AN ANALYSIS OF TIE RELATIONSHIPS BETWEEN THE ASSESSED VALUATIONS AND SALES VALUES OF REAL PROPERTY IN INGHAM COUNTY, MICHIGAN i I I I Thesis Io: III. Dogma cf M. s. MICHIGAN STATE UNIVERSITY Othmar AIIrcd LimboI-ger I955 ..... THESIS AN ANALYSIS OF THE RELATIONSHIPS BETWEEN THE ASSESSED VALUATIONS AND SALES VALUES 0F REAL.PROPERTI IN INGHAM comm, MICHIGAN By arm mm) LIMBERGER AN ABSTRACT Submitted to the College of Agriculture of Michigan State University of Agriculture and Applied Science in partial fulfillment of the requirements for the degree of MASTER OF SCIENCE Department of Agricultural Economics 1955 Approved by@ M Othmar Alfred Limberger ABSTRACT The property tax is an important item in the tax bill of the citizens of Michigan. It is also a major source of revenue fer local governments. Michigan law requires that the property tax be spread among taxpayers in direct proportion to the true market value of their tangible preperty. local assessors assign values to the individual properties fer this purpose. At the present time assessments of real preperty usually range far below true market values. At any relative level of assessment the assessed valuations have to be equal in terms of market values of properties to assure equality of taxation. Therefore the quality of assessment deserves close attention. The Iain.objective of this study'was to analyze the relationships of assessed valuations to sales values of real properties in Ingham County, Michigan. A sample of bona fide real estate sales transacted in the years from 1950 to 1953 was collected from the deed records in the County Register of Deeds office. The corresponding tax assessment data were obtained from the assessment rolls in the County Treasurer‘s office. Ratios of the assessed valuations of real properties to their cash sales values were then calculated for all the properties studied. The variations of individual assessment ratios within certain classes of properties were investigated by determining the ranges between the ratios at different percentile levels of the properties. The total range and three successively smaller percentile ranges were used. For comparisons between the average levels of relative assessment of different classes of prcperties the averages of the assessment ratios of the properties in each class were computed. Othmar Alfred Limberger The relationships of assessed valuations to sales values were investi- gated in terms of several individual questions, which dealt with specific aspects of the overall problem. 1. 2. 3. h. S. The variations of individual assessments in terms of sales values within assessment districts were expressed by the total range and the P95 - PCS’ P90 - 10, and P75 - P25 percentile ranges. These variations were found to be considerable. Less than 50 percent of the assessments conformed to standards of good assessment. Systematic inequalities of assessment were associated with different sales values of properties. The assessments in the majority of the assessment districts followed the usual pattern of decreasing rela- tive assessments with increasing sales values. Individual assessors assessed their districts at different average fractions of sales values. Some of the assessment districts had average assessment ratios which were more than twice as high as those found in other districts. County equalization compensates for some but not all of these differences. The prOperties were classified by areas of different degree of urbanisation. Rural preperties were found to be assessed highest in terms of sales values, followed by urban properties, whereas suburban and urbanized preperties showed the lowest assessment levels. Comparisons of the assessment ratios of different properties by years of sale and by age of buildings indicated that no significant differ- ences can be attributed to these factors. The considerable inequalities of assessments of real properties for tax purposes which were discovered in this study demonstrate an urgent need for improvements in this field. AN ANALYSIS OF THE mrxousms BETWEEN THE assesses VALUATIONS AND SALES VALUES or REAL mopm'rr IN mom comm, MICHIGAN By 0mm ALFRED mama A THESIS Submitted to the College of Agriculture of lflchigan State University of Agriculture and Applied Science in partial fulfillment of the requirements for the degree of MASTER OF SCIENCE Department of Agricultural Economics 1955 ! I’ii-I- .; ‘13. ACKNWMENTS The author wishes to eXpress his sincere gratitude to his advisor Dr. Raleigh Barlowe who initiated the study and through his valuable suggestions, helpful criticisms and patient counsel gave continuous help and encouragement towards its completion. The Opportunity to work under the Michigan Agricultural Experiment Station, which was granted upon recommendation of Dr. Lawrence Boger, Head of the Department of Agricultural Economics, providing the financial support which enabled the author to carry on and complete his studies in the United States, is greatfully remembered. A full scholarship for the period.of one year, administered.by the Institute of International Education, provided the means to start aca- demic work in this country. A later Foreign Tuition Scholarship from lMichigan State College helped to solve financial problems. The financial support from the Production Economics Research Branch of the United States Department of Agriculture, which financed additional help for the collection of data, was greatly appreciated. The author is indebted to Mrs. MiaBell Humphrey, County Register of Deeds, and Mr. Lawrence l’arker, County Treasurer, of Ingham County, Michigan, and their office staff for rendering their friendly assistance when the data were collected from records in their offices. Thankful recognition is due to Miss Phyllis Jagger for typing the final draft and.Miss Delores Heathman for typing the manuscript of this thesis. The valuable suggestions and wonderful encouragement which the author received from his fellow graduate students shall not be overlooked. d {1‘79 uuluwi TABLE OF CONTENTS Chapter I INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . Real Preperty TaxationinMichigan . . . . . . . . . . . The Problem Investigated . . . . . . . . . . . . . . . . MethodsofAnalysis .................. Characteristics of the Area Studied . . . . . . . . . a II COLLECTION OF DATA . . . . . . . . . . . . . . . . . . . e ProcessingoftheData................. Limitations of the Study . . . . . . . . . . . . . . . . III INEQUALITIES 0F ASSESSMENT RATIOS WITHIN ASSESSMENT DISTRICTSOOOOOOOOOOOOOOOOOOOOOOOC Variations of Assessment Ratios of Individual Preperties Within Each Assessment District . . . . . . . Variations of Relative Assessment Associated 'With Total Value Of PrOperties e e e e e e e e o e e e 0 Variations of Relative Assessment During the Time Period Of the Study 0 e a e e e e e e e e e e e o 0 Variations of Relative Assessment Between Buildings Of Different A89 in the CitY'Of East Lansing e e e e e 0 IV COMPARISONS OF RELATIVE ASSESSMENT BETWEEN VARIOUS AREASININGHAMCOUN'I'Y......o....o.o.... Variations of Relative Assessment Levels Between Assessment D18tf1¢t8 a e e e e e o e e e e o e 0 Variations of Relative Assessment Associated with Different Degrees of Urbanization . . . . . . . . . . . Comparison of Relative Assessment Levels in East Lansing and Adjoining Residential Areas of Lansing and .Meridian Townships o e e e e o e e e o e o e e e e o a o Page 10 13 18 22 26 30 30 to 148 St 76 Chapter SUMMARY, CONCLUSIONS AND RECOMMENDATIONS Summary and Conclusions Recommendations . DEFINITION OF TERMS APPENDIXaOOOOO BIBLIOGRAPHY . . . . O... Page 92 92 97 99 100 10k LIST OF TABLES Table Page I Number of Transfers in the Sampe of Each Assessment District Which'Were Actually Used in the Analysis, Broken Down by Sales Value Classes and Summarized for Each Assessment District and the‘whole County . . . . . 21 II Median Assessment Ratios, Average Assessment Ratios, Total Range and P95 - Fog, P90 - P10 and P75 - P25 Percentile Ranges of the Individual Assessment Ratios in all 2h Assessment Districts of Ingham County, Michigan, Expressed in Percents of Sales Values . . . . . . . . . . . 32 III Total Range and P93 - P 5, P9 - P10, P75 - P2 Percentile Ranges, Expresse in gerceng of Average Assessment Ratios, in 2h Assessment Districts in Ingham County, Michigan . . . 38 IV Important Factors Influencing the Average Assessment Ratios of Various Sales Value Classes of Real Properties in InghamCounty,lfichigan....o............. 142 V Average Assessment Ratios by Sales Value Classes. A: weighted‘Average for Ingham County and Four Selected Urban and Urbanized.Assessment Districts. B: 'weighted Average for 13 Rural or Suburban Townships and Four micalTOVnShiplo.o...........'....... MI VI Average Assessment Ratios and P90 - P10 Percentile Ranges for 1950 - 1953 for the 2h Assessment Districts of InghamCounty,Hichigan.................. ’49 VII Average Assessment Ratios and Equalized Ratios for the Years 1950 - 1953 in Eight Selected Assessment Districts of Ingham County, Michigan . . . . . . . . . . . 51 VIII Important Characteristics of Samples of Old and New Build- ing Preperties in the City of East Lansing, which were Compared to Determine the Significance of Differences Between Their Average Relative Assessment Levels . . . . . 55 IX Summary of Important Facts Relating to Changes of Assess- ments of Old and New Building Properties Between the Year of Sale and the Year After Sale in the City of EastIansing,Michigan.................. SB Table I XII XIII Page Average Assessment Ratios of All The Properties and of the hoperties on the Highest and Lowest Sales Value Classes, and P9 - P05 Percentile Assessment Ratios in 214 Assessmen Districts of Ingham County, Michigan, the Sample Includes Transfers made in the Years from 1950“].9530000000.000.000.000...O 62 Average Assessment Ratios and Equalized Ratios of the Assessment Districts of Ingham County, Michigan, for the Years 1950 - 1953. e e e e e e o e e e e e e e e o 66 Actually Applied and Suggested County Tax Rates for the Assessment Districts of Ingham County, mchigan in 1950-1955, Expressed in Mills of Assessed Valuations . . . 70 Average Relative Assessment Levels of Rural, Suburban, Urbanized and Urban Properties in Ingham County, Michigan, by Sales Values Classes, Assessment Ratios Covering the Whole County are Given as A: Weighted Averages of Individual Pr0perties and B: Unweighted Means of Assessment District Averages. Assessment Ratios Covering Selected Assessment Districts Which Include More Than One Area Classification Are Given Under C and D as Weighted Averages of Individual PrOpertieS e e e e e o e e o a e e o e e e e e e a e e e e 79 Average Relative Assessment Levels of Rural, Suburban, and Urbanized and Urban Properties in Ingham County, Michigan, by Years of Sale. Assessment Ratios Covering the Entire County are Given A: As Weighted Averages of Individual Properties. B: As Unweighted Means of Assessment Dis- trict Averages. Assessment Ratios Covering Assessment Districts With More Than One Area Classification Under C and D Are Given as Weighted Averages of Individual Hopertiea...o...o.oo.......o..... 80 Important Characteristics of Three Groups of Subdivisions of Lansing and Meridian Townships and the City of East Lansing Which Were Compared to Determine the Extent and Significance of Inequalities Between Their Respective Average Relative Assessment Levels . . . . . . . . . . . . 90 Figure LIST OF FIGURES Page Ingham County, Michigan, showing the classification of the county into rural, suburban, urbanized and urban areas............oo..o..........15 Total range, and P95 «- P05, P90 - P10, and P75 - P25 percentile ranges of individual assessment ratios in 2!; assessment districts of Ingham County, Michigan. The median assessment ratio is assumed as origin for each assessment district . . . . . . . . . . . . . . . 33 Average assessment ratios and median assessment ratios in 2h assessment districts of Ingham County, Michigan. . . . . 35 Average assessment ratios of properties of different sales values in Ingham County, mchigan. A: County average and selected urban and urbanized districts 0 e e e e e e e e e e e e e e e e e e e e e e hb B: Average of 13 rural townships and four selected rural tOWHShiPB c e e e e e e e e e e e e e e e e e e e h? Average assessed valuations in terms of book values and equalized.values, expressed in.percent of sales values, for three selected assessment districts of Ingham County, Inchigan in the years 1950 - 1953 . . . . . . . . e 53 Average relative assessment level of lowest and.highest assessed districts in Ingham County, Michigan compared to 100 percent of sales values . . . . . . . . . . 6).; Average relative assessment levels of real preperties in four types of areas characterized.by different degrees of urbanization, by sales value classes, in Ingham County, Michigan 0 e e e e e e e e e e o e e e e 81 Average relative assessment levels of real properties in four types of areas characterized by different degrees of urbanization, by years of sale, in Ingham.County, Rflchigan e e e e e e e e e e e e e e e e 82 Average relative assessment levels of real properties in rural and suburban areas in five selected townships, by sales value classes, in Ingham County, Michigan . . . . . . 83 Figure Page 10 Average relative assessment levels of real properties in rural and suburban areas of five selected town- ships, by year of sale, in Ingham County, Michigan . . . . 8h 11 Average relative assessment levels of real prOperties in suburban and urbanized areas of three selected townships, by sales value classes, in Ingham County,lfi.chigan..................... 85 12 Average relative assessment levels of real prOperties in suburban and urbanized areas of three selected townships, by year of sale, in.Ingham.County, Michiganeeeeeoeoosee-eeeeeeeeeeeee 86 --------------------- IIIIIIIIIIIIIIIIIIIIIIIII cm I INTRODUCTIG It is nothing new that pwpls dislike taxes. Everybody knows the story from the New Testament which tells about the Pharisees who brought the question about their taxes up to Christ, apparently hoping that they would obtain a divine condunation of taxes for the world thereafter. The Bible also mentions that tax collectors at that time were despised as public sinners. Even today people often third: of the Director of Internal Revenue as their archenq particularly at income tax report time. Rising taxes were one of the contributing causes of the American Revolution, yet Americans today pay more taxes than ever. Still noboch seems to be preparing a revolution or planning a plot. People realise that they need strong armed forces, better highways, better police pro- tection, bigger and better schools, more and better research and scores of other government services. All this costs money - tax monq. (he of the oldest taxes in this country is the property tax. Origi- nally it provided revenues for state and local goverments. The State of Michigan has withdrawn from this source, however, with the exception of the state-collected tax on certain public utilities. The property tax is still a major source of revenue for county and local goverments. At the same time the preperty tax is also an important item in the large total tax bill of the citizens. It still amounts to more than one- third of the taxes raised in the State of Michigan besides federal taxes.1 Since taxes are a painful matter anyway, it hurts especially when someone thinks that he has to pay more than his fair share. All taxes are spread according to some criteria which make it possible to determine Just how big a share of the total load everybody has to'bear. Such criteria which determine the basis for the spreading of taxes are the ability to pay, benefits received, uniformity of'yield, ease of administration and others. An example will illustrate the importance of basic criteria for a tax. The school tax is spread as part of the prOperty tax on the basis of the value of a.person's tangible property. If it were charged according to benefits received this would result in a considerable hardship for families with several school age children, whereas an assessment of the tax accord- ing to the ability to pay would certainly'look unreasonable to a rich bachelor. It could be argued, however, that either system was a just way to spread the school tax. When the preperty tax was introduced it was intended to spread it among the citizens according to their ability to pay. Since at that time people had.most of their wealth tied up in farms, houses, stores and so on it was easy to accept the value of the tangible property as a basis for taxation. These assets would easily be observed by tax authori- ties and did not change much over time so that tax evasion was made rather difficulte 1Denzel C. Cline, "Pay the Piper", Governmental Service Publications No. 1. Governmental Research Bureau, Michigan State College, 1953, p. 12. The ownership of tangible property is no longer a good indication of a person's wealth since the prOperty held in securities, bonds and other valuable papers sometimes make up a large share of a person's wealth. Despite this change in the nature of the assets held by individual tax- payers, the general property tax remained pretty much unchanged. It meets the need for additional tax revenues and offers great advantages through ease of administration and uniformity of its yield. Maw other taxes have been added to the citizen's tax bill after the property tax had been introduced. Such taxes as the important income tax and in mchigan the retail sales tax use other criteria than the property tax to distribute the tax load among the taxpayers. he general property tax is usually administered on a local basis. In Michigan the assessment of property for tax purposes is usually carried out by the township supervisors and in cities by appointed professional city assessors. Separate village assessors assess the properties in incorporated villages for the purpose of the village tax only. The taxes are collected by the treasurers of local govsrments. The Property Tax Law of 18143 provided that the township supervisors should be the assessors of their townships. Since supervisors are pri- marily elected for the administration of township affairs they do not necessarily have at the same time the qualifications to perform the diffi- cult and complex task of assessment. The situation in Michigan, however, is not typical of the United States. In most of the other states separate assessors are elected or appointed besides the supervisors or the assess- ment is made on a county basis. h It is not easy to achieve uniformity of assessment in a county, which is necessary to assure equality of taxation, as long as individual assessors assess the properties in their districts independently from each other. It is usually the desire of local peOple, however, to have as many government functions as possible reserved for local governments. People have to de- cide therefore, between the goals of good assessment and strong local governments. So far this decision was in most cases made in favor of the home rule. Real Property Taxation in Inchigan The Legal Back munch The Constitution of Inchigan states that "the legislature shall provide by law a uniform rule of taxation. . ."2 This is carried out in the General Property Tax Law by the provision that '. . . all property, real and personal, within the jurisdiction of this state, not expressly exempted, shall be subject to taxation.'3 This leaves no doubt as to whether a piece of real property is subject to tax- ation or not. This general rule for property taxation is then carried out in further detail by later sections of the law. Real property has to be assessed in the township or place where it is situated. The assessment is to be made to the owner or, if he is not known, to the occupant. Administrators, guardians and heirs can take the place of the owner.h 2f.