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Susan Kelty Law: Market Value Assessments Used by Village Hall

Written by Susan Kelty Law, Associate Broker, Houlihan Lawrence





 

Jan. 7, 2015: In the last eight years, the subject of market value tax assessments has been a hot-button issue for many village homeowners. Some who saw dramatic increases in their taxes as a result of the 2006-2007 reassessment fought to get them reduced, and many were successful, especially after the market decline of 2009. But this year, while many village residents will be happy to hear that median home prices have risen substantially in the last 12 months (about 9 percent for single-family homes and 22 percent for townhouses), Bronxville's market value assessment model actually mandates that those market gains be reflected in the 2015 tax rolls. 

With so many municipalities in Westchester now converting to market value assessment systems, this article attempts to review Bronxville's relatively new system and how it is evolving as market conditions improve.

According to Village Assessor Gerry Iagallo, Bronxville's new tax roll will be published by February 1, 2015. Although he cannot say which homes will see an increase in their assessments, or by how much, Iagallo is predicting an average increase of 11 percent for single-family homes, including townhouses. However, given the way the market value assessment system works, an increase in assessment does not necessarily mean that the tax paid will go up by the same 11 percent.

The good news, according to Iagallo, is that if school and village budgets stay about the same, the actual tax rate per thousand dollars of assessed value should go down because of the increased tax base (this past year's rate was $17 per $1,000 of assessed value). This means that for those who do not receive an increased assessment in 2015, if budgets are constant, their tax liability will actually be decreased.  

And for those whose assessments go up, they will not see the same percentage of increase in taxes owed. Iagallo characterized this new assessment increase as a necessary step in response to a rising market and encourages those who disagree with their assessment this year to avail themselves of the grievance process by filing objections within the prescribed two-week period before February 17, 2015. 

Market Value Assessment Background: In 2006, Bronxville converted to a fair market value approach in order to eliminate the inequities of our old assessment system. Under the old system, newer single-family homes were assessed at higher levels than many older homes with much higher market values, and these under-assessed homes held onto that benefit in perpetuity. The conversion to a fair market value system was expensive--it required the village to individually appraise the market value of each single-family property.

The new assessments were then implemented in 2007, which turned out to be the height of the market for median single-family prices in the village.

Under the current market value system, our assessor is responsible for periodically reviewing the village tax rolls with the goal of keeping assessments at 100 percent of fair market value. While some "market value" towns choose to adjust assessments on a yearly basis, Bronxville's model calls for a revolving assessment readjustment only when the "coefficient of dispersion" (the "COD," or error factor) exceeds 12 percent. The COD is essentially the differential between tax assessments and median market value prices (in the assessment world, a COD of 10 percent or lower is considered ideal).

It is notable that Bronxville is the only jurisdiction in the state that actually wrote the 12 percent COD into its assessment law as a mandate. As a result, unlike other towns that lagged behind the market on their assessment rolls, Bronxville stayed relatively current even in the downturn of 2009. That year, our village assessor took what Mayor Mary Marvin called "prophylactic action" and lowered assessed values by 7 percent across the board to reflect the declining market.

According to assessor Iagallo, while the fair market value system was initially expensive for the village to implement, in a few short years it has more than paid for itself. Since 2005, the increased accuracy of our tax rolls has decreased the number of small claims/ tax certiorari claims (which are very expensive to defend) by about 75 percent. Even coops and condos (which are assessed differently under state law as "commercial" property) have reduced the number of certiorari claims filed on those properties. This article is limited to discussion of single-family home assessments.

Current State of Our Single-Family Tax Assessment Roll: In early 2013, when Bronxville's COD on single-family homes was at 10.5 percent, one of the lowest in the county, our village trustees unanimously adopted a resolution that property values in the village be reviewed either when the COD exceeded 12 percent or, alternatively, every three years when the board thought a review would be beneficial. Pursuant to this resolution, starting in 2013 Iagallo was charged by the trustees with reviewing one-third of the village properties each year for the following three years. As a result, about one-third of village homes had their assessments re-examined last year and increased on average by about 5 percent.

This past year, however, when Iagallo started on year two of the three-year review cycle, he discovered that the still-rising real estate market had pushed the COD up above 12 percent. In order to comply with the mandate, Iagallo said that the "one-third-every-year" approach had to be discarded in favor of the assessor's taking immediate action to reduce the COD. For this reason, Iagallo and his team embarked on a review of the remaining two-thirds of single-family homes this past fall (the ones that were not increased last year). The new assessments are the ones that will be published by February 1, 2015.

While Iagallo cannot estimate at this point how many homes will see increases in their assessments in 2015, he confirmed that most of the two-thirds of single-family homes reviewed will see increases, as well as some additional homes that either underwent capital improvements or sold in 2014 for amounts higher than their assessed values. The rest will stay the same or go down. Multiple Listing Service (MLS) data show that about 85 percent of the 80 townhouses and single-family homes that sold in 2014 sold for varying amounts over their assessed values.

According to Iagallo, the expected $150,000,000 increase in assessments for 2015 translates into an increase of the current total tax base from $2.81 billion to about $2.96 billion. His aim this year is to bring the village assessment COD down to 12 percent or lower. In this way, he hopes that the assessment process can stabilize for a longer period of time.

Like so many of our village officials, assessor Iagallo is always approachable, and he encourages homeowners to ask him any questions they may have about the process. 

Pictured here: Midland Avenue headed north.

Photo by A. Warner

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