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STATE TAX COMMISSION RATIO STUDY. Scope/Purpose. The ratio study is the primary tool to measure the accuracy of assessments and the accuracy of the appraisal process. The study should evaluate the level of assessments and the uniformity of assessments in a particular jurisdiction. Uses

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scope purpose
Scope/Purpose
  • The ratio study is the primary tool to measure the accuracy of assessments and the accuracy of the appraisal process. The study should evaluate the level of assessments and the uniformity of assessments in a particular jurisdiction.
  • Uses

1. Equalization of values

2. Evaluation of the level & uniformity of assessments

3. Identification of appraisal priorities

4. Determination of whether administrative & statutory standards have been realized

what constitutes a ratio
A ratio is the relationship between an assessed value as identified in the assessment rolls and the fair market value of the parcel as determined by an appraisal. The ratio utilized in the study is developed by dividing the assessed valuation by the fair market value.

Example:

Assessed Appraised

Parcel #Valuation(Market) ValueRatio

1 $19,000 $100,000 19.0%

2 16,000 90,000 17.8%

3 10,000 50,000 20.0%

NOTE: Statutory level for the residential subclass is 19%.

What Constitutes a Ratio?
state tax commission ratio procedures
STATE TAX COMMISSION RATIO PROCEDURES
  • Sampling
  • Appraisals – Determining Market Value
  • Appraisal Audit
  • Statistical Analysis
  • Evaluation
ratio procedures sampling
RATIO PROCEDURESSAMPLING
  • Computer generated random sampling
  • Statistically emulating the population
  • Statistically valid sample sizes
ratio procedures appraisals
RATIO PROCEDURESAPPRAISALS
  • Compliant with USPAP
  • Cost Approach to Value
  • Market Approach to Value
  • Sample Appraisal Report Attached
ratio procedures statistical analysis
RATIO PROCEDURESSTATISTICAL ANALYSIS
  • Evaluating Levels of Assessment

Mean

Median

Weighted Mean

Confidence Intervals

  • Measures of Variability

Coefficient of Dispersion

Price Related Differential

Standard Deviation

statistical analysis evaluating levels of assessment
STATISTICAL ANALYSISEvaluating Levels of Assessment
  • Mean – Arithmetic Average

Parcel No.Assessed ValueAppraised ValueRatio

1 $ 3,840 $ 22,300 17.2197

2 100 500 20.0000

3 5,720 31,800 17.9874

4 3,230 17,400 18.5632

5 11,540 59,100 19.5262

93.2965

Mean Ratio = Total of Ratios / Number of Samples

Mean Ratio = 93.2965 / 5

Mean Ratio = 18.6593

statistical analysis evaluating levels of assessment9
STATISTICAL ANALYSISEvaluating Levels of Assessment
  • Median – Measure of central tendency which is the midpoint in the distribution of ratios

Parcel No.Assessed ValueAppraised ValueRatioRanking

1 $ 3,840 $ 22,300 17.2197 1

3 5,720 31,800 17.9874 2

4 3,230 17,400 18.5632 3

5 11,540 59,100 19.5262 4

2 100 500 20.0000 5

Median Ratio Ranking = (Number of Samples + 1) / 2

Median Ratio Ranking = (5 + 1) / 2

Median Ratio Ranking = 3

Median = 18.5632

statistical analysis evaluating levels of assessment10
STATISTICAL ANALYSISEvaluating Levels of Assessment
  • Weighted Ratio – measure of central tendency that reflects the relationship of the total assessed value to the total market value

Parcel No.Assessed ValueAppraised ValueRatio

1 $ 3,840 $ 22,300 17.2197

2 100 500 20.0000

3 5,720 31,800 17.9874

4 3,230 17,400 18.5632

5 11,540 59,100 19.5262

$24,430 $131,100

Weighted Ratio = Total Assessed / Total Appraised

Weighted Ratio = $24,430 / $131,100

Weighted Ratio = 18.6346

statistical analysis evaluating levels of assessment confidence intervals
STATISTICAL ANALYSISEvaluating Levels of AssessmentConfidence Intervals
  • The State Tax Commission uses confidence intervals that are calculated for the mean, median and weighted mean ratios.
  • The confidence intervals are calculated at the 95% and 99% level of confidence. This equates to an indication that the true population mean, median and weighted mean would fall within the confidence interval range 95% or 99% of the time.
  • The State Tax Commission predominately uses the 95% confidence interval around the median to determine the range for measures of assessment level and central tendency.
statistical analysis measures of variability
STATISTICAL ANALYSISMeasures of Variability
  • Coefficient of Dispersion – COD indicates a percentage relationship by which various individual ratios differ from the measure of central tendency which is the median. The higher the COD, the more variability exists in the assessment process.

Parcel No.RatioMedianAbsolute Deviation

1 17.2197 18.5632 1.3435

2 20.0000 18.5632 1.4368

3 17.9874 18.5632 .5758

4 18.5632 18.5632 0.0000

5 19.5262 18.5632 .9630

4.3191

Average Absolute Deviation is 4.3191 / 5 = .86382

Coefficient of Dispersion = (Average Deviation / Median) X 100

Coefficient of Dispersion = (.86382 / 18.5632) X 100

Coefficient of Dispersion = 4.6534

statistical analysis price related differential
STATISTICAL ANALYSISPrice Related Differential
  • Price Related Differential – PRD is an index statistic for measuring vertical equity and will reflect whether or not regressivity or progressivity is evident in the assessment process. The PRD is an indication of the degree to which high valued properties are over-assessed or under-assessed relative to lower valued properties.

PRD = (Mean Ratio / Weighted Ratio) X 100

PRD = (18.6593 / 18.6346) X 100

PRD = 1.0013 X 100

PRD = 100.13