‘.onstii'.uticn of Inchigan of 1908, General Property Tax Ins, State of Mchigan, 19%, Article 1, Sec. 3. 3General Pr Tax Act, Act 206, 1893. General Property Tax Laws, State of Michigan, 19 , Sec. 1. thid, Sec. 3. 5 0f major importance in connection with this study is the rule which says that "All assessments hereafter authorised shall be on property at its cash value. '5 The term cash value is defined by the General Property Tax law as "The usual selling price at the place where the property to which the term is applied shall be at the time of assessnent, being the price which could be obtained therefore at a private sale, and not forced or auction sale . . ."6 At the present tine properties are usually assessed at a level below the true market value. This practice is generally accepted in the state. In fact, the state board of equalization used 191:1 property values as a guide for the level of the state equalised valuations for the last decade. For the 1951; state equalization this level of assessment was raised to 110 percent of l9hl values. Although no state taxes were levied on general property since 1981; the values determined by the state board of equalisation are highly important for most of the counties, especially in Southern luchigan. Accordiu to a dedsion of the Attorney General these values have to be used in counties with overlapping school districts if an appeal to the state tax conclusion is made. The supreme Court ruled later that these stats figures have to be used by all counties with overlapping school districts even if no appeal is made. As a result of this decision many counties will therefore be equalised at the level of state equalised figures in the future. 5constitution of mchigan, op. cit., Sec. 7. 6General Property Tax Act, gp. cit., Sec. 27. The actual market values of real properties, harever, have more than doubled since 191:1. This shows that the state equalized values at 110 per- cent of 19141 values still lag considerably behind the price movements of the last one and one-half decades. This would have no serious consequences for the uniformity of taxation as long as the ratio of cash value to assess- edvalue would be equal in all cases. A 1'“ additional legal provisions might be helpful to complete the picture of property taxation in mchigan. “An assessment of all the property in the state, liable to taxation, shallbemadeannually, . . .n" whichmeansinotherwords thatthe assessment is to be kept up to date as a basis for annual tax levies. mly few assessors, however, actually revise all the assesaents in their districts annually. law assessed valuations are copied without changes year by year from the previous tax rolls and only property additions and changes are given consideration in the assessed valuations. Very often increasingly unrealistic assessments result from this process after a number of years. The legislators who drafted the Property Tax Laws did not expect perfect results from local assessments and anticipated the necessity for corrections. Provisions were made as it was mentioned earlier to make the equalisations of assessment possible, within assessment districts Iv the local board of review,8 within counties by the board of supervisors,9 7General Property Tax Act, 2. cit., Sec. 10. 8 Ibid, S.°e 28, 29’ 3°. 9Ibid, Sec. 31.. and in 1911 and at least every fifth year thereafter for the state by a state board.10 In case of a grievance as a result of the county equali- zation the local supervisor can appeal for his assessment district to the state tax board.u The assessment resulting from the process described above is the basis for the prOperty tax as determined by law: "The supervisor . . . shall procede to assess the taxes apportioned to his township . . . according and in proportion to the valuations entered . . . in the assess- This last section shows clearly the basic necessity of equal assess- ment on all properties if the tax burden shall be distributed Justly and in compliance with the law. The county equalization is supposed to eliminate differences between the relative assessment levels of local assessment districts in a county. This is acconqalished through differences between the county tax rates which are applied in the various districts. The relationship of the applied county tax rate in a certain assessment district to the rate charged to the county equalized value is equal to the total equalized valuation in the particular district relative to the total assessed valuation. The county tax rate which is expressed in mills of assessed valuation or dollars per thousand composes together with the school and township tax rate the total tax rate for regular taxes. his total regular tax rate has been limited by 1a13 to 15 mills of assessed valuation. The assessed moonstitution of mchigan, 92. cit., Sec. 8. nGeneral Property Tax Act, . cit., Sec. 31;. 12Ibis, See. 39. 13 Constitution of Michigan, . cit., Sec. 21. valuation has been defined for this purpose by decisions of the mchigan Suprue Court“ as the assessed valuation corrected by the process of equalization. It is sometimes difficult to raise a sufficient amount of taxes within this 15 mill limit. Special taxes beyond this limit can be voted in by the people of a taxing district up to a total of 50 mills. Municipal taxes for cities and incorporated villages are not included in the 15 mill limitation according to a la: of 19148. Taxes for the payment of debts which were incurred before the passing of the l5 mill limitation in 1932 are also outside the legal allowance. The Problem Investigated Considering the fact that the assessment for property tax purposes is performed partly by individual supervisors, who are untrained for the Job, and on a local basis it is not surprising that considerable inequalities of assessment do exist in many areas. The legislature anticipated such inequalities and established by law boards of equalization on the local, county and state level to deal with and eliminate existing inequalities. The success of the equalization process depends on the quality and complete- ness of information available to the boards of equalization. It cannot be expected that their work will alms result in perfect equality of assessment. GbJectives. In this study the main objective was to analyze the re- lationship of assessed valuations to market values of real properties in J"431;. Ignace City Treasurer v. buckinac County Treasurer, 310 Mich. 108. Ingham County, lflchigan. The analysis involved the relationships of relative assessments within single assessment districts, between assess- ment districts and between areas classified according to selected charac- teristics. The various problems investigated as part of this overall objective are listed below in the order in which they are dealt with in the follow- ing discussion of the analysis: A. Analysis of relative assessment within individual assessment districts: 1. 2e 3. This analysis involves comparisons between the levels of relative assessment of prOperties located within the same assessment dis- tricts. The assessment ratios were listed in arrays and the values for total ranges and certain percentile ranges were determined to obtain information about the extent of variations of individual assessment ratios within a district. The individual assessment ratios were grouped in classes accord- ing to: a. sales values b. years of sale to find.variations of assessment associated with these factors. The relative assessments in the city of East lensing were classi- fied and compared in respect to age of buildings to find.whether different building ages affected the relative level of assessment. B. Comparisons of relative assessment levels between different areas of assessment: 10 In this connection the assessed valuations determined by different assessors or for areas separated by distinct characteristics were compared in relation to sales values. 1. Average assessment ratios of the 2h assessment districts of the county were compared to show differences in the average level of assessment in these districts. 2. Relative assessments of properties located in areas which were characterized by different deyees of urbanization were compared in terms of: a. sales values b. years of sale to discover influences of urban mansion and suburbanisation on the level of relative assessmmt. 3. A comarison of average relative assessments was made between the city of East Lansing and neighboring subdivisions in adjoining townships to find what differences, if an, existed between the assessment of closely comparable residential properties in these assessment districts. Methods of Analysis In this study the relationship of assessed valuations to sales values, but not actual tax loads, of real properties were analyzed. The assessment - sales ratio method was mployed throughout the study. By this method assess- ments are emressed in percent of the sales values of the prOperties in question, which makes it possible to compare these ratios on an equal basis. Assessment sales ratio - Assessed 7 11 ti Sales value 11 In order to make the handling and processing of the total number of 5393 sales included in the study workable the data were recorded on punched cards and processed by IBM machines. The method of obtaining the data and their weakness and limitations will be discussed in the next chapter of this thesis. The data obtained for the analysis were investigated first to obtain some knowledge about their ranges and distributions as a basis for se- lection of suitable methods of analysis. It was discovered that the individual assessment ratios did not follow a normal distribution. In- stead the distribution was skewed left with a greater concentration of assessment ratios at values below the average ratio and a smaller number of cases ranging up to high levels of relative assessment. With the exception of two problems the comonly used statistical tests of signifi- cance which are based on the normal distribution could not therefore be used in this study. In the analysis of the variations of relative assessments of individual properties within assessment districts the assessment ratios for all the preperties transferred in each district had to be compared. This was done by listing the assessment ratios for each district in order from low to high ratios. Erom these arrays the total ranges of assessment ratios and the ranges at the P95 - 05, P90 - P10 and P75 - 25 percentile levels were selected. 0n the basis of this information the variations of individual relative assessments were presented and appraised. The second major question was related to the differences in the average level of relative assessments between assessment districts. In this case the averages of the assessment ratios in each of the districts were computed 12 and the values of these averages, which represent the percentage of total value at which the properties of each district were assessed, were compared to each other. Averages of assessment ratios were also used for comparisons between various sales value classes of preperties, between different years of sale and between areas showing different degrees of urbanization. In two of the investigations t-Tests could be used to test the signifi- cance of differences between average levels of relative assessment. In the case of the comparison of assessments by age of buildings in the city of East lensing as well as for the comparison between assessment levels in East unsing and in adjoining residential areas of Iansing and Meridian Townships all the properties were included in subdivisions. It was assumed that the subdivision averages, which were used in the comparisons, were normally'distributed.within each assessment district. For value comparison purposes, the property value data were divided into the following seven sales value classes: 1. Below $5,000 2. 8 5,000 - 3 9,999 3. $10,000 - $M,999 is. 815,000 - $19,999 5. $20,000 - $29,999 6. $30,000 - $h9,999 7. 850,000 and above In the study of the relationships of assessment ratios to building age, the city properties of East Lansing were divided into two age groups, «- those built before and those built after 19142. A city map of 191:2, showing 13 location and house number 'of all the buildings then in existence, was used in classifying prOperties into these two groups. The necessary information for the classification of area degees of urbanisation was obtained from a United States Census map of 1950 and from local real estate dealers. These breakdowns and classifications are discussed in more detail with the presentation of the analyses performed. Characteristics of the Area Studied The area covered by this study includes all of Ingham County, Michigan. Ingham County is located in South Central Mohigan in the line between Detroit, Grand Rapids, Muskegon. ‘ It covers an area of 559 square miles. The land is described as undulating plains of irregular relief with sometimes fairly steep short slepes, only in rare places as hilly. The county soil survey classified a large portion of the county as muck. Veatchls describes the soils of Ingham County as intermediate drainage loans to silt loans to sandy loams. Most of the land falls into the use classes I and II, only a small portion is classified as use class III.16 The farming enterprises of the area are described as being part of the Michigan Type of Farming Area V in which dairy and general farming pre- dominate. Moore” observed that the farms of the area, especially in 15 J. 0. Veatch, Soils and Land of Michigan, Michigan State College Press, 1953. leron a soil conservation standpoint land is classified into the land use classes I to VI. Class I thus requires no Special precautions against erosion, class VI would be entirely unsuitable for agricultural use. 17E. Howard Moore. The Effects of Suburbanization on Land Use in a Selected Seguent of the IansinggurEE-Urban Fix—1'32. UnquIIEEed PE. 15. thesis. Michigan State College, 1953, Chapter III. lit the vicinity of residential areas tend to have less dairy cows and hogs and more cash crepe and beef cattle than the average farms of Type of Fanning Area V. The relatively larger number of farms in this area that were operated on a part-time basis might be one factor responsible for this development. Part-time farmers prefer enterprises that do not re- quire long and regular hours of work in addition to their off farm jobs. According to the United States Census of 195018 the pepulation of Ingham County was 173,000 and had experienced an increase of 1:2,000'1'9 persons or 32.14 percent since l9h0. A major portion of these settled in the Greater Lansing area. According to the same source?0 Ingham County ranks sixth in Michigan so far as population is concerned. The pepulation density of the county, 309 per square mile, also ranks sixth in Michigan. The largest city in the area is Lansing with a population of 92,000. It is located in the northwest corner of the county on the main highways US-lo and US-127 which are important east-west and north-south routes in Michigan. Highways US-27, M-78, M-h3 and 14-99 connect Lansing to the northeast, west and southwest. An extensive system of mostly hard topped county roads and gravel township roads covers the county. Some commercial districts and considerable residential developments extend beyond the city limits of Lansing into the townships of Delhi, Lansing and Meridian and “Number of Inhabitants: Michigan, United States Census of Papulation: 1950, U. S. Department of Comerce, Bureau of Census, p. 13. 1 9Between one-fourth and one-third of this increase represents an in- crease in the student population at Michigan State University. These students were enumerated as residents of their home counties in l9h0 but as Ingham County residents in 1950. 20 Ibid, pp. 13-114. 14.78 14-99 x. Sc}; 34:3} 0 - ~ e .I.’e/ ’- -. ' ‘5. s -. m ' e\,‘..'- 55"? 'Q‘. ,0 ('1' ' _..__.-. -}.;/’I- ,- y. .'_ (Hui. 5:.- . I f“;- "12’. i” Williamston -' ’r/fx: . ’1': II. - " ._' h... 3‘ locks T-US-16 Webberu ville again may —-~--—Inm White Oak\ 44.36 ‘Kfir‘ér’fiili suburban Figure 1. Ingham County, Michigan, showing the classifi- ° cation of the county into rural, subm'ban, urbanized and urban areas. 16 comprise with the city of East Lansing the Greater Lansing Area. This is the main business and industrial area of the county with the geatest concentration of population. The city of Mason, which is the county seat, lies roughly in the center of the county on highway US-127, the city of Williamston in the northeast can be reached on highway US-16. The rest of the county is predominantly rural and lately in the north and northwest strongly sub- urbanized. Since the phenomenon of rapid urban expansion and extensive suburbani- sation was considered to be an outstandingly important factor in Ingham County and since these deve10pments were expected to have a considerable influence on assessed valuations of properties (parallel to their in- fluence on market valuesa) special attention was given to these factors. With the aid of a census map of 195022 and the counsel of local real estate dealers, the county was divided into four types of areas, each reflecting a different degree of urbanisation. ‘ The areas incorporated in the four cities in the county were classi- fied as urban. The urbanized areas include all areas outside those cities in the townships of Delhi, Lansing and Meridian which were classified as such by .the United States Census of 1950 on a population density basis. The urbanized area includes completely built up residential and commercial areas and also the incorporated villages in the county. All other sections which included extensive subdivisions that were already built up or in the 21 E. Howard Moore, 0 . cit., Chap. IV. 22Humber of Inhabitants: Michigan, 0 . cit. , p. 36. 17 planning and construction stage were classified as suburban. This area covers the remainder of Lansing Township, almost all of Meridian Township and large parts of Delhi and Alaiedon Townships and extends further east and southeast from Lansing along the major highways. All the rest of the county was classified as rural. CHAPTER II COLLECTION OF DATA It was mentioned earlier that the assessment-sales ratio method was used in this study. Information.on sales of real properties made in Ingham County were obtained for this purpose. The deed records in the County Register of Deeds office were searched for all bona.fide sales transacted in the year 1953. Sales involving a consideration of $1,000 or less were not included in the sample to avoid the disturbing influence of inaccurate data. Frequently such low cons siderations are used.in paper transfers which are performed to change ownership arrangements and therefore do not report the true value of the property. This procedure also excluded sales of extremely small and.low valued.pr0perties which were expected to show wide variations in their assessment ratios. The consideration involved in a transfer was computed.fron.the amount of federal revenue stamps attached to the deed. .A federal revenue stamp costing 55 cents must be attached to the deed for every $500 of the coup sideration or fraction thereof. This procedure was necessary since most deeds do not list the actual amount of the consideration involved. The united States Department of.Agricu1ture, in.studies of land.values, has often based its estimates of price levels on revenue stamps. It was therefore very important to know the degree of reliability of this source of information to justify its use in studies involving the sales values of properties. 