Equalization: Can change your effective net tax bill
FINGER LAKES--If you monitor your property tax rate compared to your tax bill, you probably know about the state equalization process and how it can affect what you pay. Unfortunately, many taxpayers don't understand how this annual end of August tax-adjusting process works.
In the state, the property tax is a local tax, raised and spent locally to finance local governments and public schools.
The state procedure of equalization is used to determine the actual property tax rate for a municipality. Essentially, 'full market value' serves as a common denominator, or equalizer, in setting the actual tax rate. In general, if a town's equalization rate is less than 100, it means that overall, the property in the town is assessed at less than full market value.
To calculate an equalization rate for a given town (which is done by the state-not the school district) the state takes the total assessed value of the municipality and divides it by the total market value of the area. The end result is the equalization rate. An equalization rate of 100 means that the municipality is assessing property at 100 percent of its market value. A rate less than 100 means the municipality total market value is greater than its assessed value. An equalization rate greater than 100 means the total assessed value for the area is greater than its total market value.
The equalization rate is meant to ensure that owners of properties with similar full market values pay an equivalent amount of taxes even with different assessment levels. The equalization rate can change from year to year based on the real estate market and each property's assessment. Both equalization rates and assessments are finalized in August prior to the start of a school year.
This year in the Penn Yan and Dundee school districts, Superintendents Howard Dennis and Kelly Houck said they have not seen any significant changes from the state to impact local tax rates. Houck said, "Actually, because of the reassessments that have occurred within our township, some tax bills will go down somewhat compared to what we projected with our budget presentations."
In Hammondsport, there are six townships that make up the tax base for Hammondsport Central School. For the coming school tax year, the equalization rate in Urbana, Pulteney, Wayne and Wheeler have dropped below 100 percent. In Tyrone and Bath, the rate has not dropped.
Hammondsport school Superintendent Kyle Bower said because of this, the equalization rate change will make the school tax rate will appear higher in the towns where the rates are below 100 percent. Bower said this year's projected school tax rate of $10.29 per $1,000 of assessed value will go to $10.46 per thousand for the towns below 100 percent. Bower emphasized, "This higher tax increase is not caused by the school district but by the changes in equalization rates."
This year in the Watkins Glen school district Business Manager Gayle Sedlack said, "Schuyler County's assessors are committed to maintaining 100 percent for each township's equalization rate. The district's tax rate decreased by 53 cents over the prior year and is now at a lower rate of $10.82 per $1,000 of assessed valuation."
The 2019 equalization rate is 100 percent for Catharine, Odessa, Cayuta, Dix, Watkins Glen, Montour Falls, Hector, Burdett, Orange, Reading and Tyrone.
For Odessa-Montour, Lisa Kuhnel, shared school business administrator for Odessa-Montour and Bradford central schools, said, "We saw an increase in assessed valuation for all the municipalities within the district of nearly 5 percent overall. Most significant was an increase in Montour and, since Montour is the largest in the district (in terms of total property value), it resulted in a decrease of about 4.7 percent when comparing projected 2019-'20 (school year) rate per $1,000 to actual rate per $1,000. When comparing 2019-'20 rates to 2018-'19 rates, the rate per $1,000 decreased by about 2.5 percent."
The Van Etten area experienced a 96 percent equalization rate for the 2019-'20 school year. All other taxing areas within the O-M district are at 100 percent for equalization rates.
WHY ARE EQUALIZATION RATES NECESSARY IN NEW YORK STATE?
Each municipality determines its own level of assessment (this is in contrast to most states that require one level of assessment statewide). Hundreds of taxing jurisdictions--including most school districts and counties --do not share the same taxing boundaries as the cities and towns that are responsible for assessing properties.
In order to distribute school district or county taxes among multiple municipalities, the level of assessment of each municipality must be equalized to full market value. Equalization rates are based on local data collected by the state.
Once the full market value of each municipality is determined, the state determines how much in taxes should be collected from each municipality. The school district does not control equalization rates. It only controls the tax levy, or the amount that taxpayers within its boundaries will contribute to the district's budget. The tax levy and the tax rate are not the same. The tax rate, is the amount of tax paid for each $1,000 of assessed property value.
If all municipalities assessed property at 100 percent of market value, equalization rates would not be necessary. However, most of the state's more than 700 school districts distribute their taxes among segments of several municipalities, many of which have different levels of assessment. The number of municipal segments in a school district ranges from one to as many as 15.
Equalization rates measure the level of assessment for the entire municipality. They are not intended to correct unfair individual assessments in a city or town. The assessor has the primary role in ensuring the fairness of individual assessments. The more frequently properties are reassessed based on current market values, the more likely it will be that assessments are fair. Property owners also have a role to ensure their individual assessments are fair.
(Source: Equalization Process--Capital Region BOCES Communication Service)