However there is no statutorily required assessment level that assessing units must achieve in the study, nor are assessing units required to declare the percentage of value at which they are assessing. The state uses a weighted mean to measure this undeclared level of assessment in its full value estimation study.

Once sample properties have been appraised by state staff, and parcel ratios calculated, overall ratios to reach municipality are generated from this data in a five-step process: (1) find the ratio of assessed value to full value in each assessed value interval; (2) find the ratio of assessed to market value for the combined intervals in each class of property in the study; (3) calculate the estimated ratio for all sampled classes combined; (4) adjust the ratio to the current assessment roll; and (5) determine an overall ratio (equalization rate) after incorporating any excluded property such as utility special franchises, taxable State-owned land, and railroad ceiling properties.

In the sales-based ratio study, the weighted mean was the measure originally adopted to determine the residential ratio for assessment appeals purposes. It was changed to the median in 1992 due to year-to-year instability, particularly in cases where sales were few. As with the full value estimate study, there is no requirement in statute for a given ratio standard to be met. No sampling of sales is done; all valid transactions are used.

As required by statute, the state also measures the quality of local assessment practices found in each full value estimation survey. The coefficient of dispersion (COD) and the price related differential (PRD) are computed as measures of horizontal and vertical equity. The maximum acceptable COD on all property is 15%, and 10% for residential property.

Adjustment/Correction of Assessments

No individual adjustments to assessed values are made within or among property classes based on ratio study results. The state has no explicit statutory authority to order reassessments based on the results of either study, nor is there a mandatory reassessment cycle. However, the assessments are adjusted in aggregate, to a common full value basis, for tax apportionment and aid allocation purposes.

The state began to use the assessment uniformity results of the 1989 survey to enforce the uniform assessment law for those units that are not in compliance with the COD standards. In September 1993, 22 assessing units were cited for noncompliant assessing standards, and formal hearings commenced in 1994. However, in early 1995 the actions were temporarily suspended.

Appeal of Ratios

Assessing units can informally appeal tentative equalization rates used to develop full value estimates. The Office of Real Property Services (ORPS) rules on these appeals. Further appeal can be made to the State Board of Real Property Services, which has the authority set final equalization rates, and any subsequent appeal is through the court system. Assessors may also contest the use of sales used in the RAR, and appeal to the State Board.

In recent years, several problems have been raised in relation to the ratio studies, including: (1) heavy reliance on labor-intensive appraisals, (2) essentially duplicate studies on residential properties, (3) full value estimates that are not current because they are not conducted annually, (4) use of rolls that lag the market valuation date by several years, (5) discrepancies between the valuation standard adopted by municipalities in the initial year of reassessment and the state-determined equalization rate, and (6) year-to-year volatility of the ratios.

Program Costs

The state has recently undergone budgetary and staff cuts that have seriously affected the ratio equalization/survey programs. It is estimated that for the l995-1996 fiscal year the equivalent of approximately 250 full-time employees will be involved with the full value estimation program, with costs of approximately $15 million. Of this amount, approximately $6.5 to $7.0 million is attributable to indirect costs (travel, administration, legal, data processing, etc.). These expenditures reflect a reduction of about $3 million in total costs from the 1994-1995 budget.

STATE OF NORTH CAROLINA

Purpose of State's Ratio Study/Frequency Conducted

The assessing function in the State of North Carolina is performed by the counties. North Carolina statutes require that the Department of Revenue annually conduct sales ratio studies in each county for the purpose of equalizing the assessments of public service companies with the assessments of all other real property classes. The studies are also utilized to determine how various funds will be distributed among the counties.

There is a mandatory eight-year cycle for revaluations in the 100 counties of the state. The state must do an in-depth review of each county's assessment level in the first, fourth and seventh years after a county's revaluation for the purpose of adjusting utility companies' ratios. Some counties voluntarily opt to conduct revaluations in advance of the eight-year requirement.

Data Used

The ratio studies use sales only. They use one calendar year (January to December) from which to select sales. For example, in studying the 1995 assessment rolls, the state compares sales information from 1994 with assessments on the 1995 assessment rolls. There is no disclosure law in most counties of North Carolina. Instead, the county sends questionnaires regarding sale price and conditions of sale to buyers or sellers (along with a stamped, self-addressed envelope) upon receipt of deed transfer information. Some counties encourage attorneys to fill out the questionnaires when they deliver the deeds to the county office. The counties are responsible for filling out ratio study sheets, as well as for data verification. The county may also comment on the validity of a particular sale. The state performs desk audits on sales information and has the final decision to accept or reject data.

Ratio Estimation Methodology

The state selects a random sample of deed book and page numbers from each county. The state projects the number of sales to choose based primarily upon the number used in prior year studies.

County personnel then evaluate sales to check for rejection codes which classify the sales as non arms-length. These sales are omitted from the ratio study. The number may fall from an original sample of 750 sales to about 150 to 400 valid sales. The state office then performs the ratio study calculations.

The ratio estimation methodology uses the median ratio to test the overall level of assessment in a given year. The minimum acceptable median ratio is 95%. A coefficient of dispersion (COD) is calculated but is not used to trigger a revaluation. If there is a high COD, the state reviews the study for any invalid data. The number which constitutes a "high" COD varies depending on the number of years since the county's last revaluation.

Within a county, properties may be stratified by township or by property class only if irregularities are suspected, such as a high COD or evidence of wide differences in ratios by class or township. There is no official minimum level of sales required, although 200 sales are desired. However, in smaller counties, there may be as few as 35 arms-length transactions during the year. There is no special treatment of large valuable properties nor are there any adjustments for time trends.

Adjustment/Correction of Assessments

There are two cases of aggregate level adjustments made to values as a result of the ratio studies. One case involves railroad assessments, while the other relates to public utility assessments. For railroads, a median ratio of less than 95% in any year causes an automatic reduction in their tax levies equal to the difference the between median ratio and 100% For public utilities, if a county has a median ratio less than 90% in the first, fourth, or seventh year after its revaluation, the state requires the county to give the utility companies a reduction in their tax levies. The formula for this reduction is similar to the one used for railroad companies, but is modified by the inclusion of certain other variables (e.g., the level of personal property). The utility company reduction continues until the next target ratio study year.

Appeal of Ratios

The counties may appeal their ratio study findings to the state Property Tax Commission and then to the Court of Appeals. Such appeals are very infrequent. Utility companies have hired two private companies to do their own ratio study. The state works with these companies to compare data for inaccuracies. This year, 18 counties are being given an adjustment for utility companies.

The state official interviewed believes that the state and counties are generally satisfied with the results of the ratio study methodology. However, there was the concern that insufficient sales may distort the ratio results. If a county has 10 townships but six of them have low sales, the ratio reflects only the four towns with sufficient sales. A better method may be to include appraisals in these cases or to weigh the study by the number of parcels in each township.

Program Costs

The ratio studies are monitored by the Property Tax Division of the Department of Revenue. The exact cost of the study is not known. It was estimated that 80% of the work involved in the studies is performed by county personnel. There are approximately three state employees involved in monitoring the studies.