19 Some investigations have been conducted; to test the reliability of tax stamps as an indication for considerations in transfers and found them to be highly accurate as long as nonpbona fide sales were excluded and mortgages were taken into consideration. Great care was used to eliminate, as far as possible, all non-bona fide sales such as family transfers, mortgaged.pr0perties without a precise statement of the mortgage balance, and transfers on contract involv- ing loan institutions. In the last two examples the federal revenue stamps attached to the deeds account only for the cash balance paid at the time of the transfer which is only a fraction of the true market value of the preperty. The use of these fractional sales values would cause an error in the assessment ratios which would appear to be higher than the true ratio. The sample started.with a complete record of all bona fide real estate sales involving a consideration of more than $1,000, of which the deeds were recorded in.1953. more than half of the sales transacted involved properties located in the city of lensing. Since this Lansing sample was considered large enough no attempt was made to gather more cases from the transfers recorded in earlier years. Most of the transfers from 1950 to 1952 in the city of Lansing involved land contracts which were paid off inrl953. The data collected from the 1953 records included a large sample of building lots. 1See: Norman Hybroten. "Estimating Cash Considerations in Real Estate Transfers from.Internal Revenue Stamps." Journal of Farm;Econcmics, Vel. 30, No. 3, Aug. 19h8, pp. 558-561. Robert.Ie Tontz, Jeppe Kristensen and 0. Curtis Cable, Jr. "Reliability of Deed Samples as Indication of Land Market Activity.” Land Economics, Vbl. 30, No. 1, Feb. l95h, pp. h7- h8. The high reliability of sales value estimates from.federa1 revenue stamps has also been verified by a recent study conducted by the Federal Land Bank which involved several selected counties in Southern Michigan. 20 For the predominantly suburban townships in Lansing, Delhi and Meridian data on bona fide transfers were also assembled from the deed records of 1952. Since only a small number of real property transfers could be obtained for the rural townships from the deed records of 1953. and 1952 the sales re- corded in 1950 and 1951 were also included in the samples. In 1952 and in the years previous to it the transfers involving considerations of less than $4,000, which usually represented vacant lots, were excluded from the sample. A special stuw was planned for the city of East Lansing involving the comparison of assessments according to different building ages. For this purpose a further enlarged sample seemed desirable. Therefore the sales transacted in 1951: were also included. It was discovered in the process of the analysis, however, that the assessment ratios computed from these values was not fully comparable to the rest of the sample. The reason for this will be discussed in the next section of this chapter. These ratios were therefore not included in the final analysis. Table I shows the number of transfers that were assembled for each of the assessment districts and actually used in the final analysis. The district samples are divided into groups according to the sales value of the preperties. The table lists also the total number of transfers in each assessment district and in the whole county. ' The information obtained from the deeds was in each case the date of of sale (date of land contract), the parties involved, the exact descrip- tion of the property transferred, the amount of internal revenue stups attached, the consideration involved whenever mentioned in the deed and a sale on land contract, if so indicated. 21 has: ”apnoea ea Hopes med emma omm mm am on no 3 om :mm mm .3 o: no» 2h an m: mo » aspen. NH 3 N N a 5% ma 0H no RH cm: 15’. N: Ra «Ra A mm m N H N N H p. m 1» H In 4' 51 R O N 0\ ON 2} .3 01 mm as m3 m3” ON 0.... s OH 3,. ‘0 ma Nu 8w now new 5” 9 ~04 on." ma Into ;u049wetttrm uossn "' IO 3131:3331 ’I'Ieuvt 4883 i i : i i 3 ! ! i 9M9H ’ " IUA .ofiptdqxoogg_ efiatttd 91311991 9 ITIASU'BQ d'yqsunom 0°49m31IIPM J‘1'30 9117104 ptetxzeaum. :3 | l i I I | 1 haeA d‘pqsuno 93PT¢QX°°&S mwww 0x901 'dnt stream Ioaeq 17111290 mil-1931113 Hanson anoma.uma nza aonHmHn azmxmmmnma.mo¢n mun nuNHmazznn a: mango gs Eda E .58 Eomm £ng a; E nun: 5.354 new: EB: 82.83 gamma moan no flea use. 3 manna so fine: H and.“ opens s_ooo.omw mam.mqa I 0mg mmmammw u ooo.o~» «$.35 . ooo.man mam.naa . ooo.oa« mmm.m a . ooo.m a ooo.m a IOHom condo end—b 22 To facilitate the checking against the assessment rolls the cases selected from the deed records were then arranged according to assessment districts and subdivisions. Care was used to identify the corresponding property descriptions in the tax rolls with those given on the deeds. The identification was sometimes rather difficult since the same properties were frequently described in different ways in the two sources. Whenever there was reason for doubt whether the descriptions involved the same piece of prOperty the case was omitted from the sample. From the assessment rolls the assessed valuation and the amount of regular taxes were obtained for the year of sale and the year after sale. This then provided the basic available information from which the compu- tations and analyses were made. Processing of the Data The amount of the consideration for each deed was determined by divid- ing the value of the internal revenue stamps attached to the deed by .0011. Value of federal revenue stamps in 3 . 1,000 1.1 The assessment sales ratio which was used exclusively in the analysis Sales value - throughout the study was then computed by using the formula: Assessment sales ratio - Assessed value .100 Sales value his means that the assessed value is always expressed in percent of the sales value. As a rule the assessment sales ratio was computed from the assessed valuation of the year after the property was sold. This assessment is made as 'of January 1 of the year after the sale. It seemed most accurate to use this value rather than the assessed value of the year of sale since 23 it usually reflected the condition of the preperty at the time of sale better, whereas the assessment of the year of sale took only account of the nature of the preperty in the earlier year. When, for instance, a new house was sold the assessment of the year after the sale included the house. The assessment made on January 1 of the year of sale was often made on the empty lot only or on the partially completed building. The same was true for the sale of older buildings if changes or improvements were made shortly before the sale of if the assessor decided to change the assessed valuation of the particular property during this year. ‘ In a limited number of cases the assessed valuation of the year of sale had to be used in the computation of the assessment ratio. This was the case if the prOperty could not be identified in the assessment rolls of the year after the sale. Sometimes pieces of preperty were integrated with other parcels as a result of the sale and were treated as on property in the assessment rolls. Whenever discrepancies in the value data sug- gested that the property had undergone marked changes between the sale and the first assessment after the sale the assessed valuation of the year of sale had to be used. Sometimes, for example, the deed only covered a vacant lot whereas the assessment after the sale apparently was made on a building also which had been erected in the meantirm. This problem leads immediately to the question of changes in the assessed valuation from the year of sale to the year after sale. It was discovered that a sizable portion of the properties included in the study experienced changes of assessment between the two years observed. In three out of the 2h assessment districts more than to percent of the preperties were found to have undergone assessment changes, 25 percent 2b of the assessment districts showed changes in assessment on more than 30 percent of the prOperties studied and in two-thirds of the assessment districts more than 20 percent of the preperties experienced changes in assessment. Since it was considered that these changed assessments could show a significant difference from the unchanged assessments, a preliminary investigation was made to determine whether these changed assessments would necessitate or justify a separate treatment of the preperties in- volved. For this purpose all the assessment ratios were classified into the following six groups: 1. No changes of assessment were made between the year of sale and the year after sale. 2. Upward adjustments of less than 75 percent of the original assessed valuation. 3. Upward adjustments of 75 percent or more of the original assessed valuation. ‘ h. Downward adjustments of less than 75 percent of the original assessed valuation. 5. Domard adjustments of 75 percent or more of the original assessed valuation. 6. The assessment of the year of sale was used to compute the assessment ratio. It was finally decided to treat the groups in which changes had been made together with the properties with unchanged assessment but to keep separate only the properties where the assessment of the year of sale had been used to compute the assessment ratio. 25 Two reasons justified this decision: 1. One practical reason was found in the fact that no systematic difference could be detected in the relative level of assessment of the properties with changed assessments as compared to those with no such changes. From an inspection of the individual cases the expectation sensed justified that these changes were generally an improvmnent of the quality of assessment in terms of the deviation of individual assessment ratios from the average assessment ratio in each class. A different kind of observation was made in cases in which the assessed valuation of the year of sale had to be used in the computation of the assess- ment ratio. In two assessment districts the average level of assessment of these properties deviated considerably from the level of assessment of the properties for which the assessment of the year after sale had been used to compute the assessment ratio. This seemed to make a separate treatment of these properties necessary, especially since their number amounted to a large fraction of the respective class samples. 2. The logical reason for the way in which the properties were grouped together was the consideration that am change in an assessment made by a local assessor must have been made for the purpose of improving the assess- ment so that it seems only fair to use the assessments after the adjust- ments without distinction from unchanged assessments when a stuck of the quality of assessment is made. For the same reason the preperties for which the assessment previous to an adjustment had to be used could not be treated in the same youp. To facilitate the handling of the large sample of the study the in- formation obtainsd and canputed was recorded on punch cards for processing 26 on IBM machines. All the information necessary for classifications was coded, and as a preparation for final analyses arrays of assessment ratios and necessary computations for statistical tests were obtained for all the classifications desired. Limitations of the Study The method of computing the consideration of a transfer was explained in the previous section. Reference was also made in the first section of this chapter to three sources2 which reported on critical tests of the reliability of internal revenue stamps as indications of considerations in deeds. A few more details from these sources seem to be apprOpriate in this connection. It was mentioned in Tontz' article that the esti- mates of low considerations from revenue stamps are not very accurate. This is one reason why the properties with a sales value of $1,000 or less were eliminated from the sample for the year 1953. For the same reason the transfers with a consideration of less than $14,000 were ex- cluded from the sample for the years 1950 to 1952. A possible error in the range of 8500 given by the internal revenue stamps could be fairly great relative to small total value. The estimate for the total value, however, could only be too high which would result in an assessment ratio that would be too low. Since low value properties are usually assessed at a relatively higher level than high value preperties, an increase in accuracy would only support the findings of this study. 2 Norman Nybroten, Q. cit. , pp. 59-60. Robert L. Tontz, Jeppe Kristensen and 0. Curtis Cable, Jr. , o . cit. , p. 147. Federal Land Bank study in Southern Michigan counties. 27 Whroten indicated in his article that for higher sales values an increas- ing number of prOperties show a sales value that actually coincides with the $500 tax classes. This leads us to expect a high accuracy of the sales Value estimates at high sales values. Criticisms might be raised against the use of the sales price to determine the relative assessment. The Etchigan Property Tax Law speaks 3 It is certainly possible that the sales price of a piece of property does not correspond in this connection about the "usual selling price." to the “usual selling price." Since, however, no other data indicating the cash value are available, the actual sales price provides the best neasure for this purpose. Special attention was given, as mentioned in the previous section, to the elimination of at least the systematic biases from the sales values obtained. Renne and Lord have suggestedh that more attention should be given to the use of land productivity values instead of prices in the assessment process and in the evaluation of the quality of assessment. They argue that the use of the productivity value of land might result in a more realistic ratio of assessed valuations to true values. It would eliminate the influence that lack of information and unequal bargaining positions of the parties in a sale have on sales prices. This approach holds consider- able promise for strictly farm lands if a suitable index of land productivity 3 General Pmperty Tax Act, Act 206, 1693. General Property Tax Laws, State of Michigan, 19141;, Sec. 27. ItR. B. Home and H. H. Lord. "Assessment of Montana Farm Lands." Montana Agricultural Experiment Station, Bulletin No. 3118, Bozeman, Montana, 1937, p. 18. 28 values were available. It would have to be modified considerably, however, where property values are affected by urbanization influences. It also could not be used.where residential city prOperties are involved. Properties of different types and values are likely to be assessed at different percentage levels of their market values. A.sample would have to be representative of the percentage shares of these various types of prOperties of the total property value in a sample area to per- mit a valid estimate of the average relative level of assessment in this area. For this purpose a stratified sample would have to be taken. The sample used in this study was determined solely, however, by the frequency of bona fide sales transacted during the years in study. One cannot assume, therefore, that this sample is representative of the composition of the total prOperty value in Ingham County or in any assessment district thereof. This limitation was kept in.mind when the average assessment ratios cal- culated from the available sample were used in some sections of this study as the best estimates of the relative assessment levels that could be obtained.5 This also brings up the problem of the best measure of central tendency which.weuld indicate the "normal" or ”right" level of relative assessment. SRoy Elough in his article on ”Recent Developments in Methods of Real Estate Equalization in Wisconsin," published in Vblume X of the Journal of Land and Public Utility Economics, presents similar considerations. He describes the modification ofithe sales ratio method, which was used as a basis for tax equalization in'Wisconsin, by more reliance on personal Judgment and mass assessment of all the properties in an assessment dis- trict. Hbre realistic and representative sampling results were the goal of the change in methods. . 29 Much could be said for using the mode indicating the most frequently found level of relative assessment. The arithmetic mean, however, takes also account of extreme values in the assessment ratios and also offers ad- vantages for application of statistical tests. Therefore, the arithmetic mean was used as a measure of central tendency throughout most parts of the study. The only exception to this rule was made for the presentation of the various percentage ranges in Figure 2. There the properties were centered around the median to provide for a more informative arrangement of the ranges shown. The conditions related to assessment of real property for tax pur- poses, which were analyzed and presented in this study, are probably typical for the whole State of Michigan. The findings, however, cannot be applied directly to areas outside of Ingham County without further study. CHAPTER III INEQUALITIES 0F ASSESSMENT RATIOS'WITHIN ASSESSMENT DISTRICTS Variations of Assessment Ratios of Individual Properties Within Each Assessment District The most basic task in the process of assessment for tax purposes is the assessment of individual properties on a local level. The resulting assessed valuation represents the basis for taxation of each piece of property. The taxes which are to be raised in a taxing district are spread among the property owners in direct proportion to the assessed valuations of their properties. This means that the amounts of taxes paid for various prOperties stand in the same relationship to each other as their assessed valuations. To assure that the taxes levied by this method are spread Justly'the legislature has provided that the assessed valuations be tied directly to the market values of the reapective properties. If the individual assess- ments do not conform to this rule the tax load will be spread unequally. Corrections can only be made by reassessment of the individual properties. The local board of review is supposed to adjust the assessments annually before the taxes are assessed to the property owners. The equality of taxation.within a taxing district depends therefore exclusively upon the equality of assessment in terms of market values of the taxable proper- ties. 31 In order to determine the quality of assessment within each assess- ment district the individual assessment ratios within these districts had to be compared with each other and their distribution around the average level of assessment had to be studied. The investigation in connection with this question was mainly con- cerned with the ranges of assessment ratios at various percentile levels of all the properties studied in each district. These different per- ' centile ranges are presented in Table II and Figure 2 for each of the 214 assessment districts of the county. Besides the total range of assessment ratios in each assessment district three more ranges of successively smaller fractions of the number of cases involved were computed. These ranges were studied for 90 percent of the cases by excluding the upper and lower five percent and in a similar way for 80 and 50 percent of the cases in each district. The total range and the various percentile ranges were listed in Table II for the 2h assessment districts. The averages of the assess- ment ratios and the median assessment ratios were also given. The table shows that in each of the assessment districts the median assess- ment ratio is smaller than the average which demonstrates the skewness of the distributions of the ratios within each district. The ranges of assessment are also shown in Figure 2. There the assessment districts were corresponding to Table II listed in order from the narrowest to the widest total range. The median assessment ratio was chosen as the origin in each assessment district so that the number of properties are split in half in each case. The 50 percent of the preperties in each district, with assessment ratios smaller than 32 0.00 0.00 0.00 0.00: 0.000 0.0 00.3 0.00 000000» 00080 0.00 0.00 0.00 0.000 0.000 0.0 00.00 0.00 :03: 0.00 0.00 043 0.000 0.000 0.0 00.00 0.00 0000 00005.0 0.00 0.00 0.00 0.000 0.000 0.0.0 00.00 0.00 053.0 0.80 0.00 0.00 0.00 0.000 0.000 0.00 00.0: 0.00 0000080 0.00 0.00 0.00 0.20 0.000 0.0 00.00 0.00 000330 000.010 0.00 0.00 0.00 0.000 0.000 0.00 00.5 0.00 000330 .0030 0.00 0.00 0.0.: 0.00 0.000 0.0 3.00 0.00 5000.8: 0.00 0.00 0.00 0.00 0.000 0.0 00.00 0.00 00000 0.00 0.00 0.00 0.00 0.000 0.00 00.00 0.00 50000 0.00 0.00 0.00 0.00 0.000 0.00 2.33 0.00 0000,0030: 0.00 0.00 0.3 0.00 0.000 0.00 00.00 0.00 80.0.0.0 0.00 0.00 0.00 0.00 0.00 0.0 00.0: 0.00 000 8.0.5 0.00 0.0.. 