Volume 1 - Opinions of Counsel SBEA No. 45
Equalization rates (county equalization rates) (state equalization rates) - Real Property Tax Law, Articles 8 and 12:
The final determination concerning equalization rates which are used to apportion county taxes, is made by the county. State equalization rates which are used, among other purposes, for the distribution of state aid to localities, school tax apportionments and the determination of local tax and debt limits, are determined annually by the State Board as a result of market value surveys conducted approximately every two years.
A question has been raised concerning the establishment of equalization rates and whether the final determination is made by the State or the county.
Article 8 of the Real Property Tax Law requires each county to establish a county equalization agency or to act as the county equalization agency for the purpose of determining the aggregate full valuation of taxable real property in each city and town within the county for the purpose of apportioning county taxes. The full valuation is determined by dividing the assessed valuation of each city or town by the county equalization rate established for each such city or town. Some counties have established county equalization agencies which actually conduct surveys in order to determine a county equalization rate for each city and town (i.e., the percentage of full value at which real property is being assessed in each city and town); some counties do not conduct such surveys and establish a county equalization rate which is carried forward year after year; still others adopt advisory rates which are furnished to all counties by the State Board of Equalization and Assessment. In any case, Article 8 provides a procedure whereby the rates established by the county may be reviewed by the State Board of Equalization and Assessment in order to determine whether or not such rates produce an equitable apportionment of county taxes. The equalization rate established by the county is used solely for the purpose of apportioning county taxes.
Article 12 of the Real Property Tax Law requires the State Board to annually determine the percentage of full value at which real property is being assessed in each city, town and village in the State of New York. This percentage is known as the state equalization rate and is used for the distribution of state aid to localities, school tax apportionments, determination of local tax and debt limits and various other purposes.
Such rates are determined by the State Board as a result of surveys which it conducts approximately every two years, since it takes at least two years to complete a survey of each city, town and village in the State of New York. Such surveys consist of sales and appraisal data concerning the various types of real property in each assessing unit.
County clerks are required by law to furnish assessors with information as to each sale of real property occurring within their respective assessing units and the assessors furnish the State Board with a copy of this information together with their comments concerning such sales. The State Board contacts the purchasers named in the reports to confirm the purchase price and to determine whether the sale was a bona-fide arms-length transaction. Generally, only confirmed sales are used by the State Board, and a comparison of the assessed valuation of the real property at the time of the sale with the actual sales prices is an indication of the percentage of full value at which said parcel was assessed.
The State Board also selects at random a number of parcels within each assessing unit and each parcel selected is appraised by a State Board appraiser and a comparison of the appraised value with the assessed value of the parcel is an indication of the percentage of full value at which said parcel was being assessed in the assessing unit. Such information is gathered in each assessing unit with regard to the various types of real property within the assessing unit (i.e., residential, commercial, industrial, etc.) and the same standard is used with regard to each assessing unit within the State of New York.
Since the surveys take at least two years, the equalization rate established by the State Board is based on a price level some two to three years prior to the date of the assessment roll for which the rate is established. It would, of course, be impossible for the State Board to determine equalization rates at market value levels as of the year in which the roll was prepared. However, as indicated above, the same standard is used for all assessing units.
Each assessing unit is notified of the equalization rate established for its assessment roll and is afforded an opportunity to examine the data upon which such rates were based and to appear before the State Board to present any evidence concerning the representativeness or accuracy of the data used by the State Board. Also, this data is public information and is on file at the Board’s offices where it may be examined by public officials and taxpayers alike.
In determining equalization rates, it is our Board’s task simply to determine the actual percentage of full value at which the assessors are assessing real property. As indicated above, one of the major uses of equalization rates is the apportionment of taxes among the various towns within a county. If the assessors in each town within a county were to actually assess real property at the same percentage of full value or at full value there would be no need for equalization. However, there is no question that assessors of various towns within the same county do not assess real property at a uniform percentage and therefore, the assessed valuation of each town must be converted to full value for apportionment purposes.
While a change in the equalization rate of a town which has a fairly constant total assessed valuation would change the full value of all the taxable property within the town and could result in a greater portion of the total county tax levy being collected in that town (especially if property values in that town are increasing more rapidly than the property values in other towns within the county), the equalization rate has no direct affect upon the total county tax levy which is primarily based upon the county budget. If the total assessed valuation and the equalization rates remain the same for all towns within a county or if the rates change and the full valuation of taxable real property is increasing at a uniform rate throughout the county, the amount to be collected in each town would remain substantially the same if the county budget remains the same. However, in such a situation, if there were a ten percent increase in the total county budget, and there were no change in revenues to be received from sources other than real property taxation, there would be a corresponding ten percent increase in the amount to be collected in each town.
January 24, 1972