STATE OF NORTH DAKOTA

Purpose of State's Ratio Study/Frequency Conducted

The assessing function in the State of North Dakota is performed by cities and townships. There are about 1800 assessing units in the state. The state conducts annual ratio studies of assessment rolls for the purpose of advising local officials on the changes needed on their assessment roll in order to be in compliance with statutory requirements. There is no distribution of funds which are based on the results of the ratio studies. Some cities and townships do their own ratio studies using the same database but the state study is the only official one.

Data Used

The ratio studies use sales supplemented with appraisals when the sample size is too small. Each ratio study ordinarily uses one calendar year (January to December) from which to select sales. For example, in studying the 1995 assessment rolls, the state compares sales information from 1994 with assessments set in 1994 for the 1995 rolls. When there are insufficient sales in a given year, up to three additional years of sales may be selected. There is a disclosure law in North Dakota. When property changes hands, the grantees have two options. They may put the sale price on the face of the deed, making it public information, or they may provide the sale price to the state board in a statement of full consideration, rendering it confidential information. The county directors of tax equalization are responsible for data verification. The state assumes that the county data verification is accurate.

Ratio Estimation Methodology

The ratio estimation methodology calculates a mean and a weighted mean, but primarily uses the median to test whether the level of assessment in a municipality falls near the statutory requirement of 100% of true value for the residential and commercial property classes. The acceptable range for these classes is between 95% and 105%. Agricultural property is valued separately and is based upon land use. A coefficient of dispersion is calculated, but is not used to trigger a revaluation. A price related differential is also calculated.

The minimum number of sales for each class is 30 or 10% of the properties in that class, whichever is lower. There is no weighting of sales and all usable sales are included. Certain classes have a problem with insufficient sales, especially in the commercial class. When there is a shortage in this class, appraisals are used to supplement sales. No attempt is made to establish an unbiased sample. There is no special treatment of large valuable properties nor are there any adjustments for time trends. Adjustments are made to sale prices to remove personal property and for agricultural property, to remove the value of certain improvements such as buildings, which are not subject to assessment. Additionally, outstanding special assessments added to the sale price by municipalities, such as those for streets, water and sewer, because they were assumed by the grantee, are subtracted from the sale price.

Adjustment/Correction of Assessments

If a calculated median ratio is outside the acceptable range, adjustment to the assessment roll is ordered by the State Board of Equalization. The state first advises local officials that changes are needed on their assessment rolls to comply with the statutory ratio requirements. If the local government does not comply, the State Tax Commissioner makes a recommendation to the State Board of Equalization that such changes are needed. The Board then orders the local government to adjust its assessment roll as needed. This is done by applying the appropriate factor to the entire roll, rather than by conducting a revaluation. There is neither a mandatory revaluation cycle nor state incentives to perform a revaluation.

Appeal of Ratios

The local assessing units may appeal to the state to eliminate some sales; there is no other appeal mechanism for local governments. Concerning the level of satisfaction with the ratio study methodology, the state official interviewed noted that there is some concern about insufficient sales. Until 1972, the state did appraisals to supplement sales. When the local assessors disputed the state-determined values, the appraisal function was turned over to the county directors. Now, many of these appraisals are exactly the same as the values arrived at by local assessors. The state official questions the objectivity of these values, but noted there are insufficient means to dispute them.

Program Costs

The ratio studies are monitored by the Property Tax Division of the Office of the State Tax Commissioner. The approximate cost of the study is $30,000. It was estimated that 90% of the work involved in the studies is performed by county personnel. There are two or three state employees involved in the ratio studies.

STATE OF OHIO

Purpose of State's Ratio Study/Frequency Conducted

The primary purpose of the state's ratio study is for state aid distribution, chiefly to school districts. It is also used for insuring that assessments are uniform among the 88 counties/assessing units. The study is conducted triennially on a staggered cycle.

Data Used

Sales are used for all property categories. Appraisals were once used for property classes lacking sales, but because of the staff reductions this is no longer possible. Sales used for a given study reflect a three-year period prior to the year the study is issued. The study released in 1995 will thus represent sales collected between 1992 and 1994, valued to January 1, 1995. The valuation year is the year the county assessing unit either undergoes a six-year revaluation and reinventory of property, or the year of the interim update (done during the third year of the revaluation cycle). Grantees are required to fill out an affidavit of conveyance, which is recorded by the county. State staff collects and screens these sales. Assessors are not involved in sales editing/verification, but the state issues lists of sales used in the "ratio study in progress" every six months. For every listing, assessors have the opportunity to comment on the validity of published sales. Assessors thus have an opportunity to examine the database for the triennial study as it develops.

Ratio Estimation Methodology

The state uses all three measures of central tendency (mean, dollar weighted mean, and median), with more emphasis on the weighted mean. Ratios are developed for each of four classes: residential, agricultural, industrial, and commercial. Assessing units are required to have ratios within 10% of the statutory assessment level -- 35% of fair market value; therefore, ratios must fall between 0.315 and 0.385. Data are not sampled, and every valid sale is used. The greatest emphasis is placed on agricultural and residential sales, and if a trend is found, the study focuses on the most recent three years of data. The coefficient of dispersion and price related differential are both computed, but only for informational purposes.

Adjustment/Correction of Assessments

The state has the authority to adjust aggregate values in each class, and by geographic area in larger counties. The state is less likely to adjust industrial and commercial values, since sales are scarce except in the most populous counties. The state requires that each county conduct a full-scale revaluation of inventory every six years, with an update in the third year. Counties budget for these reassessments through countywide property tax levies.

Appeal of Ratios

Only assessing units may appeal ratios. Additionally, they may informally appeal before the release of the official results. The ratio study is continuously being updated and computed within the triennial period, and consequently county assessors can informally comment on sales used in the study as it develops. Largely because of this, only two county assessing units have appealed ratio study results in 15 years. The ratio study is generally accepted, and state believes that its system, despite lack of appraisals and industrial sales, works well in conjunction with the reassessment cycle.

Program Costs

It is estimated that the entire Property Tax Division budget is between $1,000,000 and $2,000,000 annually. Of the 32 employees in the Division, 14 are involved in the tax equalization program.

STATE OF OKLAHOMA

Purpose of State's Ratio Study/Frequency Conducted

The assessing function in the State of Oklahoma is performed at the county level. Each year the state conducts ratio studies on the 77 counties' assessment rolls for the purpose of satisfying three statutory provisions: (1) to determine whether each county is assessing within the permissible range of market value, (2) to test whether all property classes within a county are valued uniformly and, (3) to determine if all ratios within a class are equitable.

Data Used

The ratio studies use a combination of sales and appraisals. There are no disclosure or recordation laws. Sales information is obtained from deeds which must be recorded at the county clerks' offices. County personnel send sales confirmation letters to buyers or sellers of all sold properties. The county must qualify each one according to the conditions of sale and remove non-arms length sales from the ratio process. State field personnel review a sample of sales to verify the validity of each county's procedures and make final decisions regarding the acceptance or rejection of sales. The county gets two opportunities to disagree with the final list. The reasons for objecting must be verified.

There is a twelve-month period of sales data used in a ratio study. For example, 1995 assessed values are compared with sales occurring between January 1, 1994 and December 31, 1994. The minimum sample size is about 1% of the number of parcels on the roll. Appraisals are required to be done by state appraisers whenever there are insufficient sales in a class. In addition to the ratio study, the state audits assessment rolls. It compares the assessed values of a sample of properties on two consecutive rolls. If there are large disparities, other parcels are checked to see whether inequities might exist, such as whether counties are only reappraising recently sold parcels or discriminating against certain neighborhoods.