0.00 0.00 0.00 0.00 00.00 0.00 0030 0.00 0.00 0.00 0.00 0.000 0.00 00.00 0.00 00023.0 000030030 0.00 0.3 0.00 0.00 0.00 0.00 00.00 0.00 3000.80 0.00 0.00 0.0: 0.00 0.00 0.0 00.00 0.00 0980 0.00 0.00 0.3 0.2. 0.00 0.00 00.00 0.00 0000500003 0.00 0.00 0.00 0.00 0.00 0.00 00.00 0.00 000000050 0.00 0.00 0.00 0.00 0.00 0.00 00.00 0.00 0000 03200000: 0.00 0:3 0.00 0.00 0.00 0.00 00.00 0.00 30.3 0.00 0.00 0.00 0.00 0.00 0.0 00.00 0.00 000000» 0000000030 0.00 0.00 0.00 0.00 0.00 0.0 00.00 0.00 0003.60 030500003 0.00 0.00 I. 0.0.. 0.00 0.00 0043 0.00 0000550 amass-.0 0.9330000 0 . 03.0.0 0.30.0 00.3.0.0 0.30.0 0.00.0 #0805303 9000:0000: 9.0380300 0.0830303 00.0.3.3 0 00 .. 0 00 000 .. 000 00 0 .. 000 030... 080000 08.5 no as: 500.: 00000» $000 .00 00550 00 30000000 .5000:— .0.00000 0.00000 .00 000000000 gamma an dd 2H 82.2.“ Hammad adage a .mo mung SHEEN mum .- mbm a: 00.0 .. 00.0 .000 .. 00.0 a: 0050 0000.0 .8003 0.3008000 00300 000.040 020000000 000%. 00 0.0000 "I 33 30.0.3000 000000000000 00900 00.0 00030.8 00 001.803 00 0.30.0 00008000000 5000a one .namnsofim .5500 an? no 00.00.3000 0.850003 :0 .00 00000.0 00000800000 00.60.200.00 .00 now-00.0 000950.00“ mum ... Ed 05 5.0.0 n 00m .mom a 00m 0.00 00900.0 030.0. .0 0.00000 a... _- 000000 000 00 00 00 00 00 00 00 00 00 z 00 00 00 ’- ———°_: » . . .A..... .......0..000...0..... .. . H 0000000 00080 -0000... , . . 0T 0 \ol’ I O . n \ . 0 ..‘r\\ v I . I / .800: .0000 0:00:00 00005.0 0.000 awmdnoa .939 M00003 .5 m.0030 5000.3: 0.0000 5:030 0052 030000.30 mmm .. mpm ... m own!» 030000.80 of a cam ... l 0000." 030000900 mom I mam ... m ovum.“ H33 I D 0003.. H 538...: sub OOHuu p - r - - 308200 0m." 0% 8H 0% 0.0 . , m \.‘\\.1‘{l_ I .../I, I .1 .\~..\~ ’/ V-’ ~ \b...‘ \ ‘0 - .3. 0 II‘ \ . N‘ > ,, :\. Q V. . - , \ ._ . . x . .- f, . .. \x , . . \ . . . \ . . ... \ J‘ . 1 D C \ In . . , \\ \ . A d. . .3250. I... Q . - n I ..IS . 093.0803 80.3 38 09.33 30> 0333.0 0330800 ff . n m .fi-\ .3 . N. . I: .ll'l I c m l5..\Ll\ Il\\l.| . W0 . z... , _ .L Vn/ \l .H 1A.}- . . I... if}... _ 0. M] t ...”... ._ rt... - . .....A .\.... . LT \ ’ If! 0. I. VII ‘ - w I . I \ x n \ N 'jll/ . ,1 .\ . . A \ .\ .I - ..IU' R o \ X . ..x .vle . ... . \ _ O I k \ a K ‘ K L - 05.30.94 hogan oHHEDno3 gang 0:6 03.533 808 .0003; 003.3800 0288.0 03933 DE "fl 3h the median, are symbolized by the bar to the left of the origin. The 50 percent with higher ratios are shown to the right of the zero point. This median assessment ratio at the origin assumes a different value. in each case, however. These values are given in Table II and Figure 3. Thus Figure 2 does not place these ranges into their original position in terms of percent of sales values but alines them at their midpoints for direct comparison. The full ranges as given in Table I are broken up into a negative section below the median and a positive section above it in Figure 2. In order to illustrate the extent to which the ranges in Figure 2 were shifted by assuming the median as the origin for each assessment district the average and median assessment ratios are shown in Figure 3. The largest deviation of medians appears between Wheatfield and Meridian Townships. It amounts to hh.l percent of sales values. The assessment districts were arranged in Figure 3 in order from the highest to the lowest average assessment ratio. Figure 2 shows also that in all the assessment districts the distri- bution of the assessment ratios is skewed left. More than half the number of properties in this case are assessed at a relative level of assessment below the average and a relatively large number of assessment ratios of individual preperties are found to be concentrated in a relatively small range which necessarily is limited in regard to its lowest possible value by zero assessment. No such limit is given for high assessments. The total range will therefore be mostly affected by the highest assessment ratio since too high assessment ratios can be and are found to be spread over an unlimited range. Total ranges are found to vary 35 Percent of sales value wading.H.H-H-n-n-n-..u.u.n.na.“HWHMMJ 44 H”m”H““mum”HHHHNNNNNNNHH”munmmumk mung I;wwwwwwwwwwwww. . . anew F »+ 5.3.50: lemmemWmmmm.mmmmsemi......... mflewmmmmmfi .a. o o L[ fr 'fiogm ...... -3383 mmmmmmmmmmmmmmmmmmmmmmmmmflum isomers ........... n ob oxogm Newm”mwwmewwwmwwHmH...H.HHHH............. mmmHmwmmmmmwmmmwmm .es 8.. L .......... Ox ..... .0. .......... -m‘aa— IN ...................... ”.1”.st .............................. . uniHHmmmuunmwwwwwwmuwmumnwwmmus...» .... owdads nut—knmuwwwwwmxw”nummmmmm _ .. cinema and: .clnlululul 6.41 ........ J1 L . . l. i n} l _Illxx”Amman”H”xxwvvn.”Lamar? ....... Tmmmmmmmmmmmuwwmmmmu {11-1.l:...l.u..s ......................... hon—=3 _ . . Kr. ........ Hanan _.H.H.H.H.......H.«Huu4.n.nm. ...................... .r....L..F. .W...H...U.H.H.Hmmmmuxmxn.H. .95.. AA.” ........................................... £8 00.; fl .................................. wag .......wwmumm.”.H.H-H-H.u....H.Wu.J..H.“as- .... ....HAA. ............ ”and ........ Wu ............. E “Human”Hmm“HHNNHWWWHHHH“mu““nnuwnw. - - . ..x“mmmm“”mumunmnxnmmmmmmmu 5.3 .111... I. ..... I . . .5ng . madman 00000000000000000000000000000000000000000000 0 co900000.cacao0-0000000000000090.-. ocoaa o o.aaa a .........mmaa.vuwnmamm.“33.“... whfixnvflwnl... W.......H.“.annmmmfimmwuxumm”333%.. . ,.wHHH“mum“xummmmmnmmmmmmwumma.”Lawn“... 3.0.8 .H”Hummus3.“.”5.33.3.”35.30””? 5.8 new names: 9 neg ......nmIHMAHmmHHw”..mwnxmmxx...n....H.H.H...x..umuxn I...u........mun“???H.HALWWVHAAAHM.“ .h.n.u.n.uwuuuuuunuuuHuunnunnuuunuwufl ”unuuuunuuununuuu. ”HunnuuuunufinuuunnHnquuununn”unnnuuunuunuuunu ....u.ucufidnwnflonfionflfi.”.H.W..WHIH.H...-.u.nnnn.n.u....n.u.n.u $333....H...u.”.u.u.pnnuunrnwununn.u.u.n.u.w ..H.H-u-uuunuun“”huuunu.””Huuuunnuruunuunu.u.H.HHHHHHHHHHHHHM ”.HJHHHHHHHHDHH”HWHHHHHH.H.H.H.H.H.H.nlnuunuunu LAB. cinema 330.94 T r m J 01 W m o o m m, m m o h m. 2 1 Figure 3. Average assessment ratios and median assessment ratiosin 2h assessment districts of Ingham County,‘Michigan. from a difference in the assessment ratios of h0.h percent to h95.8 percent of sales values. Ranges up to 100 percent are very common. The fact that assessment ratios of 7.3 percent and 503.1 percent are found in the same assessment district indicates extreme deviations of relative assessments from an equal average value. Since, however, as indicated in the first chapter, undetectable errors of various kinds might be included in the data used for this study, only limited emphasis and importance was attached to the extreme values as indicated.hy the total range. It may be mentioned in this connection, however, that three out of the four assessment dis- tricts with the widest total ranges of assessment ratios involved cities. It was assumed that errors were responsible for some of the extreme values of assessment ratios which determined the total ranges. In order to eliminate these errors and to obtain a more realistic picture of the distribution of assessment ratios the relative assessments of various percentile levels of the transfers in each district were determined. The percentile range P95 - P65 was assumed to be sufficient to eliminate errors causing extreme values of individual assessment ratios. This was actually accomplished as shown in.Tab1e II and Figure 2. The P95 - PbS percentile ranges do not show any similarity or association to the total ranges. All four cities in the county, three of which were mentioned to have extremely large total ranges of relative assessments, show comparatively small or average ranges for the P55 - P55 percentile range. The values for the P§5 - PbS percentile ranges vary from 27 percent to 69 percent. This is still very high for a good assessment. Deviations of 10 percent of the average assessment ratio can be accepted as a tolerance 37 for a good quality of assessment in a district. The Pb; - 05 percentile ranges go far beyond these tolerance limits in all cases. To compare the quality of assessment as indicated by the various percentile ranges on an equal and comparable basis for all the assessment districts these ranges were expressed in terms of the average assessment ratio in each assessment district and are presented in Table III. From this table we see that the best, that means the smallest, P95 - PbS percentile range still amounts to 75.8 percent of the average assessment ratio. In all other cases this range is still larger than 100 percent of the average assessment ratio and extends over more than 200 percent in one district. This means that in the case of the district with the smallest P95 - PbS percentile range (measured in terms of the average assessment ratio) the highest assessed.property shows an assessment ratio more than twice as high as the lowest assessed.property which distributes their reapective tax.loads according to the same proportions. The assessment ratio of the lowest assessed property in this percentile range amounts to seven-tenths of the average ratio in this district whereas the assessment ratio of the highest assessed pr0perty is almost one and one-half times as high as the average. In the district with the highest P§5 - PbS percentile range of assessment ratios, however, the highest assessed property pays proportionally more than nine times as much in taxes as the lowest assessed.pr0perty, the lowest assessment ratios amounting to one-fourth of the average and the highest is 2.3 times as high as the average. The values in Table III representing the various ranges in.percent of the average ratios are a direct indication of the quality of assessment. TOTAL RANGE AND P95 TABLE III - P05, P90 - 10’ P75 - P25 momma RANGES, MESS- Il PERCENT OF AVERAGE ASSESSMENT RATIOS, IN 2‘: ASSESSMENT DISTRICTS IN INGRAM COUNTY, MICHIGAN 38 Total range ’95.. P05 P90 - P10 P75 - P25 Dunsville 91.78 - 69.29 33.39 winimton Township 183.59 162.171 120.017 50.171: Stockbridge Village 221.65 135.57 111.19 36.91. Locke 161.16 137.59 113.76 5h.57 Uillianston City 185.62 75.82 68.217 31.73 Bunkerhill 167.21 187.10 137.98 50.98 Hebberville 293.25 181e71 97e50 51.59 Leroy 235.18 119.73 1017.05 1.8.75 Aurelius 227.01; 189.93 121.11 62.118 Stockbridge Township 232.69 1173.01 80.92 32.03 Vans 225.59 1.56.73 1.15.36 61.171 Alaiedon 252.31 132.01. 87.19 37.29 iheatfield 202.81 11.7.1.2 102.75 53.16 0.1111 320. 86 1179.01 103.61. 1.7.35 Meridian 1.87.05 203.71 128.97 51.29 Leslie Township 221.91 1217.68 103.83 511.68 Onondaga 369.63 133.60 m.23 53.22 East Lansing 665.95 105.63 68.36 27.35 Lansing City 865.92 125.79 85.h8 30.59 Leslie Village 1196.72 126.00 811.178 3h.27 39 Since the tolerance limits for a good assessment are expressed in percent of the average the ranges computed as relative values of the average show immediately how the actual assessments compare to the tolerance limits. A range of five percent at an average assessment of 25 percent would be rated equal by this method to a range of 16 percent at an average of 80. Both ranges would be equal to the total tolerance of 20 percent of the average in this case. The P50 - Pic percentile range was investigated next. If some of the extreme assessment ratios caused by errors in the data had not.yet been eliminated at the P95 - P05 percentile range, the elimination of the upper and.lower 10 percent of the cases from the district samples at the P90 - P10 percentile range was assumed sufficient to exclude these errors. The range between the assessment ratios at the P90 - P10 percentile levels was neces- sarily somewhat narrower than the P95 - 05 percentile range but no signifi- cant variations were discovered between the two ranges. The elimination of a typical extreme value seems to have been accomplished at the P95 - Pb5 percentile range already. The narrowest P90 - 10 percentile range amounted to 2h.3 percent of sales values whereas the widest range in any one district was equal to 59 percent. Hbasured again.in terms of the average assessment ratios as shown in Table III the smallest P 90 of the average and the widest range is still 138 percent of the average of - 10 percentile range amounts to 6h.1 percent its district. Since it was demonstrated that at this range exceptionally high and low values were already eliminated from.the sample, this range should fall within the tolerance limits set for a good quality of assess- ment. Table III shows, however, that the ranges in all the districts amount ho to upward from 61. percent of the corresponding average assessment and thus are three to seven times as wide as the accepted tolerance limits. To find more information about the nature of the distribution and the degree of variation of the assessment ratios around the average the P75 - P25 percentile ranges were computed. It was found that the smallest P75 - P25 percentile range was 10 percent whereas the widest one amounted to almost 26 percent of sales values. Again expressed in terms of the average assess- ment ratios the P75 - P25 percentile ranges varied between 27.14 percent and 62.5 percent. If the same tolerance of 10 percent above or below the average is used as a standard for good assessment as it was mentioned earlier there is no assessment district which would conform to this standard of good assessment even at the P75 - P25 percentile range which only includes 50 percent of the cases involved. In fact the widest range is more than three times as wide as the tolerance limits would permit. This shows that even if some of the deviations of assessment ratios were caused by errors the distribution of only 50 percent of the cases, after excluding the upper and lower 25 percent, was still too wide to conform to standards of unifom assessment. Variations of Relative Assessment Associated With Total Value of Preperties Numerous studies indicate a strong tendency for assessors to assess low valued properties at a higher percentage of their total value than 111 properties of higher total value.1 Some inequality of assessment for dif- ferent valued properties was therefore expected to prevail in a similar way in Ingham County. To examine this dependency of the relative level of assessment all the prOperties included in the study were grouped into seven classes according to their sales values. The class limits which were chosen for the property values were discussed in Chapter I and are reported in Tables IV and V together with corresponding assessment levels and other related information. The total sample was distributed in such a way between value classes and districts that a simple comparison between the assessment ratios of properties in each value class did not provide much valuable infermation. Some of the facts that are responsible for this situation are recorded in Table IV. The number of districts represented in each value class shows that only in.a.small group of districts were sales of high valued.pr0per- ties transacted in the period of the study. Even more important seems to be the number of districts represented with.nore than two sales in a value class. This eliminates the districts with only one or two sales which do not provide reliable information. This column shows clearly that at sales values of more than $15,000,the average assessment ratios were 1R. R. Renne and H. H. Lord. "Assessment of Mbntana Farm Lands," Mentana Agricultural Experiment Station, Bulletin No. 3h8, Bozemsn, Montana, 1937; Estal E. Sparlin. "Inequalities in the Arkansas Property Tax.Assessment System," University of Arkansas Agricultural Experiment Station Bulletin No. 369; and c. c. Taylor and G. H. Hull. "Assessment of Farm Real Estate for Tax Purposes in South Carolina," South Carolina Aggtcultural Emperiment Station Bulletin No. hlb, Clemson, South Carolina, 19 Q 1.2 Immense shaped cocoons shaved taco-me e553” Savannah" no songs no." omega: new caused us means: can amused upoauauao HO ”MEE H.000 so has: I. 00.00 00.3 0H R a a BB. 05 80.000 .. 00.00 840 S 00 m 0 000.013 .. 80.03 002mm 3.00 340 SH new 3 0H 000.03 s 000.03 00.00 «0.00 .3.“ 0m." 00: in mm 000.08 a 000.03 mm.mn $.00 mien om: «mad .8 mm 000.48 .. 80.0.8 3.00 5.00 0030 .30 003 40 in 000.0 a .. 08.0 a 8.3 «0.00 00.3 «0... 08H 40 am 80.00 .570 snag genes use new“ ”saw“... ”flew“ “Mum... toufimsmwsfioe tow-0W5 ....“ng flatmmfimm “moan“fl. .88 81> 50sec“: .0508 SSH 2H 305.0000 due no 8830 M0040 8.5 00030 00 0002.0 0002808.. Ease: Ea. ofiofifiefi 80.0040 024.5005. has. h3 determined by properties located in a small number of assessment districts and therefore do not really represent a weighted average of the county. The values obtained would rather reflect the average level of assessment of only a few districts. Another factor is shown by the following two columns in Table IV which give the total number of properties in each value class and the number in the largest district sample for each class. Except for the values from $20,000 to 850,000 all the classes are dominated by the city of Lansing with the largest number of: transfers. The figures given in these two columns show that especially in the higher value classes, where one assessment district is represented with more than half the total number of properties and where only a small number of districts are represented in the sample, the averages of the value classes can hardly be accepted as being representative of the situation in the whole county. The assess- .ment levels in the dominating district will rather cover up the tendencies prevailing in smaller districts. To show the general tendency more clearly the presentation of the results were split in two groups in Table V. Group A contains the weighted average for the whole county and lists the assessment ratios for four urban or predominantly urbanized districts. In these districts the majority of the transfers represent residential prOperties. Host of the sales with a consideration of less than $5,000 involve lots only. The highest value classes include commercial or industrial preperties and luxury housing. Group 3 gives the selected weighted average of 13 rural and partly suburban townships and the assessment ratios of four of these townships. nHll has ammo 0508.0 303.8: -- .. .. .... .... 00.00 00.00 00.0.0 00.00 00.00 33.. 05 08.000 .. .. -- .. .. 00.00 8.00 00.00 00.00 0.0.00 000.000 .. 08.000 .. 00.00 00.00 .. 00.00 00.00 00.00 00.00 0.0.00 00.00 000.000 .. 000.000 00.0. 00.00 00.00 0.0.00 00.00 00.00 00.00 00.0.. 00.00 00.00 000.000 .. 08.000 0.0.00 00.00 00.00 00.00 00.00 00.00 00.00 03.0 00.00 00.00 000.30 .. 000.0; 00.00 00.00 00.00 00.00 00.00 00.00 00.00 00.00 0.00 0.0.0 000.0 0 .. 08.0 0 00.00 00.00 00.00 00.00 5.00 00.00 00.00 00.00 00.00 00.00 000.00 30.0 .0000... .00....0. ......0. ”00...... .....w. 0...... 