I mentioned in a prior post my skepticism toward the argument that the revised – yet unreleasable — assessments could not be released because the assessments were performed at a market peak.
For the sake of discussion, I put together a simple example to illustrate the difficulty with this argument. Let’s assume that we have 5 parcels in the City of Amsterdam and the total tax to be collected by the city is $50,000. I created two scenarios:
1) A current market value assessment (this would be the assessment as of today June 9, 2008)
2) A peak market value assessment (this would be the assessments performed at the peak of the market)
To drive home my point of why the peak argument falls apart, I arbitrarily set the peak assessments to five times what the market value is today. So for a home assessed at $200K today (Parcel #2), it was assessed at $1 million dollars last year at the peak of the market. Yes, this is ridiculous but it drives the point.
If you look at the table below, you will see the two scenarios spelled out in terms of the peak assessment versus current market value in terms of the assessment, the total taxes paid and the tax rate per thousand. While the peak assessment is set to five times the current assessment, you’ll note that the tax levy per parcel remains exactly the same under both scenarios.
How can this be?
This ‘can be’ because the tax rate per thousand under the peak assessment is five times less than under the current assessment. This makes sense as the city tax levy across all parcels has remained fixed at $50,000 and naturally as the total assessed values increase, the rate at which they’re taxed has to decrease given a constant tax levy.
This is why I think the ‘peak assessment’ cannot be argued with a blanket statement (I paraphrase) of ‘the assessments were performed at a market peak so we cannot use them’. The problem with this ‘reasoning’ is that if you do not stop and think about it, you’d likely walk away with the impression that you would be overpaying under the peak assessment scenario. But as I’ve shown, even with peak assessments at 5 times what they would be today, the amount you would pay would remain exactly the same.
Before I close, I will accept one line of counterargument: if you can show that the decline in the market value is not uniformly distributed across the city. In other words, if you can show me – with hard numbers—that the market values in different section of the city have declined at radically different rates than I may reconsider my point. However, to refute my arguments, you’d have to demonstrate it with hard numbers not with an opinion as then it’s just your word against mine. (And I always tend to side with my words)
It’s this lack of transparency with the numbers – whether it’s the distributions of changes in taxes per my prior post, the variance in decline of different sections of the city, the lack of uniformity in the assessments, whatever—that makes this process troubling. We can’t get to a discussion of policy if we have no basis from which to analyze and develop a policy. Assessments are meant to be driven by ‘hard numbers’ not by gut feelings or opinions on the rate of change or actual market values. I’m not buying any of it.