Ratio Estimation Methodology

Oklahoma calculates the median to test whether the level of assessment is within the statutory requirement of between 11% and 14% of market value for each of the three class of property: residential, commercial and agricultural. There can be no more than a 1½% difference between the medians of each property class. If there is an insufficient number of sales in a class, the state supplements that sample with appraisals. There is no special treatment accorded to large high-value properties. A coefficient of dispersion is used to test whether each property class has greater than a 20% average deviation from the median ratio.

Adjustment/Correction of Assessments

Counties are required to update their assessment rolls every year and must visit each property at least once within each four-year period. The state sends a review notice to each county every year based upon its ratio study findings. If a property class ratio is out of compliance, the county's roll is rejected. The budgetary process is stopped until the roll is approved. County staff may not receive their wages until the roll is in compliance. There are financial incentives given to counties for a portion of their revaluation costs, graded according to need.

Appeal of Ratios

The appeal mechanism for counties begins with two opportunities for county personnel to meet with the Ad Valorem Division of the State Tax Commission to review contested sales. Quite a few appeals are resolved at this level. Counties appealing the state's finding of non-compliance are given a hearing before the State Board of Equalization.

Program Costs

The Oklahoma official interviewed could not make an estimate of the state's cost of conducting the ratio study. There are about 25 state office personnel and 12 state field staff people involved in the ratio study.

STATE OF OREGON

Purpose of State's Ratio Study/Frequency Conducted

The assessing function in the State of Oregon is performed by each of the 36 counties in the state. Unlike the practice in most other states, the counties conduct their own annual ratio studies of their assessment rolls for the purpose of adjusting the assessments to the statutory level of 100% of true value.

According to a state official, at the present time, the only state role is to establish the procedures for carrying out the studies and do some minimal auditing of the counties' practices. The state generally accepts the counties' results. Oregon is now in the process of setting up a program to become more involved in the review of the data used in the studies. A case was recently won by a railroad company which appealed its assessment. The state was not able to convince the court that the counties' ratio studies were sufficiently objective in monitoring their own assessments. The state's proposed new involvement would be primarily for the purpose of being prepared for such litigation.

Data Used

The county ratio studies use sales as their indicator of market value. Only very rarely do they supplement with appraisals. In their ratio studies, the counties follow a sales year from May 1 to April 30 and match the prices of the usable sales, trended to July 1, to their assessed values as of July 1 on the assessment roll. When there are insufficient sales available, a county may choose to look at two years of sales data instead of one.

There is a disclosure law in Oregon. The deed must show the dollar consideration when it is filed after a sale. The counties send a questionnaire or telephone one of the parties involved in the sale to verify the conditions of sale for all non-residential sales and for some residential sales with "outlier" ratios. County assessors supply assessment information for the sold parcels.

It is the responsibility of the counties to check the sales information and to determine if there are reasons for rejecting a sale. As stated, at present, the state staff does some minimal checking of assessments supplied by the counties. The state is considering the undertaking of more conclusive audits and becoming involved in the process of confirming sales. It has submitted a plan to a consultant from the International Association of Assessing Officers (IAAO), who has suggested that the state review the counties' questionnaires and make some additional inquiries of its own.

Ratio Estimation Methodology

In the counties' ratio estimation methodology, the mean, median and weighted mean are all calculated to test whether the overall level of assessment for all property classes is at the statutory requirement of 100% of true value. Each county then chooses which statistic is the best indicator for the ratio study. (The IAAO consultant has recommended the use of the median as the preferred measure of central tendency.)

Both a coefficient of dispersion and an average deviation are calculated. However, there is no statutory maximum level of dispersion. Other statistics calculated include a coefficient of variation and frequencies of distribution. Additionally, a list of sales by date of sale is established for the purpose of trending. Within a county, properties are stratified by property type. A sample size of 5% of the parcels in a property class is preferred, but is not always attainable. Instead, if a class such as rural residential has insufficient sales, the ratio for the residential class may be applied to these assessments.

Adjustment/Correction of Assessments

As a result of the counties' studies, when an estimated class ratio is not at 100%, adjustments may be made to all parcels in the class to bring the assessments to full value. The normal county revaluation cycle is once every six years. Not all counties have adhered to this schedule. The state is considering encouraging greater compliance with this statute. For the past four years, legislation has required that the state review four counties per year. If their ratios are not at 100%, the state has the option to withhold grant money. This option has rarely been used, especially if the county submits a good plan to correct the problem.

Appeal of Ratios

Counties have no reason to appeal ratio findings to any other level of government since it is at their level where the ratios are calculated.

The state official noted that, as a result of taxpayer dissatisfaction, there has been a property tax limitation imposed upon local governments since 1990. The state must make up the difference in revenues not attainable through property taxes. In spite of the recent tax ceiling, individual taxpayers are often upset when a dramatic increase in the value of their property results in an increase in their property tax bills. The state official noted that for residential property the system works fairly well, but this is not the case with regard to commercial property.

Program Costs

Since the ratio studies are conducted at the county level, virtually the entire cost of the study is carried by the counties. The exact cost of the study could not be estimated by the person interviewed. If additional monitoring is undertaken by the state, the amount of state funding will be increased accordingly.

STATE OF PENNSYLVANIA

Purpose of State's Ratio Study/Frequency Conducted

The assessing function in the State of Pennsylvania is performed by its 67 counties. The state conducts annual ratio studies of county assessment rolls for two purposes. The initial purpose has been to estimate aggregate market values by property type based on aggregate assessments for school tax apportionment. In 1982, enabling legislation provided the State Tax Equalization Board the second function of determining common level ratios (ratios of assessment to market value) within each county.

Data Used

The ratio studies use sales only. Each ratio study uses one year of sales. For example, in studying the 1994 assessment rolls, the state utilizes sales information from January 1,1994 to December 31, 1994. These study results will be ready for publication in June, 1995. All counties must supply sales information to the state. County assessors determine which sales are usable for ratio studies. The state reimburses the counties twenty cents per sale to aid in processing costs. State staff checks a sample of the sales for verification of ratio reliability.

Ratio Estimation Methodology

The ratio estimation methodology used in Pennsylvania calculates the mean as an estimate of the level of assessing because this measure gives each property a weight of one regardless of its full value. This is considered more reasonable than a weighted mean which would give high-valued properties more weight in the calculation. A normal distribution is assumed although there is no attempt to establish a data set that is representative of the parcels on the roll. All valid sales are included. There is no minimum number of sales required for an acceptable sample size. To determine the mean, a two step procedure is used in order to prevent distortions caused by "outlier" ratios. First, all sales ratios are included to estimate an initial mean. This mean is multiplied by four to set a new upper limit for the ratios allowed in the final calculation. Likewise, the mean is then divided by four to establish a new lower limit for the ratios allowed in the final calculation. A final mean is then calculated after eliminating all ratios outside the allowable range.