0...... ...... ...... mm... mamas“. Adan—HE mpg 924 manage gnaw flu gm ma gm 5&4 Gaga «m msgmHn magma as 9.2 0355 En mach Rad goo 305” g mogd Eamon—H3 3 8818 £935 a an man—Hg Bamammd Hog»: 1» 1:5 In these areas the sales usually involve inexpensive residential prOperties and farm preperties from smaller tracts of land to whole farms. Figure h visualizes the information contained in Table V. In put A of Figure l; the curve representing the weighted averages of the whole county for each value class surprisingly shows hardly any general decline of relative assessments for rising property values. 1 decline in the first half of the curve is followed by an almost equivalent rise in its second half. The other four curves, however, representing individual assessment districts show some variations that are only partly reflected in the county curve. Three of them show a clear, although not very steep, downward slaps indicating that the generally observed fact of declining relative assessments with rising total values of preperties holds true in these districts else. For the city of Lansing, however, a decline of relative assessment. is shown only for some lower sales value classes, whereas the assessment ratios increase considerably for higher valued prOperties. In fact the assessment ratios of the two highest value classes exceed those of the lowest one. no city of Lansing actually represents a major part of Ingham County as far as the number of inhabitants and the total value and number of proper- ties are concerned. Therefore a curve showing the average relationship be- tween sales values and relative assessment levels, which is determined by a large number of transfers in the city of Lansing, might be representative of the conditions which affect the majority of the properties in the county. However, it covers q: the situation which prevails in most of the assessment districts. Part B of Figure I; represents the rural and suburban townships of Ingham County. In this case the declining relative assessments with increasing a 0 0.0.3 30.050000 . 4 .ewmwuemehebd How .5 000000 can one had: a m. . chow .. ...w... ”0...”... 0 no 0.": .. Ho 000.030 0.308 .933 conm 03.8 no u .8qu £8 m o O." l. ’ 4| IF . o 0 cm a a “mg 0, .1 OH .. ow .0 Q: .. om eeeeeeeeeee 8H0» .000... ’47 60080.60 00.30 08.00000 .3000. as 33088.... Henna MA as 30.805 «m .5020! .5500 50000 5 800.0 8000 £89303 «0 33.89.00 .00 00330 #:0503004 emeaobd .0. one»: 80.00 08.00 08.00 80.00 80.00 80.0 and? 3000 0.8.0.03 030950. 8.095035 “HEB 0329300....” ...... . ................... ,. 0&9"on manage“. ma .. eeeeee men—Hep code» no $598.0 1:8 property values are clearly demonstrated indicating that the same systematic inequality of assessment that was found in other parts of the country is also present in the county although not in as drastic forms as was indicated by other studies.2 Variations of Relative Assessment During the Time Period of the Stuck The data used in this study include sales transacted in four consecutive years. Since significant changes might have been made during this time in the assessments of the area the question arose concerning the comparability of the data collected from transfers of different years. If a major reassessment were made in an assessment district during the time period under study the use of assessment data from years before and after the reassessment in a district sample covering the entire period would be considerably complicated. According to information obtained from the county treasurer's office no assessment district in Ingham County had been reassessed between 1950 and 1953. Since then the city of Williamston has been reassessed in 19514 and the city of Lansing in 1955. A reassessment in Meridian Township will be completed soon. Another significant type .of change, which would have to be considered in the use of the data, would be a gradual and systematic adjustment of the assessments over a number of years in am one district. To determine whether am significant changes might have occurred be- tween 1950 and 1953 the preperties studied were classified by years of sale. The average assessed valuation was computed for every class and the 28cc footnote on p. 1.1. 89 TABLE VI AVERAGE ASSESSMENT RATIOS AND P90 - P10 PERCENTIIE RANGES BY YEARS FOR 1.950 - 1953 FOR THE 2h ASSESSMENT DISTRICTS OF INGHAM COUNTY, MICHJ GAN _ “..— Ye Alaiedon Aurelius Bunkerhill Delhi . Ingham. Lansing Township ar P90 - P10 X P90 ' P10 P90 ’ 310 X P90 “ 210 X P90 - Pic Ii P90 ’ P10 1950 39.37 27.8 53.3 31.17 10.7 36.11 35.1111 23.3 511.31 26.92 18.3 3.3 112.72 28.6 56.5 29.01 22.5 110.0 1951 32.53 23.3 50.0 37.35 20.0 57.0 88.90 33.3 62.5 30.86 18.3 3.23- 145.70 30.0 53.3 32.86 22.0 1111.1 1952 311.88 16.7 53.3 38.68 22.2 51.0 112.10 23.5 75.0 29.110 17.9 175.0 37.99 26.7 85.9 30.214 18.0 110.0 1253 35.33 23.1 50.0 35.88 16.0 83.3 87.09 28.5 82.3 30.96 16.8 52.0 89.30 35.6 56.5 29.95 15.2 88.9 ‘3— ‘2 MI Leroy Leslie Township Locke Meridian Onondaga Stockb dge _* X P90 ... P10 X P90 - P10 3 P90 - P10 X:P10 i P 90 " P10 2 PQQ P19 1950 06.07 39.2 53.7 01.00 23.0 60.0 00.00 22.0 60.0 22.36 13.6 31.2 50.00 33.3 87.5 38.70 25.9 53.7 1951 26.76 18.8 35.0 50.22 33.8 66.7 83.30 15.6 67.5 23.35 11.8 35.3 89.87 23.3 68.0 36.88 28.0 80.0 1952 314.75 33.9 36.0 01.38 214.0 60.8 32.51 18.6 110.0 21.51 11.8 30.0 35.110 12.0 50.0 37.08 18.5 56.7 1_9_5_3 37.73 10.0 56.0 55.93 33.3 78.6 37.02 13.3 110.0 19.00 5. O 32.0 [42.142 22.0. 75.0 36.711. 2.212. ’46.]- ._ VeVEY Wheatfield White Oak Williamgpon Dansville Leslie Village ____ X P90 ‘ P10 X P90 ' P’10 X P90 ' P10 X P90 “ P10 X P90 ’ P10 X P90 ' P10 1950 53.61 81.0 66.7 53.93 38.5 83.3 88.55 22.0 91.8 35.59 21.3 .0 -- -- -- 50.98 20.0 56.8 1951 38.03 20.8 50.0 83.28 22.0 76.2 37.53 26.7 52.6 36.98 18.7 .0 52.13 -- -- 32.26 23.1 80.0 1952 35.31 18.7 53.0 35.01 26.7 88.0 80.13 25.7 88.5 25.20 12.9 .8 .36.17 -- -— 37.98 23.3 62.5 1953 37.62 12.5 73.3 80.02 22.5 53.3 85.77 -- -- 26.01 16.7 , .0 83.86 -- -- 38.03 15.8 57.9 : 0. #015 W Stockbridge Village Webberville East Lansing Lansing C Mason Williamston City 1 p90 - Flo 1 P90 - 910 x 290 - P10 ‘1 P90 - 210 '2 P90 - 210 ‘2. P90 - P10 1950 25.86 18.3 '32.9 27.53 -- -- 80.91 30.0 60.0 33.63 25.7 29.05 17.3 38.6 38.02 27.3 50.0 1951 25.18 22.0 30.0 21.06 15.0 30.0 38.73 26.6 86.1 38.69 20.5 1952 28.02 19.0 87.5 26.59 18.6 62.0 35.21 25. 8 53.3 35.77 16.7 1953 27.71 16.0 86.6 29.85 18.3 39.0 37.00 25.5 88.6 -35.01 22.1 29.33 18.0 36.h 3h.93 28.6 85.9 32.76 12.6 36.0 33.30 25.0 51.1 28.70 ’1108 hb.0 3&002 25.7 h207 50 total ranges as well as the P55 - P05, P90 - 210, P75 - P25 percentile ranges were listed. Part of these results are shown in Table VI. From.the results obtained, no significant changes by year of sale were observed for any one district. It appears therefore, that no significant changes in the assessed.valuations of the county has been made between.l950 and.l953. Every year the county board of equalization determines an equalized total assessed valuation for all property in each assessment district. To this equalized value a uniform county tax rate is applied to determine the total amount of county taxes to be raised in the particular’year. This total county tax is then divided into the total assessed.valuation as given by the assessment rolls to determine the actual tax:rate which is then applied to the assessed valuation of taxable property in this assessment district to determine the amount of county tax to be paid by each preperty. This process of equalization is supposed to eliminate any differences in the assessment level between assessment districts. The total value for the county should be equal to that prescribed by the state board of equalization. The discussion of the differences between assessment districts was reserved for the next chapter. Here short reference only will be made to the effect of this process of equalization upon the relative assessment within each assessment district for four consecutive years. The results fer eight selected assessment districts were presented in Table VII to show the relationship prevailing from.year to year between assessment ratios and equalized.ratios. The selection was made according to the smallest variations of assessment ratios from year to year. Such variations are assumed to be caused by small sample sizes which result in 51 .uodnea anoeunonne veuaausvu . e .uoaaeu assessmene amassed a e Ho.mn ~>.~m oo.~n oo.m~ oo.mH «H.mw mm.m~ am.o: om.om m©.m: o>.nw -.mm w~.om Hw.mm azamw Hm.H~ mb.oa 4N.on oo.mn 0:.mm mo.am pa.om nh.:m cH.Hn mm.m~ mm.nn oa.~m 00.04. aw.om :m.m: mm.m~ mo.mm mH.m: Hm.oa mh.n~ on.- as.an Hm.a~ Nw.:m ~m.cm oo.H4 mo.mw manusaea seven-dadyz e e e . e e e e e weauqua seem macaques masseuse “assures «6 has 58.: ~53: EH8 lemons .58 ESE .8 sagas baseman. page 5H 3H nmfi .. 6min mean as 811 824: 0038 a: 85:2 gamma wage HHb. nnmaav 52 large deviations of sample means from the average relative assessment level of the district. The districts with the smallest variations turned out to be the urban and urbanized districts of the county for which a large number of sales were recorded each year than for rural townships. The equalized ratios were computed in accordance with the equalized valuations in the assessment districts to that the relationship of assess- ment ratios to equalized ratios corresponds to the relationship of total assessed valuations to total equalized valuations in each district. The method of computing these values is explained in great detail in Chapter IV. The results shown in Table VII indicate that a rather stable relation- ship existed between the assessment ratios and equalized ratios from year to year in each of the districts. This only shows that a certain order of treatment of the assessment districts had been adapted by the county board of equalization which was not amended for any of these districts during the years from 1950 to 1953. At the same time the total assessed valuations and with them the equalized valuations rose steadily in all the assessment districts. Since the relative level of assessment did not rise significantly at the same time the increase in total assessed values must have been caused by an actual increase in the total number and value of properties. More will be said about the assessment and equalized ratios in connection with a com- parison between assessment districts in the next chapter. Three of the districts listed in Table VII were shown graphically in Figure 5. The lines demonstrating the assessed and equalized valuations in percent of sales values in these districts show the rather constant relation- ship between these corresponding ratios from year to year in each district. ally small differences can be found in the relative treatment of these dis- tricts during the observed number of years. 53 Percent of sales value *7 — -- Mason -—-—-—-—-—- lensing City /.,\ .. ................... Maidian 50% ,a \ \\ 7 /' \ a - assessed valuations .. ’,"/ \ / / \ e e I equalized valuations 808 ”Mr" ..N e i/ “'3, M /\ ,. / '\. 30‘ Q ...; “/14 ..... \k \ ...... """"""""""""" ‘a ,,,,, "e 204.. . a 10» o : e a: it e-—— 1950 1951 1952 1953 Years Figure 5. Average assessed valuations in terms of book values and equalized values, expressed in percent of sales values, for three selected assessment districts of Ingham County, Michigan, in the years 1950 - 1953. Sh Variatiom of Relative Assessment Between Buildings of Different Age in the City of East Lansing In times like the present, which are characterized by continuously changing price levels, changing styles and techniques of construction, and a building boom, important problems arise particularly in residential areas regarding the assessment of building properties of different age. Owners of new houses tend to suspect that their properties were over-assessed in comparison to older houses. At the same time the obsolete style and de- preciation of values of older houses often makes their owners feel that the tax load on these preperties is too high in couparison to new housing properties. To examine whether any differences existed between properties of dif- ferent building ages a special stucv was conducted in the city of East Lansing in which the relative assessment levels of old and new houses were compared. The dividing line between "old" and ”new" buildings was drawn with the help of a city map of the year 19112. The individual deed records were checked against this map and houses which were recorded on the map were classified old, others as new. The dividing date has the advantage that the building activity was interrupted during the war and early postwar years so that this year represented a distinct dividing point between old and new houses. Important characteristics of the samples representing the old and new building pr0perties in the city of East Lansing were listed in Table VIII. The number of subdivisions and individual properties in each group show that a larger sample was available for old buildings. The highest 55 TABLE VIII IMPORTANT CHARACTERISTICS OF SAMPLES OF OLD AND NEW BUILDING PROPERTIES IN THE CITY OF EAST LANSING, WHICH WERE COMPARED TO DETERMINE THE SIGNIFICANCE OF DIFFERENCES BETWEEN THEIR AVERAGE RELATIVE ASSESSMENT LEVELS Old New Building Building No. of subdivisions 36 28 No. of subdivisions containing only old or new buildings 15 3 No. of individual preperties 330 118 (In percent of sales value) Highest average assessment ratio in a subdivision 57.18 89.37 Lowest average assessment ratio in a subdivision 28.88 29.92 Average assessment ratio of the individual preperties 37.25 36.08 Mean of subdivision averages 37.05 35.33 Standard deviation of sub- division averages 6.27 5.76 Total Range 11.6 - 135.8 16.5 - 75.0 P95 - P05 Percentile range 28.6 - 68.7 26.8 - h7.7 P90 - P10 Percentile range 26e2 " 53e3 2801 "' 143.5 P75 - P25 Percentile range 28.8 - 39.3 31.2 - 38.5 56 and lowest average assessment ratios are quite similar in each group. The total range and the various percentile ranges of the individual assessment ratios are wider in all cases for the older buildings, which might partly be a result of the larger sample. The means of the subdivision averages, the difference of which was tested for significance in this section, are compared to the average assessment ratios of individual old and new build- ings. The standard deviations of both groups of subdivision averages are also given in Table VIII. To test the significance of any difference in the assessment levels of old and new houses a t-Test3 was applied on the assumption that the means of the assessment ratios of old and new houses of the individual subdivisions in the city are normally distributed. 3 Dixon and Massey. Introduction to Statistical Anal sis, New York: McGraw-Hill, 1951, pp. 102-103. To prove or disprove that two pepulations have the same mean when 62 is not known. 1‘1 " X2 3 p \Fu/Nl + (1/N2) (anfé’ )2 2_EH12’ N1 + Zglz'gfl— N1+N2-2 where S when é X112 - sum of squares of averages for old houses £1212 - sum of squares of averages for new houses 5 X11 - sum of averages for old houses ‘2 X21 - sum of averages for new houses 57 The difference of the average assessments of old and new houses being 37.05 percent for old houses and 35.33 percent for new houses was found to be not significant at the five percent level. This means that no systematic inequalities of assessment are associated with different ages of buildings in the city of East Lansing. In connection with this comparison the questions arose as to the kind and number of adjustments of assessments which were made by the assessor between the two years which were recorded for every transaction. A summary of the facts discovered in connection with the changes of assessment is given in Table IX. . In each age group the number of changes which had.been.made on the assessments of the observed properties were expressed in percent of the total number of transfers. It might have been expected that more adjust- ments were required for old preperties to take account of varying building and neighborhood conditions causing different rates of appreciation or depreciation. It was actually found, however, that almost twice as many changes had been.made in the case of new building preperties than for old ones. The respective figures were 10.30 percent of all the old building properties and 18.6h percent of all the new building preperties included in the study. An explanation for this fact, however, is at least partially found in the fact that some of these changes of assessment on new houses are actually original assessments on the newly constructed.house whereas the assessment in the previous year was on the empty lot only or on a partially completed'building. Furthermore the values of new prOperties are often changed shortly before or after the sale through finishing of _ TABLE IX 58 SUMMARY OF IMPORIANT FACTS RELETING T0 GHENGES 0F.ASSESSMENTS OF OLD AND NEW BUIEDING PROPERTIES BETWEEN THE YEAR OF SALE AND THE YEAR AFTER SALE IN THE CITY OF EAST mm, moment Old New Buildings Buildings No. of changes 3h 22 Percentage of changed properties 10.30 18.6}; No. of increases of lower than average assessment 25 11; No. of decreases of higher than average assessments 2 0 No. of increases of higher than average assesments 7 8 No. of averages of sabdivisions raised 12 out of 36 13 out of 2h No. of averages of subdivisions lowered 2 out of 36 0 59 basements and other rooms of the house and addition of garages and improve- ments around the house. Mbst of the adjustments made were increases of low assessments,thus diminishing the deviations of assessment ratios from.the average value, i.e. improving the quality of assessments. In two cases a downward adjustment of high relative assessments had the same final effect. In some cases assessments were increased.which already amounted to a higher than average fraction of the sales value of the reSpective prOperties. Few of these increases of high assessments resulted in a.widening of the range of assessment ratios both in terms of percent and sales values and relative to the average level of assessment. CHAPTERIV COMPARISONS 0F RELATIVE ASSESSMENT BETHEEN VARIOUS AREAS IN INGHLM COUNT! Variations of Relative Assessment Levels Between Assessment Districts Except in the cities, most of the assessing of property for tax pur- poses in Michigan is done by township supervisors. Since these officials are rarely elected because of their ability to appraise properties, wide variations often occur between the levels of assessment found in different assessment districts. Pblitical considerations, failure to adjust to changing market values, general ease in administration and other similar factors often cause assessors to keep the level of assessment low in their districts. Other factors such as the need fer a larger tax.base often cause higher levels of relative assessments. Since individual assessors tend to follow their own.inclinations, wide differences often exist between the assessment levels found in contiguous taxing districts. These differences in assessment were anticipated by the state legis- lature when it arranged for the equalization functions carried on by the county boards of equalization. To improve the tax.base which is provided by the assessment figures established by township and city assessors and approved by local boards of review the county board of equalization has to obtain estimates of the existing differences between the relative level of assessment in the various assessment districts. The success of 61 the county board of equalization in compensating these differences depends largely on the precision of these estimates. It was one objective of this study to discover_the extent of the inequalities which existed between the levels of relative assessment of Ingham.county. The sample used in this study has one shortcoming when used for this purpose. Fbr accurate measurement of the average level of relative assess- ment to find the differences between the assessment districts the sample should be representative of the various types of’properties which compose the total property value in each assessment district. The sample of this study was determined, however, by the frequency of bona fide sales which 'were transacted during the observed.period. Since the average assessment ratios, which were computed from the arailable sample,'were the best esti- mates of the relative assessment levels in the assessment districts of Ingham County which could be obtained from the collected data, these values were used for interdistrict comparisons of relative assesmnent levels. The limitations of these values must be kept in mind, however. The averages of the assessment ratios in each district are listed in Table I in order from the lowest to the highest average relative assessment. This list shows that considerable differences in the levels of assessment do exist between.the various assessment districts of the county. The fact that the highest assessment ratio, which was feund in.Leslie Township with h7.00 percent of sales values, is more than twice as high as the relative assessment level of 20.h7 percent in Meridian Township illustrates this clearly. The ratios for the other 22 districts are distributed over this whole range; but a relative large number falls between 3h and 39 percent of sales values. These assessed valuations are also shown in Figure 3 for all 62 TABLEX AWGE ASSESSMENT RATIOS OF ALL THE PROPERTIES AND OF THE PROPERTIE ON THE HIGHEST AND INEST SALE VALUE CLASSES, AND P95 - P05 PERCENTILE ASSESSMENT RATIOS IN 214 ASSES- MENT DISTRICTS OF INGRAM COUNTY, MICHIGAN, TEE SAMPLE INCLUDES TRANSFERS MADE IN THE IEARS FROM 1950 to 1953 " Iverage assessment Average 1" relative 31811381? 