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Property Tax Justice
"We
Don't Chase Sales"
Equality
of taxation in Travis county is seriously called into question
by an article appearing in the most recent issue of "Statement,"
the property tax publication of Texas Comptrollers Office.1
In his comments, author
Tim Wooten of the Property Tax Division outlines several methods
of statistically checking the "equity" of local property tax
appraisals.
In
light of Mr. Wooten's remarks, our review of published 1995
-1998 sales data obtained from Travis CAD indicates that valuations
are clearly being altered on sold properties to match their
selling price, while values assigned to the much larger class
of unsold properties are almost certainly calculated differently.
In
property tax jargon this is known as "sales chasing."
Statistical
analysis makes most people catatonic. However, combining just
a small dose of probability theory to the topic of property
tax appraisals may prove interesting to Travis county taxpayers.
The concepts introduced by Mr. Wooten are basically common
sense, couched in mathematical terms.
There
are two types of property in Austin: those that have sold
in the last year and those that have not. Only a small percentage
of all properties sell each year. The values assigned to sold
properties must be "equitable" compared to tax appraisals
placed on unsold properties. The goal of "equality" is a system
that places a similar value on similar properties, whether
or not they sold.
Simple
statistics cited by Mr. Wooten tell us that Travis CAD is
almost certainly treating the two sets of taxpayers differently.
| Residential
Sales Ratio Study Results from Travis CAD |
| Sale
Year |
#
of Sales |
Appraisal
Ratio |
Weighted
COD2 |
| 1995 |
7,613 |
98% |
5.1964 |
| 1996 |
7,225 |
96% |
4.9656 |
| 1997 |
7,659 |
98% |
4.8302 |
| 1998 |
9,039 |
99% |
4.8148 |
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The
right-hand column in the above chart calculates a statistic
known as the "Coefficient of Dispersion." This is a measure
of how closely TCAD tax appraisals come to matching the reported
sales prices of properties which have sold. The residential
appraisal COD for the last four years has averaged 4.9492.
Mr.
Wooten cites studies by the International Association of Assessing
Officers which state in part, "COD's of less than 5.0 are
very rare except in (cases where).... (2) extremely homogenous
property groups such as condominium projects, or.... (4) appraisals
have been adjusted to match sales prices." Given the wide
range of residential property types in Travis county, it appears
the latter conclusion of "sales chasing" is warranted.
The
basic premise here is that if the COD for any statistical
sample is very low, say under 5.0, then it is statistically
almost impossible for there to be equal treatment of both
the sample and the remainder of the universe of properties.
In terms of property tax appraisals in Austin, Mr. Wooten's
article verifies our longstanding contention that sold properties
are taxed at a much higher level than unsold properties.
Because
of the direct financial impact of the Property Tax Division's
annual ratio study on state funding of Austin area school
districts, it will be interesting to see what changes are
made at Travis CAD to ensure that all taxpayers share the
tax burden equally.
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1
- "Selective Reappraisal", by Tim Wooten, Property Tax Division
Statement, February, 2000
2 - This is the weighted average Coefficient of Dispersion
for the four TCAD appraisal areas.
3 - Ibid., page 7
(return
to Property Tax Justice)
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