There is no statewide statutory ratio. Larger assessing jurisdictions may assess up to 100% of full value, but smaller counties may not assess at greater than 75% of full value. There are no other statistics calculated in the ratio studies. Properties are stratified by class and ratios are calculated for several classes only when creating an aggregate market value by property type for state aid to schools. There are no class ratios developed for the purpose of determining the common level ratio.

Adjustment/Correction of Assessments

According to the state official interviewed, the state is the primary repository for county data, but has little enforcement capability. It has no jurisdiction to adjust any unusual aggregate or parcel values revealed by its ratio studies. Neither are there any statutory revaluation requirements. The state reports the findings of its ratio studies to each of the counties, but has no authority to enforce adjustments or revaluations for non-compliance.

Appeal of Ratios

Counties may appeal informally to the State Tax Equalization Board if they dispute the state's ratio findings. Additionally, a formal appeal can be heard initially by a county court and, if unsuccessful, by a state court. Because county courts historically have not enforced revaluations, counties rarely appeal to the state court. Only in the last few years have there been any judgments ordering revaluations.

Program Costs

The cost of the ratio study was estimated to be about $1.3 million. Most of this amount is for personnel salaries.

STATE OF RHODE ISLAND

Purpose of State's Ratio Study/Frequency Conducted

The purpose of the state's ratio study is for distributing state aid for educational purposes to Rhode Island's cities and towns. The results of the sales ratio studies used are sent to local assessors in the 39 town and city units in the state. Ratio studies are conducted annually.

Data Used

Both sales and appraisals are used in the state's ratio study. However only the sales data are used to determine the level of assessing. Appraisal data is incorporated into the study for state aid purposes only. The current year ratio study is used for assessor information purposes and includes sales of the previous calendar year. For state aid purposes the ratio study includes sales data over a three-year period. Sales data are obtained from sales abstract cards filled out by assessors and then sent to the state for review and compilation. Assessors make comments on sales it they feel they are of questionable use. The state is the final reviewer of sales for accuracy and arm's-length characteristics. In addition, the state checks "outlier" ratios with assessors for exclusion from the study.

Ratio Estimation Methodology

The state uses both the median and the weighted mean, although greater emphasis is placed on the median. There are no minimum standards of assessment compliance -- the ratio is not used to determine whether or not assessing units are in compliance. Four class ratios are computed along with one composite ratio. At least five sales per class are used in each town, supplemented by appraisals if necessary: 200 of these sales are randomly chosen statewide for appraisal each year. Sales and appraisals are representative to the extent that they are drawn from the combination of property classes that comprise at least 80% or more of the total value in a municipality, and are in proportion to the aggregate value comprised by each class. The state will exclude valid sales having anomalous assessments. The state uses the coefficient of dispersion to measure the average deviation, and there is no minimum required standard for this measure. The price related differential is not computed.

Adjustment/Correction of Assessments

Values are not adjusted. However, assessing units are required to reassess every 10 years to the statutory requirement of full and fair cash value, or a fraction thereof, not exceeding 100%. No adjustment is required between reappraisals, so in any one year many assessing units have rolls that do not approximate the standard adopted in the initial year of reassessment.

Appeal of Ratios

Ratios studies for assessment purposes are only informational, so appeal of these results are moot. However, property owners may use ratio study results as evidence in assessment appeals. School districts cannot contest ratios as such, but they can contest the constitutionality of the formula used for state aid. At present, school districts in three towns have taken this matter to the State Supreme Court. Overall, there has not been any strong amount of discontent with state procedure, mainly because there is no discernible standard against which to measure the quality of local assessing.

Program Costs

It is estimated that the ratio program costs approximately $300,000 annually, and involves five people. Personnel costs are primarily for appraisals.

STATE OF SOUTH CAROLINA

Purpose of State's Ratio Study/Frequency Conducted

The purposes of the state's ratio study are for state aid distribution and for monitoring assessment practices among its 46 county assessing units. The state conducts the study annually. While some counties conduct their own separate studies, they have no force of law.

Data Used

The state uses both sales and appraisals in ratio studies. They are categorized into three categories: residential, agricultural, and all other. Ratio studies reflect sales and appraisals collected in the previous year. The ratio study issued in 1995 thus reflects sales and appraisals collected in 1994. Sales are obtained from disclosure forms that are sent by local assessors to grantees. When returned to assessors, assessors mark categories indicating if they are invalid sales for ratio study purposes. Copies are then dispatched to the state.

Ratio Estimation Methodology

The state uses the median to compute overall and property class ratios (residential, agricultural, all other). Assessing units are in compliance if the median ratio is between 80% and 105% of market value. The state does not sample for sales, but instead uses all valid sales. Where sales are sufficient, the state stratifies sales into several classes of property, and also supplements with appraisals to make tests as representative as possible. There are no adjustments for time. Instead of the coefficient of dispersion the state uses the index of inequality to measure assessment uniformity. Counties are expected to have an index below 15%. The state does not compute the price related differential.

Adjustment/Correction of Assessments

Counties not in compliance with assessment standards are ordered to reassess all properties within two years. Although there has been no recent instance of a county refusing to reassess, such inaction can result in a 20% loss of state aid and a reduction in the level of personalty appraisal for taxation purposes. Legislation passed and signed by the Governor in June 1995 mandates that counties reappraise all property every five years.

Appeal of Ratios

Counties have no appeal on final ratios. However, they may seek informal hearings during the ratio process. At this informal stage, approximately 10% of the counties have questions about the data used. In general, counties are pleased with process, especially since the index of inequality does not consider the first or last quartiles of data. The state is generally satisfied with the ratio program, particularly with the recent requirements for counties to periodically reassess.

Program Costs

Program costs could not be segregated from overall Property Tax Division costs. At most, only two or three employees are devoted to ratio studies on a full-time basis. Personnel involved in sales and appraisals collection are also involved in other responsibilities throughout the year. The estimated cost of supplement appraisals is $25 per parcel.

STATE OF SOUTH DAKOTA

Purpose of State's Ratio Study/Frequency Conducted

The purposes of the state's ratio study are for: (1) state aid distribution, (2) monitoring compliance to assessing standards among the county assessing units, and (3) state equalization purposes. Ratio studies are conducted annually in the state's 66 counties.

Data Used

Only sales are used in the ratio study. Such data are obtained from certificates that are filed with county assessor's office. The assessor fills in missing information and provides comments on sales, as necessary. The state then audits these sales, using two years worth of sales. The ratio study published in 1995 will draw upon sales that occurred between November 1, 1992 and October 31, 1994.

Ratio Estimation Methodology

The state uses the median to determine whether counties are assessing between 85% and 100% of the statutory level of assessment (100% of true and full value in money). One overall ratio is computed, but the ratio is adjusted for the school aid formulation. The state uses all arms-length sales, and in rural counties the absolute minimum is 15 valid sales. In many instances sales of prior years are used to augment the minimum. Additionally, sales of similar property classes from adjacent counties are used. The state uniformity standard is a coefficient of dispersion of 25% or less for horizontal equity, and a price related differential standard of 0.95 -1.05 for vertical equity. These two measures are for advisory and internal use only.