10'9“ P95 - P05 “segment assessed assessed value value class class Meridian 20.h7 25.37 13.72 5.0 - h6.7 webbed-ville 26.36 80.51 2h.55 1h.1 - 62.0 Stockbridge Village 27e0? 32e79 23e36 1500 ‘ 5107 mm“)! TWP 290.," 35099 19eh7 1107 " 60.0 Mason BOem 38.21 20e9s 11.5 " 57e1 W 30.20 37.11; 20.80 15.0 - 6000 lensing Township 30.28 3h.07 21.3h. 13.3 -I62.3 lensing cw 3h.98 h6.05 30.16 18.2 - 62.2 may 35008 151.80 28.15 uleo " S6eo Uflliamston City 35.61 n.60 30.30 25.0 - 52.0 ‘1nt 35067 Mob-7 22e3? 150k - 62e5 AM” 36033 140063 33030 1he3 "' 8303 lest Lanlils 37.30 Shoéh 31.65 2h.6 -’6h.0 Stockbridge rosnship 37.69 1.3.61. 28.90 21.7 - 75.6 Vow 38.92 h8.67 22.02 lh.0 - 75.0 locks 39003 10081 31km 1308 " 67s5 Leslie Village h1.h3 55.83 29.37 17.8 - 70.0 hinterhill h2.76 50.50 33.96 20.0 - 82.9 “lite M new “5090 ue73 2200 0 85.? Indian “3051 “be” [#0031 26s? " 7605 Dansville hh.02 h5c77 h5.13 -- - -- sheatricld hum 55.30 36.20 22.0 - 88.0 (bondage M31 53.1.1: 33.11: 20.0 - 80.0 1.3110 Tmhip h7.00 h7e8§ 115.80 20.0 - 78.6 63 the assesanent districts of the county, together with the median aseess- lent ratios. Table 1 lists also the average assessment ratios of the highest and lowest assessed value classes in each assessment district. The higher assessment level was in the majority of the districts found in a lower sales value class than the lowest assessment level. One of the few exceptions to this rule was found in the city of Lansing which makes these exceptions very inportant in terms of numbers and value of properties in the county. On the average the variations of average assessment levels between different value classes of preperties are, although considerable, not as wide as in some other parts of the United States according to some earlier studies.1 The P95 - 05 percentile ranges are also listed in Table I for each of the assessment districts. It is not surprising that the assessment ratios at the 05 and 95 percentile levels rise with rising assessment levels in the districts. The information contained in Table I is illustrated in Figure 6 for the lowest and highest assessed district in the county. is this figure indicates, the average level of assessment in terms of sales values was more than twice as high in Leslie Township than in Meridian Township. For comparison the average level of relative assessment for the whole county is shown. Further information visualised in Figure 6 includes the average assessment ratios of the highest and lowest assessed value classes and the P95 «- P05 percentile ranges of Leslie and Meridian Townships. 1 See footnote No. l on p. hl. 6h —-—-—— county average —— -- - average of highest and lowest assessed value class p95 . p05 percentile range Percent of sales values average assessment level 100—. 9c» 80» 70* 605 50L ho» {—m» -.1 5.” .'.._~.._.': . .. .... :‘4.‘;,‘.-.'-* 23",." .... ‘.o... ‘..'.‘. 'o's'.»9 If'ul ' 1 ...}- .' \'-‘- at: - -.~.. .‘ :w.‘ <- _. .. a. . .. . 3', .-.‘-':- ." L'Z’n‘ -_:--‘.-. c7. (.sr we‘p ’39". 1,7. .;‘-_-°u‘ v' ‘9' ‘ . a ' ~‘ :.:-.‘,--"~ 4-. -‘;, -:. ;4-‘.l‘; :‘IRJ.II,‘. 5...; ,7... _- .4 ‘ o‘ u ‘ ' ’f.l {' '_" v‘yZl e e 3"? v‘.. ...‘-I . “a --~..r .5... a... ..., .',-‘ "‘l r"..".l.‘ _ .o‘. . ...: ' ...—.-.... '(-1-". ’ M I. ' ’4 3 'e. e. “.... s s . " - ‘ - .f‘ ,e' u‘".': (1'..l'. 9e;- \ 1‘ 2;. / " "‘ "' EMFGQ’»; I a, -.. -_ e, ..‘ .‘r In'r. c.- w- .- ;" '1 I‘i'. ‘:~" l-‘I c..I "' ' -\ . I . 37.. "’--'-' -.'.'.‘u'1 f "y ',-s '\ 'u ‘1 7“".- ‘.':."-2 O . ...“? L ‘ :57 _\ .. x .:';.1:_-. ' .‘I‘L ' - 3'...“ ‘ i ' 11“." b ' _~ |\ I .- 94‘ h\ t ,' _-.' 1 ‘ "-‘1 . 'r .5 ‘. -. I. t .- K‘ . . s c' _{.‘.‘. ‘ t ' ‘x .s .‘- ..1‘ ‘. e 4‘“ . . s'l ‘1'.- ...-..e.' . .‘|"‘O;‘-Y..: . - a- g 1”“? r . .‘ a e‘ 3". v '1'. ...-1'. . I. e rs -_ -. '.._, . ' .. \.- :05» ..." .'“.‘ L- \..l_ , ' u. 3‘. ‘1 'F.'{. ‘ '. ‘1 {7... I) ‘1-1"".". ~._-:. 5 ‘ V '31. .- ’\ X $15.9). . ‘1 ................... r . ‘ \ .' ‘v. u l (1 far-Ln: .' .. _ ' ,..- .:‘${'~{ ... Figure 6. Average relative assessment level of lowest and highest assessed districts in Ingham County, Michigan, compared to 100 percent of sales values. 6S The average variation of relative assessments associated with different value classes in Leslie Township happens to be the smallest in Inglam County with only 2.05 percent of sales values. The variation shown for Meridian Township is about average. The highest degee of variation between sales value classes was found in Vevay Township with 26 percent of sales values. The differences in the average levels of relative assessment between assessment districts discussed above are not directly projected into the respective tax loads of these districts. The process of equalization, the purpose of which is the elimination of differences between the relative assessment levels of assessment districts, was described shortly in the previous chapter. It is the task of the county board of equalization to assign values to the individual assessment districts which in every case are supposed to represent equal fractions of the respective total value of property in these districts. The county tax is spread on the basis of the equalized valuations of the assessment districts. A county tax rate is charged to the assessed valuations of the individual properties which makes the total amount of county tax raised in the district equal to the total tax detersdned on the basis of the equalized valuation. This applied county tax rate is supposed to compensate for an differences in the average level of assess- ment between assessment districts. The county equalized figures for the years since 1950 were examined to determine the extent to which complete equalization had been attained. In Table XI the average assessment ratios of the years 1950 to 1953 were listed for each assessment district together with the corresponding equalized ratios. The equalized ratios were calculated from the pro- portional equation: TABLE XI AVERAGE ASSESSMENT RATIOS AND EQUALIZED RATIOS OF THE ASSESSMENT DISTRICTS OF INGRAM COUNTY, MICHIGAN, FOR THE YEARS 1950 - 1953 _ 66 Year .Alaiedon. Aurelius Bunkerhill Delhi Ingham; agifigigg Leroy1 Tgsiihipl a e a e a e a e a e ____a. e a e a e 1950 39.37 hh.0h 31.17 36.71 35.hh h1.53 26.92 3h.22 62.72 hh.81 ?’29.81 31.71 h6.87 59.88 hl.00 h2.76 , _-- 7' ; hl.06 52.56 h6.87 h8.88 1951 32.53 36.23 37.35 83.73 88.90 55.25 30.8h no.66 h5.70 86.58 L 32.86 33.32 26.76 35.65 50.22 51.77 h7.18 88.05 j 2h.86 33.12 h0.68 81.93 1952 3h.88 38.66 38.68 88.91 32:19 86.21 29.80 38.60 37.99 38.63 -. 30.21: 30.75 38.75 16.16 141.38 12.33 37.57 38.20 . 29.31 38.93 39.09 39.99 1953 35.33 38.96 35.88 12.78 117.09 50.08 30.96 110.51: 89.30 50.10 29.95 29.12 37.73 50.39 55_._9_3_ 56,39 ___f 87.03 87.891 33.35 hh.5h £6.17 56.55 Locke Meridian Onondaga Stockbridge1 .Vevay Wheatfield. White Oak W' iamston Township ownship __ a e a e a e a e a e .a e a e a e 1950 80.80 88.00 22.36 28.75 pghghg 68.56 38.70 £7.93 53.61 68,82 53.93 63.92 88.55 57.90 35.59 81.65 1951 h3.30 51.76 23.35 31.18 h9.87 59:55 36.88 h5.7§ 38.03 80.78 h3.28 h8.9h 37.53 88.86 36.98 u5.52 . 32.02 39.7 . 1952 32.51 38.02 21.51 28.8h 35.80 82.26 37.3; . 35.31 h1.89 E 35.01 39.18 h0.13 h7.91 25.20 30.97 32. 39.72 _ 1953 37.02 83.23 19.00 .25.00 h2.h? 50.56 36.;8 83.56 37.62 86.69 80.02 hh.8h 85.77 58.89 26.01 32.53 __1 """ “'”" 29. 2 3 .00 Dansville Leslie Stockbridge 'Webberville East lensing Mason Williamston Village Village Lansing City City __ a e a e a e a e a e a e a e s. e 1950 -- -- 50.98 53.17 25.h6 31.53 27.53 35.21 h0.91 83.15 . 33.63 35.92 29.05 81.66 38.02 h3.20 1951 .5231; 53.09 32.26 33.25 25.1u 31.21 21.06 28.06 38.73 36.17 ' 38.69 36.56 29.33 85.9h 38.93 39.61 .6 1952 36.17 36.78 37.9h 38.81 28.02 33.88 26.59 35.32 35.21 36.28 i35.77 36.97 32.76 .51332 33.30 37.52 3953 h3.86 uh.58 38.03 38.3 27.71 32.86 29.85 39.87 37.00 37.72 b 35.01 36.09 28.70 h3.89 38.02 38.23 22.36 = Marks lowest average assessment ratio and equalized ratio in each.yedr. §#.h0 8 Marks highest average assessment ratio and equalized ratio in each year. a - Assessment ratios. e - Equalized ratios. , 1The assessed and equalized ratios listed first in each.year apply to the runal parts of the townships only, the second figures include the incorporated.villages on a weighted basis. :' i. I u I _ I | 67 A55 :Efig-re :r‘ which was derived by analogy from the equation A :E-r. :ra The equalized ratio is then expressed in the formula E%_A%ra re Where A - total assessed valuation of an assessment district E - total equalized valuation of an assessment district re - No. of mills of equalized valuation charged for county tax r‘ - No. of mills of assessed valuation charged for county tax 1% - Average assessment ratio E3 " Average equalized ratio A few words should be said about the information that can be obtained from Table II regarding the .county equalization in the years from 1950 to 1953 in Ingham County. If the average assessment ratios for the districts were assumed to be the correct levels of assessment and the equalization were perfect the equalized ratios for all the assessment districts would have to be equal in each year. This could not be expected from the avail- able data since some of the variations in average assessment ratios from year to year are obviously caused by inadequate sample sizes. But even after excluding these deviations of sample means from the evaluations considerable differences between the levels of the equalized ratios can still be observed. A comparison of some of the values which appear in Table I will illustrate the existing differences. The lowest and highest values of assessment and equalized ratios for each of the four years are marked in Table II by underlining. From this it can be seen that in three out 68 of the four years the lowest assessment as well as equalized ratios were found in Meridian Township. Obviously the equalization did not go far enough in this case. No clear reason can be given for the wide distribution of the highest assessment ratios and equalized ratios among the districts during the four years. In some cases, however, a tentative explanation can be given why the highest equalized ratios occur in certain assessment districts. Sur- prisingly in one year the city of Mason shows the highest equalized value although in terms of the four year average assessment ratio this city ranks only as fifth lowest out of the 211 districts. The list of actually applied tax rates in Table III shows that the assessment of the city of Mason was raised more by the county equalization in each of the four years than the assessment in an other district. This study would suggest, how- ever; that the assessments of four other districts which show lower levels of relative assessment than the city of Mason should be raised more in the process of equalization. In this case the board of equalization must have based its decisions during these years on information that was in disagree- ment with the findings of this stucw. In two other years the highest equalized values were found in the townships of Leslie and Onondaga which rank highest and second highest in regard to the average assessment ratio. The changes made by the equali- zation in these cases might have tended in the right direction but were not sufficient to compensate for the high assessment level of these townships. In the case of Vevay Township a large deviation of the class mean seas to have been responsible for the highest equalized ratios of the year 1950. 69 Table XIshows that equality in the relative levels of assessment and with it equality of taxation was not achieved between assessment districts through county equalization in the years from 1950 to 1953. Therefore a set of county tax rates were cosmuted which would restore equality of taxation according to the relative levels of assessment discovered by this study. These rates were computed on the basis of the county equalization figures since 1950 and the average assessment ratios found in this study. The tax rates being the number of mills of the assessed valuation that were used by the township treasurers, or suggested for use by the county treasurer, to spread the county tax between the individual properties of their districts are listed in the left column of each assessment district in Table III. These rates reflect the results of the process of equalization. The rates that were suggested as a result of this stuch are listed in the right column of Table XII for each assessment district. These rates were again calculated from the basic formula: 5 1 Li - ra : r. The suggested rate is therefore equal to rsnEer a Whore Efl - the average equalized ratio for the whole county in a single year. ii - the average assessment ratio for each assessment district and year. ro - No. of mills of equalized valuation charged for county tax. r. - suggested No. of mills of assessed valuation to be charged for county tax. It must be kept in and that these suggested tax rates cause a complete 70 _.__ “* «...... . TABLE XII ACTUALLY APPLIED AND SUGGESTED COUNTY TAX RATES FOR THE ASSESSMENT DISTRICTS OF INGHAM COUNTY, MICHIGAN IN 1950-1955, EXPRESSED IN MILLS OF ASSESSED VALUATIONS Alaiedon Aurelius Bunkerhill Delhi Ingham ; Lansing Leroy Leslie Year 1 Township 1 Township $1 __ a s a s a s a s a s a s a 1950 7.55 7.18 7.95 9.07 7.91 7.98 8.58 10.50 7.08 6.62 7.18 9.89 8.68 6 6.33 7.08 3.33 1951 7.28 7.33 7.61 6.38 7.37 8.87 8.57 7.73 6.62 3.23 6.59 7.25 8.66 8.31 6.70 2:33 . - 0 . 9e 9 1952 7.26 6.11 7.61 5.51 7.19 5.06 8.60 7.25 6.66 3.61 6.66 7.05 8.70 6.13 6.70 3.33 67 , 7027 04 1953 6,77 5,97, 7.32 5.85 6.53 8.86 8.08 6.78 6.28 3.33 5.97 7.01 8.20 3.56 6.19 3.33 . e4 ‘7 029 0 1958 7.25 6.51 7.88 6.80 7.20 5.83 8.78 7.69 6.32 3.38 6.28 7.67 9.16 6.33 6.81 151.98 .33 7. .31 1955 7.38 6.88 8.85 6.36 8.05 5.80 9.32 7.65 9.32 5.31 7.08 7.63 9.32 6.85 7.08 8.92 __ 5.30 1,2 7.88 5.28 Locke Meridian Onondaga Stockbridge Vevay ‘ Wheatfield White Oak Williamston Year TOWShj-Pl , Township _ a s a s a s a s a s # 8. s a s a s 1950 8.02 7.00 8.68 12.65 8.01 5.20 8.36 7. .3261 8.17 5.28 58.00 5.28 8.05 5.82 7.90 7.95 8. 1951 7.77 5.50 8.68 10.21 7.76 8.78 8.07 6.3: 7.79 7.00 3,7635 5.51 7.77 6.35 8.01 6.115 7. 1952 7.66 6.56 8.66 9.91 7.82 6.02 7.92 3.36 7.77 6.08 77.33 6.09 7.82 5.31 8.05 8.86 . . 9 1953 7.17 5.67 8.08 11.05 7.31 8.98 7.28 5.71 7.62 5.58 76.88 5.28 7.31 8.59 7.68 8.07 7.11 1958 7.68 5.95 8.87 11.35 8.02 5.17 7.76 3.3; 7.99 5.97 7.113 5.19 7.83 5.35 8.80 7.81 1955 7.70 5.92 11.80 11.29 8.83 5.15 8.05 6:13 9.32 5.98 78355 5.16 8.05 5.32 10.81 7.77 .__ 7.32 i Dansville Leslie Stockbridge Webberville East Lansing Lansing City Mason Williamston Year Village Village .. -' City .__ a S a s a S a S a S _A 8. s a s a, 8 1950 .. .. 7.07. 5.55 8.36 11.11 8.68 10.27 7.12 6.91 ‘ 7.21 8.81 9.68 9.73 7.67 7.88 1951 6.62 77,57 6,70 7.39 8.07 9.88 8.66 11.32 6.77 6.86 6685 6.87 10.18 8.13 7.37 6.82 1952 6.66 5.89 6.70 5.62 7.92 7.61 8.70 8.02 6.75 6.05 .6. 77 5.96 10.26 6.51 7.38 6.80 1953 6.27, 3,79 6.19 5.52 7.28 7.57 8.20 7.03 6.26 5.67 . 6.33 6.00 9.39 7.31 6.90 6.17 1958 6.32 5.28 6.81 5.61 7.76 8.58 9.16 8.82 6.81 6.23 6,93 6.68 10.23 7.72 7.31 «- 1955 9.32 5.25 7.08 5.58 8.05 8.58 9.32 8.77 6.81 6.19 16359 -- 9.83 7.68 681 ~- a - Applied county tax rate. 8 = Suggested county tax rate. 1The suggested ra te listed first in each year applies to the rural parts of the townships only, the second figure includes the incorporated villages on a weighted basis. , 71 change of the tax base in the county so that they cannot be applied directly to the assessed valuations. This is shown in the following illustration. The anount of county tax which is allocated to an assessment district is determined by application or a unifora county tax rate to the equalised valuation of the district. A tax rate is then actually applied to the total assessed valuation of the district to obtain the prescribed amount of taxes. This applied rate is inversely related to the unifon rate which is charged to the equalized valuation as compared to the relation- ship ot the assessed valuation of the equalized valuation of the district. This is shown in the following foraula: E . r. - A . ra E x A - ”a : ro Where E - the total equalized valuation of the assessment district A - the total assessed valuation of the assess-ant district r° - uniform county tax rate charged to the equalised valuation r - county tax rate applied to the assessed valuation a The suggested tax rate, as listed in Table III, yields a different mount of tax, however, when applied to the assessed valuation. It actually implies a different equalized valuation for the assessment district. This is shown in an example: The date given for a selected district were: Total assessed valuation: 3 1,768,300 Total equalized valuation: 3 2,555,652 County tax rate applied to the equalized valuation: 5.1 mills Tax rate applied to the assessed valuation: 7.38 mills County tax prescribed: :73 13,033.83 County tax spread: $ 13,050.05 72 To equalize the relative levels of assessment between the assessment districts of the county a tax rate of 6.148 mills was suggested for this district. With this tax rate applied to the assessed valuation of the district the total amount of county tax raised would only amount to $ 11,168.58 The equalised valuation of the district which is implied by the suggested rate is only equal to 3 2,2h6,780 In a similar way the equalised valuations of all the other assessment districts are changed. They do not add up to the original total equalised valuation of the county so that another tax rate would have to be charged to the new equalized valuation to obtain the originally prescribed amount of taxes. To simplify the owls it is seemed that the assessment district which was used as an staple, is the only assessment district of the county so that the originally prescribed tax has to be raised in this district alone. The tax rate to be charged to the new equalised valuation would then be 5.80 mills This nss tax rate would again change the rate which has to be applied to the assessed valuations of the district. In this simplified case this applied tax rate would again be equal to the original applied rate. It would certainly change, however, if more than one district were included in the example. 