Chief Appraiser Reviews Audits with Commission
Chief Appraiser Lynn Bentley presented the commissioners with copies of her audits from 2016, 2015 and 2014 in an effort to help them understand why she changes values each year.
“Audits are done on a yearly basis by the Department of Audits and Accounts. These audits measure how close our values are each year to the properties that have sold. The results of the audit indicate whether or not we are at fair market value, which is what a property would sell for,” said Mrs. Bentley.
There are three measurements taken in the audit—the median ratio, the COD and the PRD. Georgia properties are taxed at 40 percent, which is assessed value. The ratio is a comparison between the assessed value and the sale price. If the fair market value and the sale price are the same number, then the ratio would be 40 percent, she said. The median is simply the median ratio after the samples that the Audit Department chose for the study are arrayed in numerical order by ratio.
The median is important because if it is not met, public utilities are taxed at a lesser rate. For 2016, we have a median ratio of 39.61. This means the utilities will be taxed at the full 40 percent rate.
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“Before I made any changes to the 2016 digest, our overall median was 36.09. If I had not made any changes, and this audit came in at a ratio of 36, that would be an instant loss of approximately $100,000 in revenue from the public utilities,” said Mrs. Bentley.
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The COD (Coefficient of Dispersion) gives a better look of whether or not equity and uniformity are being achieved. This measures how close fair market value is to all of the samples being used. You could have a good median, but if your COD is too high, you are only meeting a few of the sales – not a majority. When the COD is within range, a majority of the sales are being met within a reasonable range. The state requires a COD of 15 or less for residential and 20 or less for agricultural/commercial properties, which we were well below in both categories.
The COD is important also in that if it is not met consistently over a three year period, the Department of Revenue will impose a $5 per parcel fine, which would be approximately $50,000.
The PRD (Price Related Differential) is also an indicator of equity and uniformity. It measures if lower priced properties are being under assessed or if higher priced properties are being over assessed. An acceptable range for the PRD is from .95 to 1.10, with 1.00 being the goal. If the PRD is low, this indicates values are regressive, meaning the higher valued properties are undervalued. And in contrast, if the PRD is high this indicates values are progressive, meaning the higher valued properties are overvalued.
Another component of the audit is the independent appraisals. The auditor conducting the audit randomly chooses several properties throughout the county and conducts an appraisal on each property, just as if a bank had ordered an appraisal for a loan. These can be seen throughout the samples, as they are the ones without a seller listed. The ratio is a comparison between our value and the value from the auditor’s appraisal. Addressing concerns about commercial properties not receiving adjustment – there were 14 appraisals conducted, 4 of those were commercial. The ratios were 37.37, 38.51, 40.74, and 42.63 which is excellent. We did well on the others also.
This audit and the two prior years’ audits prove that our values are uniform and equitable. As the law states now, this is what I am tasked to abide by and follow. If someone feels property values need to be administered in a different way, those feelings need to be directed to the state legislature. An option available is something DeKalb County put in place. They have values frozen on homesteaded property. I can email you a copy of the bill if you would like. Or if the county commission wishes – I can just stop making yearly adjustments, but it will be at the risk of lost revenue. Also, not making yearly adjustments – based on market changes on different types of property in different locations – is what put Fulton County in the mess they are currently in.
One last item, there seems to be some confusion as to what inflationary growth is. Part of our digest submission is a report I provide which breaks down the total digest increase by real and inflationary growth. Real growth is any new construction. Inflationary growth is changes made based on the market (sales). The reason these are separated is that inflationary growth is removed from the equation when calculating the roll back rate. In 2017, real property increased $43m. Of the $43m, $12m was new construction and $31m was inflationary increases due to sales.