Adjustment/Correction of Assessments

Counties not in compliance with ratio standards are required to submit a plan for moving into compliance. Failure to take action results in the loss of all funding from a statewide personal property replacement fund, recently created to compensate counties for the loss of revenues resulting from legislation revoking county taxation of personalty. There are currently no provisions in statute for mandatory periodic revaluation. The state provides no financial assistance to counties during revaluation.

Appeal of Ratios

Counties may appeal ratio results to the Office of Hearing Examination, where it is heard by an administrative judge. Appeals have been scarce since the program was implemented in the past two years. Overall, the program has been cost-effective and has been acceptable both to county governments and to the public at large.

Program Costs

It is estimated that the ratio program costs $100,000 annually. It involves two full-time employees (one quarter of the staff in the Property Tax Division).

STATE OF TENNESSEE

Purpose of State's Ratio Study/Frequency Conducted

The purpose of the state's ratio study is to: (1) equalize assessments for school funding, (2) equalize assessments for grievance procedures, (3) compute tax relief for low-income elderly and disabled citizens, (4) update values, if necessary, in counties in between appraisal years, (5) equalize centrally assessed utility assessments, and (6) equalize personal property assessments. For most counties, the ratio study is conducted in the second and fifth years of the six-year reappraisal cycle. Also, a separate study is conducted in the third year of the cycle for updating values. Since reappraisal cycles are staggered, different counties are scheduled for ratio studies in different years -- 85 of the state's 95 counties have adopted this cycle. In the 10 other counties that use a four-year reappraisal cycle, one study is conducted in the second year for equalization purposes. However, no ratio study is conducted in these counties for update purposes.

Data Used

Sales of all property types are used exclusively in the ratio studies. The study period reflected in a ratio report is the calendar year preceding the report. For example, the sales data contained in ratio studies issued in 1995 are taken from 1994. Tennessee does not have a sales disclosure law, so assessors attempt to verify through mailed letter questionnaires, telephone calls, and field verification. Information is electronically transmitted to the state, with allowance for rejection. State procedures require that an attempt be made to verify all sales.

Ratio Estimation Methodology

The state uses the median in the ratio studies that examine the level of assessment for equalization purposes. However, the dollar-weighted mean is used in update studies, and is applied individually by property class or subgroup. The update study standard requires that counties assess between 90% and 110% of full market appraised value (without regard to the varying assessment levels in the state's classified assessment system). The state does not sample, as the quantity of verified sales is often small. Generally, the state attempts to use at least 30 sales per class or subgroup, which is sometimes difficult for commercial and farm sales in the more rural counties. The state computes the coefficient of dispersion and also the price related differential as measures of horizontal and vertical equity for informational purposes, using criteria established by the International Association of Assessing Officers for their normally accepted standards.

Adjustment/Correction of Assessments

The state has the authority to adjust parcels in a given class by factors that adjust them to market value. No adjustments are made in the equalization studies. Counties are eligible for grants on a per parcel basis for reappraisals, whether on a four- or six-year revaluation cycle.

Appeal of Ratios

Appeals by the assessor can be made to the State Board of Equalization. Public hearings can be requested for the factors used, but they are seldom requested. Since the ratio study results do not involve penalties against the assessing units, and because assessors are generally kept abreast of ratio studies in progress, assessor appeals seldom occur. Despite the low appeal rate, the state is dissatisfied with the convoluted scheduling of equalization and update ratio studies. There is considerable effort expended to monitor sales, which is a difficult task, since there is no sales disclosure law. The state would like to weight sales by property class, but there are often too few sales to validly do so.

Program Costs

No cost information on the ratio study program is available. At present, a shortage of staff precludes the possibility of supplementing sales with appraisals.

STATE OF TEXAS

Purpose of State's Ratio Study/Frequency Conducted

The primary purpose of the state's ratio study is to help determine the distribution of state funds to school districts. The study's secondary purpose is to test the level of assessment in each of the 254 counties/appraisal districts. Ratio studies are conducted annually by the state, and while some of the counties conduct their own studies to test assessment uniformity.

Data Used

Both sales and appraisals in all property categories are used in the study. The state also performs audits of assessing procedures and practices used by appraisal districts to determine the value of properties within their jurisdictions. Ratio studies use sales and appraisal data collected over a 15-month period, from January 1 through March 31 of the next year. For example, the ratio study released in February 1995 obtained sales and appraisal data in the period from January 1993 through March 1994. Texas has no sales disclosure law, so sales information is drawn from the following sources: responses to letters sent to grantees from the state and from appraisal districts, other governmental entities, and tax consultants representing clients grieving local assessments.

Ratio Estimation Methodology

The state uses the mean, weighted by value in each property class, to measure the level of assessment. The statutory assessment level is 100% of its appraised value. The results of the study are used by the Texas Education Agency to help determine the distribution of funds to school districts.

Sample size varies by appraisal district, based on the target margin of error and variability in each property category of the prior study year. The confidence level is 95% and the target margin of error varies from school district to school district, depending on the amount of value. Field staff conduct "property analysis adjustment" tests to determine whether there is variability between assessed value ratios of unsold properties in a class to those in recently sold properties in each assessing school district. If the difference is large, then greater sampling will be done, with supplemental appraisals or sales occurring after the date of certification.

The state also studies assessment uniformity in all appraisal districts. Under Section 5.12 of the Property Tax Code, the Comptroller must audit the performance of an appraisal district if one or more of the following conditions exist in both of two consecutive annual studies conducted by the Comptroller: (1) the overall median level of appraisal for all property in the district is less than 0.75, (2) the coefficient of dispersion around the overall median level of properties used to determine the overall median level of appraisal for all property in the district exceeds .30, or (3) the difference between the median levels of appraisal for any two classes of property in the district is more than .45.

Adjustment/Correction of Assessments

Beyond the authority to audit assessment practices, the state has no authority to adjust values, nor can it impose penalties on appraisal districts that are out of compliance with ratio study standards. However, the level of assessment, as determined in the ratio study, helps to determine the amount of state funding sent to each school district. Officials from these taxing districts within an appraisal district are seated on the appraisal district's board of directors, which have budgetary control over their appraisal districts. Appraisal districts are required by law to reappraise every three years. Reappraisal costs must be financed locally.

Appeal of Ratios

Appraisal districts, school districts, and taxpayers who have a tax liability of $100,000 in a school district have 40 days in which to file an appeal of the ratio study. Only school districts can continue their appeal to district court. Most appeals pertain to sales used in the study. Appeals are made to the Comptroller of Public Accounts within the Property Tax Division, where cases are heard by administrative judges.

Program Costs

No cost or employment information regarding the ratio program can be segregated from the overall Property Tax Division budget or employment roster. The Property Tax Division has 80 employees and a budget of approximately $4 million.

STATE OF UTAH

Purpose of State's Ratio Study/Frequency Conducted

The primary purpose of the state's ratio study is for state aid distribution, especially to school districts. A secondary purpose of the study, by court order, is to insure uniformity of assessments among classes, both among and within the 29 county assessing units, particularly for 4-R (Railroad Reorganization and Regulatory Relief Act) purposes. Ratio studies are conducted annually.