73 The suggested tax rates were based on the average equalised ratio for the county to make them closely casparable to the applied tax rates. This was actually achieved as the rates listed in Table III show. The important point to be demonstrated was not their individual value, how- ever, but their relative level indicating how much higher or lower the tax rate charged in one district has to be than in another district to lake the tax loads equal in terms of property values in all districts. The variations of seaple means around the average level of assess- nent from year to year caused by shall sample sizes have a disturbing effect on the resulting suggested rates. Nevertheless Table III shows that the variations between the rates suggested for each of the assess- ment districts are Inch wider than the variations between applied rates. This indicates that the equalization did not go far smug: to compensate for the differences which actually existed between the relative assessment levels of different assesnent districts. In 1950, for example, the extras values of the suggested rates were 5.20 mills and 12.65 mills whereas the respective values of the applied rates read 7.01; mills and 9.68 mills. For 1952 the extreme values listed in Table III as suggested rates were 54$ mills and 9.91 sills, while the actually applied rates ranged from 6.66 mills and 10.26 mills. The highest suggested rate did not appear in the same assessnent district with the highest applied rate, nor is the lowest suggested rate found in the sale district with the lowest applied rate. In both years which were listed as examples for extreme values of tax rates the highest suggested rates were found in Meridian Township whereas the highest rates were actually applied in the city of Mason. This shows that Mason was assumed to be 7b the relatively lowest assessed district in the county by the board of equalization. Meridian Township was found to be the lowest assessed district according to this study. d A Special situation is involved in the case of the townships of Ingham, Leroy, Leslie, and Stockbridge which include the incorporated villages of Dansville, Webberville, Isslie, and Stockbridge. These villages are kept separate from the townships in the assessment rolls but are assessed by the township supervisors for the purpose of the county and school taxes and equalized together with the townships. The properties in these villages are assessed separately by a village assessor for village tax purposes. In Tables XI and III two figures are therefore shown for the assessment and equalized ratios and for the suggested tax rate. The first figure always takes only the township into consideration, the second figm'e combines the township with the incorporated village on a weighted basis. A comparison of these figures shows also that in three out of the four townships in question the relative assessment was considerably higher on the farms in the township than on the village properties. In Table III the actually applied and suggested tax rates are also listed for the years 195a and 1955. Since no data on assessments for these years were available at the time of this study the suggested rates were computed by using the average assessment ratios of the years 1950 to 1953 for each district. These values could not be used as a basis for computing the suggested tax rates whenever general reassess- ments had been made in an assessment district. This was the case in the city of Willimton in 1951: and in the city of Lansing in 1955. 75 Since no data on the new assessments in these districts were available yet no suggested rates were computed for these two cities in the years affected by the reassessments. A special equalization committee was appointed in Ingham County in 1955 to obtain improved information as a basis for the l955 equalization. Table XI shows some remarkable changes in the applied tax rates for 1955 as compared to rates in earlier years. For the first time the applied rate for Meridian Township was higher than that of the city of Mason in 1955. It approaches the suggested rate much closer than in the years befbre. Considerable changes were also made in some other townships which more or less agree with the suggested rates. It was found to be a common practice in many school districts of most of the assessment districts to charge a millage rate for school taxes that adds up with the county tax rate to 15 mills of the equalized valu- ation. Since in.most cases the equalized valuation was higher than the assessed valuation this total tax rate amounts to more than 15 mills of the assessed valuation. The appendix to this paper shows a.map of the school districts of Ingham.County'and lists the tax rates for the year 195k to illustrate the property tax situation which applied for the vari- ous school districts. The tax rates do not include short term special assessments such as drainage and street improvement taxes. The tax rates are given as applied to 1953 state equalized valuations. In.l95h the state equalized valuations had to be used for the first time by the county equalization boards according to a decision of the Attorney General. Since 195k state equalized figures were not available early enough, however, the state equalized.valuations of 1953 had to be used. 76 It is interesting to note that in the case of some school districts the total tax rates in terms of the assessed valuations amount to more than 50 mills. In the second fractional school district of Meridian Township, for exaxuple, the total tax rate amounts to 61.21; mills of assessed valuations in 1951;. The quality of the local assessment within the assessment districts was discussed in detail in the first section of Chapter III. The ranges of assessment at various percentile levels are demonstrated in Figure 2 and the high and low values of total ranges and the three investigated percentile levels were mentioned in the discussion in terms of percents of total sales values as well as in percent of the average assessment ratio. There are differences in skewness and in the width of the various ranges between the districts but no important conclusions can be drawn from these differences at this point. None of the assessments in the individual districts conforms to standards of a good assessment. Variations of Relative Assessment Associated with Different Degrees of Urbanization It was emphasized in the introduction to this study that Inghal County is presently characterized by rapid urban mansion in the Greater Lansing area and by an extensive suburban movement. 'Dzis shift of land from farming into potential or actual residential and commercial land uses is accompanied by considerable increases in market values in the respective areas. If assessments do not follow these moments of market prices inequalities of relative assessment levels result between areas that are characterized by different degrees of urbanisation. An attupt 77 was made to determine whether and to what extent inequalities of assess- ment were associated with different deyees of urbanization in Ingham County at the time under study. For the purpose of a comparison between such areas the county was classified into four types of areas according to different degrees of urbanisation: (1) rural, (2) suburban, (3) urbanized, and (h) urban areas. These areas are drawn into the county nap shown in Figure 1. The terri- tory incorporated into the four cities of Ingham County was classified as urban. Certain areas around the city of Lansing, in Lansing, Delhi and Meridian Township classified as "urbanized“ by the United States Census of 1950 together with the incorporated villages of the county were treated as urbanized areas. These are mostly built up residential areas outside the cities which include important commercial establishments. Extensive suburban areas or areas in the process of suburbanization surround the city of Lansing and to a lesser degree other communities of the county and stretch out along the major highways not only in the area under study but also in neighboring counties. A large area of the county, however, especially in the south and east portion of it is still classified as rural. According to this classification all the properties which are located in nine out of the sixteen townships are classified as rural, the properties of the remaining seven townships fall according to their location in the. town- ship, into rural, suburban or urbanized groups. To find the differences, if any, in the level of relative assessment between the four classes of properties, the sales studied were sorted into these four classes by IBM and broken down by value classes and years. The average assessment ratios were then computed for all the properties in each 78 class. The results are listed in Tables XIII and XIV, and demonstrated in Figures 7 and 8 as broken down by value classes and years. An inspection of these Tables and Figures shows us the following results: The highest relative assessments are in each value class associ- ated with the group of rural preperties. City prOperties show the second highest assessment levels whereas urbanized and suburban properties are assessed at the lowest levels in terms of sales values. There is practi- cally no. difference between the levels of relative assessments in urbanized and suburban areas, which is remarkable since urbanized areas usually in- clude somewhat older residential properties and also comercial properties whereas suburban areas are characterized by mostly new residential proper- ties or zones of rapid changes in land use. This equality of assessment agrees, however, with the results of the comparison between properties of different building ages in the city of East Lansing, which was discussed 5 in the previous chapter. Doubts could be raised whether these results gave a true picture of the existing situation or were accidentally caused by differences in the rela- tive levels of assessment between assessment districts. The majority of the properties constituting the four classes according to degrees of urbani- sation are located in separate assessment districts. In the seven townships that are divided into two or three of these classes usually the rural or the suburban-urbanized properties are by far in the majority. This suggested the possibility that differences in the average level of relative assess- ment between the four classes were overshadowed or entirely caused by the distribution of the taxing districts among those four areas. TABLE XIII AVERAGE RELATIVE ASSESSMENT LEVELS OF RURAL, SUBURBAN, URBANIZED AND URBAN PROPERTIES IN INGRAM COUNTY, MICHIGAN,BY SALES VALUES CLASSES, ASSESSMENT RATIOS COVERING THE WHOLE COUNTY ARE GIVEN.AS.A: ‘WEIGHTED AVERAGES OF INDIVIDUAL PROPERTIES AND B: UNWEIGHTED MEANS OF ASSESSMENT DISTRICT AVERAGES. ASSESSMENT RATIOS COVERING SELECTED ASSESSMENT DISTRICTS WHICH INCLUDE MORE THAN ONE AREA CLASSIFICATION ARE GIVEN UNDER C AND D AS WEIGHTED AVERAGES OF INDIVIDUAL PROPERTIES value Classes Below $5,000- $10,000.. $15,000- 3520,000- $30,000- $50,000 a 105,000 $9, 999 35111, 999 $19, 999 $29,999 $149, 999 above weighted average assessment ratio V of rural preperties hh.18 h0.00 36.93 3h.82 37.75 -- ~~ weighted average assessment ratio of suburban.properties 27.7h 28.09 23.92 22.5h 16.78 28.32 h3.52 A 'Weighted average assessment ratio of urbanized preperties 3h.89 27.9h 23.73 25.77 2h.00 22.26 21.23 weighted average assessment ratio Of urban pr0per‘bies 143038 35e32 31055 32e79 32038 35e39 £150,414 Unweighted.mean of average assess- ment ratiosof rural areas h3.h6 h0.22 35.65 35.59 33.57 -- ~- Unweighted.mean of average assess- B ment ratios of suburban areas 30.62 30.27 21.72 23.81 17.76 -- -- Unweighted mean of average assess- ment ratios of urbanized areas 36.98 29.90 23.85 23.51 25.13 20.29 ~- Unweighted.mean of average assess- ment ratios of cities hh.hh 36.82 31.70 30.19 29.01 37.97 h2.78 weighted average assessment ratio of rural properties in five _ _ . c rural-suburban townships ~ ; .7 much 39.25 38.33. 32.89 36.15 -- ~- " weiAEhEed’fierage aseegemt ratio“ ’ ”“7 I” I“ " ' I M "I” I 7 ”"1”” I ” ”MI " ”I" of suburban.properties in . five suburban townships 35.33 28.62 20.35 27.hl 21.h3 21.20 -~ 'Weighted average assessment ratio of suburban pr0perties in three suburban-urbanized townships 27.30 27.71 2u.11 22.38 16.09 28.36 h3.52 D weighted average assessment ratio of urbanized properties in three suburbanpurbanized townships 32.76 27.5h 23.60 25.13 2h.00 22.26 21.23 62. TABLE XIV AVERAGE RELATIVE ASSESSMENT LEVELS OF RURAL, SUBURBAN,AND URBANI- AND URBAN PROPERTIES IN INGRAM COUNTY, MICHIGAN, BI YEARS OF SALE. ASSESSMENT RATIOS COVERING THE ENTIRE COUNTY ARE GIVEN A: HEIGHTED AVERAGE 01" INDIVIDUAL PROPERTIES. HEANS OF ASSESSMENT DISTRICT AVERAGES. COVERING ASSESSWT DISTRICTS WITH MORE THAN ONE AREA CLASSIFICATION UNDER C AND D ARE GIVEN AS WEIGHTED AVERAGES OF INDIVIDUAL PROPERTIE AS B: AS UNVEIGHTD ASSESSMENT RATICB 1950 1951 1952 1953 Weighted average assessment ratio of rural properties 1.33.87 ’40.“; 36.10 170.87 Udghted average assessment ratio ‘ of suburban prOpwties 29.11; 29.151; 26.25 211.79 Weighted average assesanent ratio of urbanized propcties 3h.93 29.00 29.95 28.118 Weighted average assessment ratio of urban properties 37.h1 32.82 3h.86 314.99 Unveighted mean of average assess- nent ratios of rural areas 18.98 140.38 36.10 111.11 Umeighted mean of average assess- B nent ratios of suburban areas 26.51: 27.72 26.h2 26.96 Unveighted mean of average assess- nent ratios of urbanized areas 30.12 30.614 30.01; 31.65 Unweighted nean of average assess- nent ratios of cities 35.170 33.112 3h.26 33.68 weighted average assessment ratio of rural properties in five rural-sebum townships 1:14.08 140.55 35.18 171.67 0 Weighted average assessment ratio of suburban properties in five rural-suburban tosnships 30.55 32.11 27.53 29.76 Weighted average assessment ratio of suburban prep erties in three suburban-urbanized townships 27.69 29.37 26.38 214.51; D Weighted average assessment ratio of urbanized properties in three suburban-whanised townships 26.147 28.59 27.80 27.99 .fimEoE .588 8&3 5 .3330 and? modem .3 .Sdpeufianhs mo nookmon 03833 by cougaodg 30.8 no 8&3 use.“ 5 33.393 neon no adobe." Seasoned 3.533 omens: .5 0.53pm ends» sedan SONS o8..rom Samoa SM? . 80H: 8mm 0 .2 R is co... and? sen-e 82 Percent of sales value 50 V .-——-—-—- rural --- --—- suburban \\ ........................... urbanized to A ‘ / —- . -- urban \e \'\ ...-“#- _.__.,....__...._. --—-. 30 1r """ ~_,,, ..................................... __ __ __ K .............................. \ .. \ \ -—. N 20 a 10 h ° 1930 193? 1932 1933 tears Figure 8. Average relative assessment levels of real properties in four types of areas characterised by different degrees of urbanization, by years of sale, in Ingham County, Michigan. 83 53.20.“: .hvfifio 3235 5 .3330 on?» game.» .333 330.3» 05.» an 398 acne—55m use H95.» 5 33.8993 use." no 326..” 33333 3.330.“ swayed om enema...“ $.93 Bflam 086m 08.? Some... 89.3 Samoa 82M 0 dengue II ...I Has... {...}... so” ..I II. il .8 / \x / / \ / /.<.\ / / l/ .18 /, / / /l./ 404 on? sedan Ho 9503A Percent of sales value {L \\. / ho \\ // 30% i. If \ ' \\ ,, /,- —-— rural ZOT —- —-— suburban 10«- 0 Jr : ,L 5 1950 1951 1952 1953 Years Figure 10. Average relative assessment levels of real prepertiea in rural and suburban areas of five selected townships, by year of sale, in Ingham County, Michigan. 85 .339 .5560 5&5 5" .3330 and? madam an finances 3.333 8.3» no 32¢ 333% Ea .383» 5 33.893 H3." me 325..” unmannemma 3332 $985. JH 0.33.» and: 3.3m 8me Eryn 083W o8umn 08w: 8on 0 gang int-......Si: 93353 I. ..I. an: \ / \ / / ..ON 1. ... ... ...:\ / all. \ ../ , I .I \ x l. R \ .......... \ \ \ :3 \ ennui «ea-u no page Percent of sales value he T 30 t. 20 .. —--— —— suburban .................... .. urbanized 10 « 19:50 1931 1932 1933 Years Figure 12. Average relative assessment levels of real prepertzles in suburban and urbanized areas of three selected townships, by year of sale, in Ingham County, Mich-18m. 87 Two types of comparisons were used to test the validity of the above findings. In the first of these, the average assessment ratios of the different assessment districts were averaged on an equal weight basis which eliminated the possibility of a dominating influence on the results by one single assessment district which happened to be represented with a large number of preperty transfers in one class. These unweighted averages, how- ever, did not show any remarkable differences from the original findings. The differences in the level of assessment of different classes of properties could best be shown within single assessment districts. This was not possible with the sample of this study, however, since the eagle sizes were not sufficient for all classes withon one district. To obtain an equivalent result without disturbance by assessment districts which entirely belonged into one development class, averages were computed for the five townships with both rural and suburban properties and for the three townships falling into the suburban and urbanized areas. ”The re- sults of this check test are shown in Table XIII by value classes and in Table XIV by years of sale and are visualized in Figures 9 and 10 for the rural and suburban areas and in Figures 11 and 12 for the suburban and urbanized townships. Gomarisons of parts B, C and D of Tables XIII and XIV with part A of the same tables show that the check tests strongly support the findings, which were based on the weighted averages of the samples covering the whole county. The Figures 9, 10, 11 and 12 as compared to Figures 7 and 8 pre- sent the sane information. Part D of Table XIV, comparing the assessment levels of suburban and urbanized preperties by year of sale in townships which include both kinds of properties demonstrates clearly the equality 88 of assessment for these two classes. Figure 12 visualizes these ratios. The check tests thus remove the doubts which could have been raised against the findings from the original classifications of properties. Reference must be made here also to a discussion of equalization rates in the previous section of this chapter regarding the incorporated villages of Ingham County. These villages are classified as urbanized areas in connection with the presently discussed problem. It was pointed out that in the case of three out of these four villages the village properties were assessed relatively lower than the properties in the rural part of the respective townships. This agrees fully with the findings of this investigation which establishes that rural properties show the highest average relative assessments while suburban and urbanized properties are assessed at a lower level. Urban properties are assessed at an inter- mediate level, higher than prOperties in suburban and urbanized areas but lower than rural properties. It seems that township supervisors tend to underestimate the true market value of suburban properties since they are used to deal with farms and are therefore mislead by the comparatively small size of building lots. Their often rural background also causes them to attach a high value to the productive nature of farm properties as compared to residential proper- ties. They also fsil to recognize fully the increase in land values which results from the change in land use so that farms which are sold for a higher price in suburbanized areas are still assessed at traditional levels. 