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Articles

2005 Assessment Changes In Residential Class

(posted: 05/19/2005)

Background: The decision was made to discontinue the cooperative 'Property Tax Administration System' (PTAS) used by the majority of municipalities in Kent County for the preparation of assessment and tax rolls. This meant that the City of Kentwood needed to bring those functions in-house which had been handled on a Kent County mainframe computer. At about the same time, the City made the decision to move off from the IBM AS/400 which supported the Rehmann Robson 'SEV' software used since early in the 1980's to value residential properties. These changes required that the Kentwood Assessors Office implement software in-house to perform all computerized functions from the appraisal of properties to the generation of assessment and (ultimately) tax rolls.

Accomplishments: During 2003, all City parcels' base data (names, addresses, current values, for example) were converted into the new in-house software. Assessing staff then valued commercial, industrial, personal property, and some residential properties using the new 'Equalizer' software from BS & A. The bulk of the residential class' data needed to be hand-loaded during 2004 in preparation for the 2005 assessment roll.

Electronic conversion was not deemed possible by BS & A. One of the primary reasons is that the old software valuation model was based on the Marshall Valuation Service's Residential Handbook. This company studies construction costs across the country, releasing updates quarterly. The new software is modeled on the Michigan State Tax Commission cost manual as issued in 1998. There are differences in the data requirements relative to story height, foundation, and area which could not be converted without an appraiser massaging the data, then making the entries. Staff worked through over 13,000 residential parcels with one person entering data and another reviewing each parcel for accuracy and consistency.

Issues and Concerns:  Despite the best efforts of staff, errors will have been made. Many have been found and corrected through quality control measures within the department. The Assessors Review held the week of February 21 through 25 brought out only 78 parcels for appeals---about half of the taxpayers believed they were increased too much and half questioned reductions. Further investigation into several of the reductions did discover errors which have been corrected for not only those coming in, but also for other properties with like issues. (Examples: Basement garage entry errors and incorrect effective age on some parcels resulting in excessive depreciation.) The errors did not involve many parcels, nor many dollars of assessed value.

I participated in the initial computerization of assessing office records when 'SEV' was implemented. I also have heard from other assessors across the state over the years who have converted from one software package to another. The usual result of any such conversion is that there are properties whose assessments change more drastically than others. The 2005 Kentwood data conversion not only moved data to another software package, but also gave city appraisers the opportunity to find some situations where past data may have been incomplete or incorrect. These changes were incorporated with resulting changes in assessed value. The new software allows for differing multipliers to adjust the results of the cost approach to actual market based on story height and/or building ages. The old software required that an average be used within each neighborhood. Values have been and will continue to be more refined over time with these tools.

In times of greater value appreciation, conversions such as we have experienced resulted in some assessments increasing greatly, others increasing lesser amounts, and a few reductions. The 2005 equalization study indicated less than a 1.5% increase in overall residential values was needed. The typical variance between properties then resulted in more parcels experiencing reductions from the 2004 assessed values than would have otherwise been noted. These reductions are not localized, not consistent by age of home, and not even consistent by style of home. Reductions are noted from Hall Street at the north, to 60th Street in the south; from Patterson in the east to Division Avenue at the west. They should not be perceived as loss in actual value, but in refinements of the accuracy of the assessing process. Since assessment administration is based in statistics, assessors consider valuations within plus or minus 10% of value to be very good! Most of the reductions in assessments experienced across the city fall within the natural variance. The goal has been better equity between properties as well as accuracy in assessments.

The other issue common to inquiries from taxpayers is that reductions in assessed values such as this do not translate into reduced taxable values. Demolition-caused value loss results in reductions in taxable value. Otherwise, even if the assessed value is reduced, the taxable value will continue to increase at the consumer price index (1.023 this year) until the taxable and state equalized values are equal.