Data Used

Sales are used on four classes of property: (1) primary residential, (2) second home residential, (3) vacant, and (4) commercial. Appraisals are obtained only on primary residential property, predominantly in rural areas where sales are scarce. Because the state has no sales disclosure law, it sends out questionnaires to grantees. A second questionnaire is mailed if no response is made to the original mailing. Copies of returned questionnaires are sent to county assessors. Field staff meets with assessors to discuss questionable sales. The process is more streamlined in Salt Lake County, because the state uses sales already verified by the county for its own ratio study. Furthermore, the state can use the Multiple Listing Service to obtain additional residential sales if necessary. The state would like to extend this approach to other urban counties whenever possible.

Ratio studies have generally drawn on 18 months of data. For example, data drawn from the last half of l993 and all of l994 are used in the l995 study. However the market has been heavily active in the state, and the state wants to reduce the study period to 12 months. If possible, the state would even use a six-month period in some areas, because Utah has undergone considerable appreciation in real estate values in the past five years. In all instances, sales are time-adjusted forward to January 1 of the year the study is issued.

Ratio Estimation Methodology

The state uses the dollar-weighted mean (sum of assessed values/sum of sale prices or appraised values) in each of the four property classes to determine whether or not counties are assessing between 90% and 100% of full market value. The state does not sample, but uses a minimum of 29 sales and appraisals per class per county. Smaller threshold sizes may be used it the data set comprises at least ten percent of the value of the class or subclass. In larger counties, data are stratified by square footage, age, and geographical area. The state uses the Mann-Whitney test to determine whether a difference in the means of the property class data sets within a county are statistically significant. The state can also audit property records and procedures on classes of property for which sales data are scarce.

The state calculates the coefficient of dispersion (COD) or coefficient of variation (COV) (if normal distribution exists), with different standards for urban and rural counties. In urban counties, the maximum acceptable COD is 15% for primary residential and commercial classes, and 20% for vacant land and secondary residential property. In rural counties, the maximum acceptable values are 20% and 25% respectively. The acceptable limit for the COV is 1.25 times the COD. Price related differentials are calculated, but only for informational purposes.

Adjustment/Correction of Assessments

The state can order county assessing units to adjust or factor their assessment rates so that assessments are in conformance with the minimum COD/COV requirements in ratio studies. This factoring may be applied to property classes or geographical areas. Failure to take action results in factor implementation by the state, the costs of which are charged to the offending county.

As of January 1, 1994 each county assessor is required to annually update property values, based on current market data. The county assessor is also required to give a detailed review of property characteristics for each parcel every five years. The first annual update is to be completed by July 1, 1998. The state provides technical assistance to counties when updating, and will provide one-half of the costs for special requests for appraisals from rural counties. County assessors have formed a Multicounty Appraisal Trust, a consortium of county assessing units that coordinates reassessment activity. Counties pay into this fund on a regular basis.

Appeal of Ratios

If counties contest the factoring or corrective action order, they have 15 days to appeal the order to the Tax Commission. Additionally, the issues of dispute can be mediated by the Multicounty Appraisal Trust. Following the hearing, the Tax Commissioner may alter the order either by changing factors or through other corrective action. Most disputes center around data issues, not the authority of the state to order corrective action or adjustments to values. Most of the assessing units are satisfied with the procedure. Minor points of dispute relate to the detailed substrata used in urban counties, the timing of the release of the ratio results, and adjustment orders issued close to election days.

Program Costs

No costs are available for the ratio study. There are seven employees involved in the ratio study, only two of which are dedicated full-time to the program.

STATE OF VERMONT

Purpose of State's Ratio Study/Frequency Conducted

The primary purpose of the state's ratio study is for state aid distribution, especially to school districts. It is also used for apportioning county taxes, but this is relatively insignificant. The state has recently reverted to a biennial study period for its ratio studies of all 262 school districts.

Data Used

Sales are used in all real property categories except utilities. State appraisals are used if there are less than three sales per category, and if such a category of property comprises 5% or more of the total listed (assessed) value in the municipality. The total number of sales and appraisals in each ratio study must comprise at least 4% of the total property count in each municipality. The biennial study conducted this year (and published in January 1996) will represent sales and appraisals collected between April 1, 1993 and March 31, 1995. In alternate years, the state provides school districts with annual statement of fair market value, which is essentially what is published in the prior year's ratio study.

Sales are drawn from transfer reports filled out by grantees and filed with the deed. One copy of the report is sent to the lister (comparable to an assessor), who fills out information about property characteristics. Listers may recommend rejection of sales it one of twelve reasons indicated by the state is present. State regional advisors meet with listers to discuss instances where large numbers of sales are rejected.

Ratio Estimation Methodology

The statutory level of assessment is 100% of fair market value. The state uses three measures of central tendency in its ratio studies: the median, mean and aggregate mean (sum of listed value/sum of sale price); although the greatest emphasis is placed on the weighted mean. For state aid distribution purposes, the ratio must be at least 80% of full market value. The state computes a ratio for each of the 15 property categories, as well as one overall ratio. The overall ratio is used for state aid purposes. The state does not sample, but instead uses the sales selection criteria mentioned in the section on data collection above. To make observations in the study as representative as possible, the selection of the state's supplemental appraisals (see

Data Used

, above) is based on how closely the property's listed value approximates the average listed value of the class. No time or other adjustments are made to the ratio studies. The state computes the coefficient of dispersion (COD) and the price related differential, but these measures are subordinate to the over-all ratio.

Adjustment/Correction of Assessments

The state has no authority to adjust values, nor can it impose penalties on assessing units. However, listing units that have overall market value ratios below 80% will have state aid reduced 1% for every 4% the ratio is less than 80%. Listing units can avoid loss of state aid for five years after any year in which the overall ratio is 95% or higher, if the COD is also below 20%. There is no mandatory reassessment cycle.

Appeal of Ratios

Listers have a 30-day period to review tentative ratios with state advisors. Upon approval of The Property Tax Director, the ratios can be amended. If they are still not satisfied, units may then appeal to Valuation Appeal Board. In the past year, 44 of 262 school districts have appealed fair market estimates to the Director. Very few cases have continued to the Valuation Appeal Board. The system is generally accepted, although some listing units prefer to rely on the median of the ratio study. Some also object to what they consider to be arbitrary trimming of "outlier" sales of some assessing units.

Program Costs

No costs are available on the ratio study program. The state uses the equivalent of three full-time employees on ratio studies, even though no one is employed full time in the program.

STATE OF VIRGINIA

Purpose of State's Ratio Study/Frequency Conducted

In Virginia, property assessment is performed by counties and cities. By state law, except for agricultural property, all property must be assessed at 100% of fair market value. Land-use values are used in assessing agricultural property. In general, counties are required to revalue every four years and cities are required to revalue every two years. Counties and cities may opt to assess on a more frequent basis. Of Virginia's 35 cities and 95 counties, 42 localities assess on either an annual or biennial basis. The State of Virginia regularly evaluates local assessment practices through assessment ratio studies.

The ratio study, conducted by the Virginia Department of Revenue, serves three purposes: the apportionment of state education aid, the apportionment of assessments of public utility property that crosses municipal boundaries, and the monitoring of assessor performance. Many counties and cities also do their own ratio studies, but these studies are not published. The state's ratio study results for six categories of property are published annually.