89 Comparison of Relative Assessment Levels in East lensing and Adjoining Residential Areas of lensing and Meridian Townships An almost continuous residential area extends from the city limits of Lansing east as far as Ckanos and northeast to Haslett. This area includes the city of East Lansing and parts of Lansing and Meridian town- ships. Naturally a tendency exists for territorial expansion of the city of East Lansing and attempts were made to incorporate sue of these sec- tions into the city. These attempts were strongly apposed by the inhabit- ants of the respective areas. One of the principal agruments against the annexation was the prospect of higher taxes if these areas were added to East Lansing. Assessed valuations are only one of the factors determining the actual tax loads of properties. But the assessed valuations as equalized by the county determine the maximum amount of regular taxes that can be allocated in a taxing district within the 15 mill limitation. These equalized valu- ations also determine the amount of county tax that is allocated in each district. If the equalization does not succeed in compensating the dif- ferences between the relative levels of assessment of the assessment districts in a county the tax loads will be spread unequally. The assessment part of this local taxation problem was therefore made part of the study. For this purpose the relative assessment level of the subdivisions of the city of East lensing was compared to the average assess- ment ratios of subdivisions outside the city which offer living conditions closely comparable to those in the city itself. Under this aspect 10 sub- divisions were selected in Lansing Township which directly adjoin East TABLE.XV 90 IMPORTANT CHARACTERISTICS OF THREE GROUPS OF SUBDIVISIONS 0F LANSING mm mm TWNSHIPS AND TI WHICH WERE COMPARED TO DETERMINE THE CANOE 0F INEQUALITIES BETWEEN THEIR RESPECTIVE AVERAGE RELATIVE.ASSESSHENT LEVELS LE cm or ms? LANSING : mm AND 31mm:— Number of subdivisions inp cluded in the comparison .Eighest average assessment ratio of a subdivision Lowest average assessment ratio of a subdivision Average assessment ratio of all the transfers in- cluded in the comparison Mean of the subdivision averages Standard.dewiation of the subdivision averages 57.18% 29.38% 37.2% 36.95% 6.5“ 10 News 21.67% 30.15% 30.22% 6.90% 23 37.50% 5.70% 19.13% 21.56% 8.514% 91 Lansing on its west and northwest side. Twentybthree subdivisions of Mbridian Township were included.which extend as far east as Okemos and Haslett. Comparisons between the:means of the average assessment ratios of the subdivisions in each of the three assessment districts were made by t-Test2 on the assumption.that the average assessment ratios of the subdivisions in.each district are distributed according to the normal curve. This assumption is usually valid for the distribution of sample means; the samples in this case being the various subdivisions. Some of the characteristics of the three groups of subdivisions which were compared for differences in the relative assessment level are listed in Table XV. The t-Tests showed that there was a significant difference between the average relative assessment of either two of the three areas in the comparison at the five percent level. This shows that the average level of relative assessment in East Lansing with 36.95 Percent of sales values is significantly higher than the assess- ment level of 30.22 percent in Lansing Township. The assessment at 21.56 percent of sales values in.Meridian Township is significantly lower than the assessment in.either of the other two residential areas. These systematic differences in assessment were not fully eliminated by the process of county equalization. Table II shows that there are still differences between the average levels of assessment of the three districts after the county equalization. The differences in assessment are therefbre reflected in the tax.loads of the selected.residential sections in the respective taxing districts. 2See footnote No. 3 p. 56. CHAPTER V SUMMARY, CONCLUSIONS AND RECOMMENDATIONS Em and conclusions. It was the main objective of this study to analyze the relationship of assessed valuations to sales values in Ingham County, Michigan. A number of questions were investigated which dealt with particular aspects of the assessment problem. Thus a picture of the situation in the field of assessment in Ingham County was obtained from the results of these individual problems. A summary of these results, characterizing the assessment situation in the area under study, indicates considerable variations between the relative levels of assessment of real properties. Equality of assessment, however, is a basic condition for equality of property taxation. Many Michigan residents have a high regard for "home rule" and thus favor retention of these governmental functions now performed by local governments. The administration of the property tax can be listed as one of these functions. For this, however, a price has to be paid in new instances. If the local administration of the preperty tax results in inequalities of taxation, it weakens the financial basis of local govern- ments and with it their stability, efficiency and reputation. The more efficient and satisfactory local governments perform their functions at the present the more stable and unquestioned will be their position in the future. Inequalities of assessment also violate the provisions of the prOperty tax law. The property tax is supposedly spread according to the true sales 93 values of property. The existing inequalities of assessment modify this order of distribution considerably, so that it sometimes seems that the tax could just as well be allocated according to the hat size of the preperty'owners. The investigations performed on the various problems of this study provided the fellowing information: Problems involving variations of relative assessments within assess- ment districts. A. B. Within each assessment district a low degree of variation‘be- tween the relative levels of assessments and small deviations of the individual assessment ratios from.the average level of assessment is desirable. Deviations of 10 percent from the average assessment ratio were accepted as tolerance limits for good assessments. In each of the assessment districts, however, less than 50 percent of all the cases studied fell within these tolerance limits. The total ranges of assessments frequently exceeded 100 percent of sales values. These inequalities are especially important since they are directly projected into the tax loads of the respective properties. Certain characteristics of real prOperties tend to influence the assessors in making their appraisals and thus cause systematic inequalities in the assessed valuation. One of the characteristics for which the assessment ratios of preperties were compared was the total amount of sales values. In most of the assessment districts the relative levels of assess- ment followed a generally observed pattern. In these cases the C. D. 91: low priced prOperties were assessed higher relative to sales values than higher priced.properties. This results in a re- gressive taxation in the assessment districts which fellow this pattern. In some districts, however, as in the city of Lansing, medium.priced properties are assessed lower than properties sell- ing at low prices, whereas the assessments rise again considerably for properties in high value classes. The assessment ratios were compared by year of sale for two reasons. Firstly systematic changes of relative assessment during the period of the study would have to be considered if the samples of more than a year were used in an analysis. Secondly such systematic changes could also point out intentions of assessors to adJust or correct the assessments in their districts. The analysis did not reveal that any significant changes had been made in the relative levels of assessment between the years from.l950 to 1953. The age of buildings has an important and sample: influence on the market value of properties through different degrees of depreci- ation and obsolescence. Different building ages could therefore cause systematic differences in assessment levels if assessors over or underestimated the values of older buildings. A special study'was therefore made of East Lansing properties to determine the effect of building ages upon the quality of assessment. lb significant differences between the average levels of assessment of houses built before and after world.war II could be discovered. 95 Problems involving variations between assessments in areas distin- guished by selected characteristics. Characteristics which are common to all the properties in certain areas affect the assessment of these properties equally and are responsible for differences between the relative assessment levels of properties in con- tiguous areas. A. One distinguishing characteristic is the location in a certain assessment district, which is assessed by an individual supervisor or assessor. Differences in knowledge and opinion of different assessors result in differences in the average levels of relative assessment between the assessment districts. The lowest average assessment ratio was found in Meridian Township with 20.h7 percent of sales values whereasthe Leslie TOwnship was assessed.more than twice as high with h? percent of sales values. This demonstrates that rather significant differences exist in the average levels of assessment between assessment districts. In this connection the county equalization of’the years 1950 to 1953 was investigated. The rates by which total assessed.valua- tions in the assessment districts were changed.by'the county board of equalization did not restore equal levels of relative assessment when applied to the average assessment ratios of the respective districts. This means that equality of assessment was not restored through equalization in the period under study. The rates of change of assessed valuations through county equalization.remained rather constant for each assessment district from year to year. Some changes in the relative treatment of assessment districts were made in 1955, however, which resulted in an adjustment for the lowest assessed district. B. A large part of the county is found to be under some influence of urbanization. Some of the suburban areas have only recently come under the direct influence of the city of Lansing through a rapid mansion of the residential zone around Lansing. The assessments of real prOperties were compared according to the degree of urbanization of the area in which they are located. Some differences were found between the average levels of assess- ment of the classes of urban, urbanized, suburban and rural proper- ties. The highest level of relative assessments was associated with rural properties, cities showed somewhat lower assessments, and urbanized and suburban areas were assessed lowest in terms of sales values. C. High city taxes are an important argument for residents of suburbs surrounding the city against annexation of their sections. The assessment levels of the subdivisions of the city of East Lansing were compared to those in adjoining subdivisions in Lansing and Meridian Townships to investigate the assessment part of these taxing differences. The average assessment level in East Lansing was found to be significantly higher than in the adjoining resi- dential districts of the neighboring townships. The analysis smnmarized above indicates considerable inequalities of relative assessments of real properties in Ingham County. Some of these inequalities can be traced to certain characteristics of the preperties. 97 Recommendations. The inequalities of assessment discovered and reported by this study suggest that more attention should be given to the equality of assessment for property tax.purposes. There is no doubt that the presently low quality of assessment needs to be improved. Whether this could be accomplished to a satisfactory extent within the present system of preperty tax administration or whether a change in the system should be made would have to be decided after careful examination. On one side the advantages derived from.the present system of inde- pendent local administration of the property tax have to be considered. These would.have to be compared.to the advantages for individual residents and the improvements of the basis of successful local governments which could be obtained from a change in the present system. A number cf:neasures to improve the quality of assessment could be taken without changing the present system of‘property taxation if this were preferred. 1. Assessor schools have proved successful’in other states. Information relating to real estate appraisal, current market prices of real estate, and improvements of usual weak points of property assesmment would be useful for every assessor. Newly elected supervisors are especially in need of such assistance. ‘ 2. A return to assessment at 100 percent of true market values would eliminate an.important source of inequalities. This would also build up the as base of new taxing districts. 3. Employment of a professional assessor as adviser to the county board of equalization who is also available to assist local assessors has been successful in Oakland County. 98 The legislature could by law delegate the task of assessment to some other official than the township supervisor. Many other states have adopted a system of county-wide assessment which has some advantages over local assessment. 99 DEFINITION OF TERMS "Assessment District": A political subdivision of a county, such as a township, incorporated.village, or city which is assessed by an individual assessor. "Taxing District": A subdivision of a county within.which uniform.tax rates are charged on the assessed valuations of preperties. This is usually a school district. ”Assessment Ratio": The term.used for the percentage ratio of assessed valuations to sales values of prOperties. "Relative Assessment": The assessed valuation expressed relative to the sales values of a piece of prOperty. It is used as a synonym of "assessment ratio.” "Equalized Ratio": The term used for the percentage ratio of equalized valuations to sales values of prOperties. "Quality of Assessment": The general term used for the extent to which individual assessment ratios conform to standards of assessment. "Applied Rate": The tax rate which is actually used to compute the amount of taxes from the assessed valuation of property. "Suggested Rate": The tax rate, suggested on basis of the findings of this study, for the computation of taxes, to improve the equali- zation between assessment districts. APPENDIX In! RATES CHARGED IN HILLS CF SThTE EQUALIZED VALUATTINS IN'THE SCHOOL DISTRICTS OF IHGHAM COUNTY,JMIGHIGiN IN’l9Sh Special tues like drain taxes, street improvement taxes, etc. which are not spread equally'in.the regular taxing districts are not included. 5.06h.mills. County Tax Rate for 195k: ““--r»-— ..—.. e “*-_-——_—.__—-l _-_WH—.—_‘o-‘-——~——_-mm- __.--._ ".-_—.__ -e ..- ,-_ .. . Schodl tax 10 Township or Siv ‘3 d cit rate School Dusty rate - t Azizzggzif Allo- Extra district. Allo- Extra ing a, ser- Totdl cated voted _, No. cated voted site vice Aurelius - -- 1 n-. 6.23 11.291; 2 8.28 13.3hh 3 fr. 5.52 10.581; ' h 5052 10e58’4 5 b.87 9.93h 6 fr. h.06 9.121; 7 fr. 8.28 13.3h1; 9 n-. 6.18 1.1.2111: 10 9.9 111.951: n n 84:1 maul. Bmkerhill - -- 1 tr. 11.19 9.2514 2 8.6? 13.73h 1‘ 11097 901314 _ 5 1r. 3.29 m Delhi -- -- l 9.9 ‘ 2.5 11 28.1.61; 1 n. 5.78 3 13.81;]; 2 9.9 7 5 7.1 3h.06h 5 tr. 9.9 2 1? 33.961; 6 6eh2 16eth 7 9.19 113-2511 8 h.06 9.121: :4 _._ _ 12 4.1;. 5.7 g m 101 Township or School tax 1e smen cit rate School Erating rate Btnld- Debt “diggictt mo- Etra district 0- tra ing & ser- Total cated voted no. cated voted site vice Ingham -- - 1 fa: 7'3 L—m ° _ Cit _ 8 11.5 21;.561L mg i 20.1581) Ming T'pe — "'- 1 fr. N 1 11'. 3 9.9 13 55 330W 2 9.9 5 6 25.961; 2 tr. 9.9 3 11 28.9611 1. 7.3 7.8 20.161. 1 . 90L 10 . Leroy - -- l 14.07 9.131; 2 fr. 6.88 11.9111. h fr. 5.115 10.511; 6 tr. 7.1: 3.1 15.561: 7 7.61; 12.701; 12 n-. {9 10.961; 12 u. .01 A 9.132; mic -- — W 1 1r. 6 6.? 17.761; 2 6.3 11.361; 3 6.6 11.661: 5 5e3 10e36h 6 than. 9.1.01. 7 n-. 7.02 12.081. 2 6.17 11.22L Locks -- -- 1 909 3 17e95h 2 13.16 9.221; 3 5.72 10.781; ’4 fr. 7 12.0614 5 1r. 7 12.061. 6 5.3 10.3611 7 11‘- 7.31.: 12.1101; 8 n. 8.86 3329311. Heridian - -- 1 fr. 9e? 3 12 29e95h 2 he 9e9 7 5 8 3he96h 7 9.9 15 29.9614 _ _ i 8 g 9.9 J a 7.1. 5.2g. 102 Township or School Tax 1 ci rate School atin rate Build- Debt 588°88'91“? nil—55‘s- a district Ho- 9. ing a ser- Total £13m“ cated voted No. sated voted site vice Quandaga -- -- 1 tr. 8.5 13-561; 2 5.66 10.721: 1‘ 5.95 11.0114 6 9.9 111.961; 10 fr. 5.1; 10.1461; 1 1. 1 . 909 i 114.9611 SW1d” e5 e5 1 h‘e 705 A“ 1 M e e e "" 2 e73h Mason, R A 8 87 __ 7_'§ 5 13.86111) W" 2 fr. 5.31. 10.10:. 3 fr. 9.9 111.9611 h tr. 6.81 11.871. 5 he heO? 9.131; 7 be 11.07 9.131; 10 3‘. 509 103% 'mtmld 2 a. 5.36 10.121. 3 a. 6 11th fl 6 50332 1043211 White Oak -- - 2 11.06 9.121: 6 14.06 9.1214 11 L26 9.6211 Williamston 10.1.0 37. 1.1) 1 m. 9.9 2 5 5 26.961. 5 7 12.066 8 n‘e 6e05 11.112; 1 The total tax rates for city school districts include in the first figure the city tax rate fix the city itself, the second figure except the city tn rates and applies to the consolidated districts outside the city limits. 103 303001. 1315731015 or 1mm comm 195k .\_¥ L_l v i I 1 128:1 12 grade districts Source: School Districts of Ingham County, 19143, Michigan Public Education Study Comission, corrected for 19511. 10h BIBLIOGRAPHY Blough, R., I'Recent Deve10pments in Methods of Real Estate Equalization in'Wisconsin", Journal of Land and Public Utility Economics, Vol. 10, No. l, l93h. Cline, D. C., ”Pay the Piper”, Governmental Service Publications No. l, Governmental Research Bureau, Michigan State College, 1953. Dixon and Massey. Introduction to Statistical Anggygig. New York: MbGraw Hill, 1531. General Pr0perty Tax Laws, State of Michigan, 191111. Mbore, EL H., "The Effects of suburbanisation on Land Use in a Selected Segment of the Lansing Rural-Urban Fringe." Unpublished Ph.D. Thesis, Michigan State College, 1953. Number of Inhabitants: Michigan. United States Census of Population: 1950. U. S. Department of Commerce, Bureau of the Census. Hybroten, N., nEstimating Cash Consideration in Real Estate Transfers from Internal Revenue Stamps.” Journal of Farm Economics, V01. 30, No. 3, August 19h8. Renne, R. R. and H. H. Lord, "Assessment of antant Farm.Lands.' antana Agricultural Experiment Station Bulletin 3&8, Boseman, Montana, 1937. Sparlin, E. 3., "Inequalities in the Arkansas Property Tax Assessment Systems." University of Arkansas Agricultural Experiment Station Bulletin 369, Fayetteville, Arkansas, 1939. Taylor, C. C. and G. H. Hull, 'Assessment of Farm Real Estate for Tax Purposes in South Carolina", South Carolina Agricultural Experiment Station Bulletin hlb, Clemson, South Carolina, l95h. Tontz, R. L., Kristensen, J., and Cable, C. C., Jr. "Reliability of Deed Samples as Indication of’Isnd Market ActiVity." ‘Land Economics, Vbl. 30, No. 1, February l95h. Veatch, J. 0., "Soils and Land of Michigan", Michigan State College Press, 1953. ‘36,». big 11.1‘2 {1.1-1 mg I '56 m .773 1;? ‘s ”F77 0151-7319360") 1 NOV 1.4 L950 1‘: mas-'9 9 rest '9 star! 1818111.):5 /> Devil-h E “”9 999999 i191 9113 9999‘ “‘9'“ 3