Data Used

For the ratio study, sales data is used for all types of property. If the number of sales in each property class is large enough, a sample of the sales is used. It is usually the case that a random sample of the sales data is used in urban areas and total valid sales are used in rural areas. State representatives guard against over-representative sampling of neighborhoods with a high volume of sales.

Sales data from recorded deeds is received by the state monthly from the county or city clerk. This source of data is used because it is considered to be unbiased. The sales included in the ratio study cover a 12-month period. Whenever necessary, sales data provided by the county or city clerk is verified with the assessor and/or checked by representatives of the state. A number of criteria are used for excluding invalid sales (e.g., where the selling price is less than $3,000, where the selling price is equal to the assessed value, and where the sale is between family members). Sales price outliers 75% above or below the median are reviewed and verified with the locality before being removed from the sales used in calculating the ratio.

Ratio Estimation Methodology

The ratio calculated is the median for each property class. The Department of Taxation conducts a mini or abridged ratio study in the year immediately following a revaluation using about 200 sales for localities with large public utility property. An advance study is done in localities with large utilities to test the validity of the next median ratio.

Adjustment/Correction of Assessments

Neither assessing unit aggregate values nor individual parcel values are adjusted in accordance with state-established ratios, except in the following situation. In the year following a revaluation, an assessing unit's level of assessment, as measured by the median ratio, has to be at least 70% of fair market value. It this requirement is not met, the state is authorized to require the assessing unit to conduct another revaluation. The state is also empowered to withhold from a non-complying assessing unit the profits from state liquor sales.

Appeal of Ratios

There is no appeal mechanism mandated by statute, however, if the assessing unit protests the ratio to the state, the state will investigate the complaint. Also, assessing units are empowered to sue the state if they disagree with the ratios determined for them. Overall, the ratios are exceptionally well received. A major user of the ratios is the Virginia Department of Education, which relies heavily on the ratios in its formula for school aid distribution: 50% of the basis for aid distribution consists of the true value of property as determined by the ratio.

Program Costs

The annual cost of the ratio study program is estimated at $125,000. The estimated cost includes field staff, computer, and printing costs. The Department is automating its data gathering process in the field by entering all data on laptop computers. This will allow direct uploading to the mainframe computer, thus eliminating internal data entry, reducing editing time and speeding the final publishing of the study.

STATE OF WASHINGTON

Purpose of State's Ratio Study/Frequency Conducted

In Washington, the 39 counties assess real and personal property. By state law all property must be assessed at 100% of true value. Exceptions to this are agricultural, open space, and forest land, which are valued on the basis of current use. There is no classification of property for purposes of taxation. Ratio studies are regularly conducted by the Washington Department of Revenue to measure the counties' actual levels of assessment.

The state conducts ratio studies annually for both real and personal property. It is usually the case that, despite the statutory requirement, counties are assessing at less than 100% of market value. The main purpose of the ratio study is to produce the average level of assessment for each county, which is used to equalize the state school levy between counties and to apportion the value of centrally assessed utility/railroad property among counties. Although the primary purpose of the ratio study is not to improve assessment practices, monitoring county assessments is considered to promote improvements.

Data Used

Sales data for all types of property is used in the real property ratio study, with state appraisals used only when there are not enough sales for a property group. A sample of the sales data is used for large counties having many sales each year. The sales data, whether collected by the state or counties, is obtained from real estate excise tax affidavits which are required to be filed for every real property transaction. Sales used in the study cover a time period of eight months, from August 1 through March 31, five months before and three months after the January 1st lien date. Both state staff and assessors are responsible for verification of the data. All sales verifications are subject to state audit. There are 27 criteria for excluding invalid sales (e.g., sales with no dollar value, quit claim deeds). For the study of personal property assessments, only appraisal data from audits of company books and records is used.

Ratio Estimation Methodology

The ratio used is the single weighted mean for all property. Each county's ratio is reviewed by the Department of Revenue's research office. The ratios developed have undergone a great deal of scrutiny in utility litigation and have proven to be reliable. There is no need to time trend the data since it covers only an eight-month period. Any vertical inequities by value level that are observed are brought to the attention of the assessor.

Adjustment/Correction of Assessments

No adjustments are made to aggregate or parcel values because of the ratio. Equalized values are always used in the apportionment process of state centrally assessed property. The Department of Revenue exercises general supervision of the administration of assessment and tax laws within the state, but does not have the authority to order changes in assessing practices.

Appeal of Ratios

As prescribed in the state's Administrative Code, assessors are issued preliminary ratios and are given two weeks for review. If an assessor disagrees with the ratio, he can request that the state review it. If the state sustains the ratio without change, the assessor may appeal to the State Board of Tax Appeals. Each year about 2 counties out of 39 ask for review of the ratio. On the other hand, a number of county assessors contend that their locally calculated ratio is higher than that which is determined by the state.

Program Costs

The state official interviewed was not able to estimate the annual cost of the ratio study program.

STATE OF WEST VIRGINIA

Purpose of State's Ratio Study/Frequency Conducted

In West Virginia, property assessment is done by the 55 counties. By law, with the following exceptions, all property must be assessed at 60% of market value. The exceptions to this standard of assessment are active farmland, managed timber, and antipollution equipment. State law requires all property to be reappraised every year, although the property does not have to be inspected each year. Property must be inspected every three years.

Property is classified for purposes of taxation. Taxes by class vary not by level of assessment but by tax rate. The four classes and their tax rates are as follows:

  1. Intangible personal, farm personal property - $0.50 per $100 of assessed value
  2. Residential, farm property - $1.00 per $100 of assessed value
  3. Other property located outside municipality - $1.50 per $100 of assessed value
  4. Other property located inside municipality - $2.00 per $100 of assessed value

The State of West Virginia regularly evaluates local assessment practices through assessment ratio studies. The ratio studies, conducted by the West Virginia Department of Tax and Revenue, serve as a tool to measure assessor performance in maintaining assessments at the statutory level. Some counties also do their own ratio studies for comparison purposes, but these studies are not published.

Because of the structure of local government in West Virginia (for example, all school district boundaries follow county boundaries), it is not necessary to "equalize" assessed values for either cross-district apportionment of taxes or state-aid distribution.

Statewide ratio study results are published by the state annually. However, in order to give assessors the opportunity to adjust their assessments to conform with the statutory standard of assessment, ratio studies are actually conducted four times a year and issued to the counties as they are completed.

Data Used

Sales data is used for all types of property. All valid sales are used in the ratio study. The time period covered in the published ratio study results is one year, although often shorter periods are used in special studies requested by individual counties. Sales data is obtained from deed information submitted both by the assessor, in coded form, and by the county clerk. Little monitoring of assessor data is done by the state; however, wherever found necessary, data items are verified with the assessor. Unusable sales are identified by the assessor and include many types (for example, sales between related individuals and sales containing personal property). The data used in the ratio study is kept in a mainframe file accessible by all counties through a network.

Ratio Estimation Methodology

The ratio is calculated as both a median and a weighted mean for each property class, and both of these measures are given in the published report. The degree of difference from the required assessment level is measured by means of several statistical tests including the coefficient of dispersion, the Mann-Whitney test and the price related differential. Adjustments are made to each ratio for the residential class to correct any vertical inequities related to the value (selling price) of the property.

Adjustment/Correction off Assessments

If the ratio shows that a property is under- or over-assessed, the property's value for tax billing purposes is adjusted accordingly. If an assessor persists in not conforming to the statutory assessment standard, the state tax commission may remove him or her from office.

Appeal of Ratios

While there is no statutory appeal procedure, very frequently state staff meet informally with county staff to review the ratios. Counties appear to be very satisfied with the ratios' accuracy. The State Department of Tax and Revenue is quite proud of its work, the accuracy of which was demonstrated recently by its winning a railroad 4-R (Railroad Reorganization and Regulatory Relief Act) case on the basis of its ratios.

Program Costs

The source of the above information was not able to estimate the annual cost of the ratio study program.

STATE OF WISCONSIN

Purpose of State's Ratio Study/Frequency Conducted

In Wisconsin, property assessment is the responsibility of 1,893 cities and towns. By state law, all property must be assessed at market value. Property is classified for purposes of taxation into six groups: (1) residential, (2) commercial, (3) manufacturing, (4) agricultural, (5) swamp and waste, and (6) forest land. Wisconsin law requires that assessments to within +/-10% of the Department of Revenue's estimate of market value for each major class of property (i.e. representing at least 5% of total municipal value). The law also requires each taxation district to assess property at full value at least once every five years. Ratio studies conducted annually within the state produce equalized (estimated market) values for each municipality, thereby providing a measure of local compliance with the statutory market value standard of assessment.

Ratio studies are conducted annually by the Wisconsin Department of Revenue's seven district offices. Since the municipalities within a county or a school district are most likely to be assessing property at different levels of market value, the main purpose of the ratio studies is to equalize assessed values for taxation and other purposes. These other purposes include apportionment for state education and revenue-sharing aid, estimation of market value subject to tax and debt limits, and provision of a basis for appealing assessments to the Department of Revenue on property valued at $1 million or less. There are approximately 110 uses of equalized values in the state. Many municipalities in the state conduct their own ratio studies, although these are not mandated.

Data Used

For the ratio study, sales data is used for all types of property, with appraisals used to supplement sales data in some cases. Approximately 35% to 40% of all sales are valid, ratio usable sales. A 12-month period (calendar year) of usable sales is used. Ratios for two- and three-year periods are also calculated, but these are for internal analysis purposes only and are not published. The sales data is received from county treasurers and is derived from Real Estate Transfer Returns. Whenever needed, the data is verified with assessors. There are several criteria for eliminating invalid sales (for example, sale of only part of a parcel, sale of mixed-class property, gifts, and family sale). Also, agricultural and swamp/waste land sales are not used in the study.

Ratio Estimation Methodology

The state calculates all three measures of central tendency: mean, median, and weighted mean. The state uses the weighted mean to determine compliance with state-established standards. The ratios are forwarded to the assessors, along with other statistical measures of level of assessment, such as the coefficient of dispersion. There is no need to adjust for time trend, since only one year of sales is used. The only adjustments made are for personal property and, in the case of properties over 35 acres, for premiums paid to purchase adjoining land.

Adjustment/Correction of Assessments

Neither the aggregate value of the assessing unit or class nor the parcel values are adjusted because of the ratios established, since equalized values are always used in place of assessed values in processes such as cross-municipal levy apportionment.

The level of assessment must be within +/- 1 0% of the state-established ratio at least once in a four-year period. If an assessing unit fails to meet this standard, it is advised after the fifth year that the assessor must complete a course of education in the sixth year. If noncompliance continues through the seventh year, the state orders the assessing unit to revalue. Currently, of 1,849 assessing units, 178 are under the assessor education order. The number under an order to revalue will not be known until the fall of the year.

Appeal of Ratios

Assessors are notified of their equalized values. If they disagree with them, they may file an appeal with the Wisconsin Tax Appeals Commission on or before October 15. Such appeals are filed fairly infrequently. There were no appeals last year by any municipality. As for satisfaction with the ratio program, those assessors who understand the ratio process are generally satisfied with 4, but other assessors resent it; home rule is very strong in Wisconsin.

Program Costs

The annual budget of the Bureau of Equalization is currently $4.8 million a year statewide. This figure includes the cost of personnel, supplies, services, travel for field appraisal, and computer time.

STATE OF WYOMING

Purpose of State's Ratio Study/Frequency Conducted

The purpose of this state's ratio study is for the equalization of assessed values among the 23 county assessing units. State aid to taxing districts is not linked to the results of the study. The State Board of Equalization conducts these studies annually.

Data Used

The state uses only sales in its ratio analysis. The two main property classes considered in the study are residential and commercial. Both classes of property are assessed at 9.5% of market value, but the state analyzes assessing practices in terms of full market value. Centrally assessed property, such as utilities and railroads, are not included in the study, nor is property assessed at its use value, such as agricultural property. The state obtains sales data from county assessing offices. Local assessors verify sales through telephone calls or through questionnaires. The state has a disclosure law on sales, through statements of consideration, and uses International Association of Assessing Officers criteria for projecting sales. Sales used in annual ratio studies are drawn from a one-year period. The 1994 sales ratio study uses sales that occurred between February 1, 1994 and January 31, 1995, valued to February 1, 1995. No adjustments are made on sale prices.

Ratio Estimation Methodology

The State Board of Equalization uses the median as its measure of central tendency to determine whether or not assessing units are in statutory compliance. The acceptable range is between 90% and 110% of market value, computed overall and for residential and commercial classes. For horizontal assessment equity, the Board uses the coefficient of dispersion (COD). The maximum acceptable COD is 18% on residential property, and 22% on commercial property. For vertical assessment equity, the state computes the price related differential, and the acceptable range is between 0.98 and 1.03. The state does not sample, but instead uses all valid sales it can obtain. At present no testing is made about how representative the sales are to the properties in each county.

Adjustment/Correction of Assessments

The Department of Revenue provides the sales ratios to county assessing offices and to the State Board. The Board has the authority to make aggregate adjustments in property classes that are out of compliance. At present, the Board utilizes a statistical software package called VHAAS (Vertical and Horizontal Assessment Adjustment system), in order to determine which factors should be applied to which groups of property values to bring them into compliance. VHAAS can be used by local assessors to identify vertical inequity and to adjust values. However, it is not a substitute for comprehensive mandatory reassessment, which is required every four years. The State Board also has the authority (yet to be exercised) to deny certification of assessment rolls until assessing practices are rectified. The need for corrective action can be found not only in the ratio study, but from the Board's monitoring of assessment procedures, such as agricultural land valuation.

Appeal of Ratios

Counties have five business days to appeal the ratio study results to the State Board of Equalization. Counties may appeal the Board's decisions to district court. Appeals have been scarce, as the Board has had its authority for only a few years. Counties are somewhat fearful of the equalization process, especially the publicity concerning the ratio results. The Board, for its part, would like to see more statistical sophistication in its studies, given that there is no refining or sampling of the data being used. An evaluation of the state's ratio study program has been issued by the Wyoming Board of Equalization. This report, Appraisal Performance in Wyoming, issued in March 1994 outlines the procedures used, and makes recommendations for improving and measuring appraisal performance.

Program Costs

No costs are available for the ratio study program. Much of this work involves county assessors verifying sales. Furthermore, development of the ratios and their utilization involve two separate state entities.

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