THE GENERAL PROPERTY TAX IN MICHIGAN: VAatA'rIo-Ns m LOCAL ASSESSMENT LEVELS 1' ‘ Thesis for flu Wu? M. S.‘ MICHIGAN STATE UNIVERSITY ' , Arley. Dean Watch I t:, 19607 | I 8 C 0 ’. 0 | v 0 i . 0 0:. , . _ :‘.‘I ' 4 Z ‘-. . 9 fi §."|' I .\' ";‘- I . I 0‘0 ' Q ~ ‘ . ' .' ' ° . ‘°‘fil".‘” LIBRARY Michigan Stan Univmity LIBRARY Michigan Stats Univmity THE GENERAL PROPERTY TAX IN MICHIGAN: VARIATIONS IN LOCAL ASSESSMENT LEVELS BY Arley Dean Waldo AN ABSTRACT Submitted to the College of Agriculture 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 1960 ’/// CL? «2 _...—/ , , ,-- I 1 Approved/}< 5.16%.} A /¢,D-¢Lf'(au{.) 7/ L ) ABSTRACT The purpose of this study was to ascertain the extent to which cer- tain property classes tend to be either over-valued or under-valued by local prOperty tax assessors in Michigan. I Data from 21 county equalization studies completed by the Michigan State Tax Comission during the period from 1955 to 1959 were utilized in the analysis. These studies included data for 320 township and 53 city assessment districts. The county equalization studies, which were based upon sample field appraisals by the Tax Commission, provided estimates of the assessment- appraisal value ratios of each property class within the individual local assessment districts. The assessment-appraisal value ratios were adjusted to the equivalent of a 100 percent assessment for all real prOperty and for all personal property within each assessment district. It was assumed that the appraisal valuations of the Tax Commission were a uniform measure of the true property values. Thus, in each district, variations in the assessment levels of the individual property classes were measured by the deviation of the individual property class assessment level from the average assessment level of either all real preperty or all per- sonal preperty in the district. The distribution of adjusted assessment- appraisal value ratios was then computed for each preperty class. Among the township assessment districts, 20 classes of real property and 5 classes of personal property were analyzed. In general there were wide variations among the assessment levels for each property class. The analysis indicated that local assessors tended to over-value cutover lands, farm vacant real estate, and lands upon which timber has been partially harvested. Under-assessment was most prevalent for suburban residential properties. There was also a tendency for assessors in predominately rural areas to value potential homesite prOperties at higher levels and farm improved real estate at lower levels than did assessors in urbanized townships. Township assessors tended to over-value pipelines and the personal property of utilities, and to under-value farm and industrial personal property. Among the city assessment districts, 6 classes of real preperty and 3 classes of personal property were analyzed. The data indicated that utility real estate was over-valued and that potential business and potential residential properties were under-valued by the local assessors. City assessors also tended to over-value utility personal property and to under-value industrial personal property. The study concluded that assessments within the individual districts were far from uniform and that certain classes of property were over- assessed in a substantial majority of the districts. Moreover, the present equalization system is not adequate to assure the equitable treat- ment of all property owners. THE GENERAL PROPERTY TAX IN MICHIGAN: VARIATIONS IN LOCAL ASSESSMENT LEVELS BY Arley Dean Waldo A THESIS Submitted to the College of Agriculture 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 1960 G/GEES/ g]? 60 ii ACKNOWLEDGEMENTS This project could not have been completed without the help and encouragement of many others. Special thanks are due to Professor Raleigh Barlowe, my major pro- fessor, whose guidance was invaluable and whose own high standard of scholarship was inspirational throughout this project. I am indebted to'Mr. Edward W. Kane, Secretary of the Michigan State Tax Commission, and to his staff for facilitating the collection of the data. Mr. William.H. Heneberry of the Department of Agricultural Economics gave valuable assistance on several occasions. I must also thank the Department of Agricultural Economics for the financial assistance which made this undertaking possible and the various members of the clerical staff who aided in the computational and typing work. Credit is also due to my many fellow graduate students who provided help and, more importantly, encouragement at every turn. Finally I must express my deep appreciation to my wife. But for her constant support and patience this task would have been impossible. TABLE OF CONTENTS ACKNOWLEDGEMENTS . . . . . . . . . . . . . . . . . . . LIST OF TABLES . . . . . . . . . . . . . . . . . . . . . LIST OF ILLUSTRATIONS . . . . . . . . . . . . . . . . . . . CHAPTER I O IMRODUCTION O O O O I O O O O O O O O O O 0 Nature of the Study . . . . . . . . . . . . . . The Problem . . . . . . . . . . . . . . . . Objectives . . . . . . . . . . . . . . . . . Historical Trends . . . . . . . . . . . . . . Property Taxation in the United States . . Property Taxation in Michigan . . . . . . . II. LEGAL AND ADMINISTRATIVE ASPECTS OF PROPERTY TAXATION IN MIC HIGAN I O O O O O O O O O O O O O O O O O 0 Legal Requirements . . . . . . . . . . . . . . . Constitutional Restraints . . . The Level of Tax Assessments . . . . Exemptions from the General Property Tax . Property Tax Rate Limitations . . . . . . . Administration of the General Property Tax . . Local Assessment Procedures Duties of the Local Assessor . . Equalization of Assessment Districts . The State Tax Commission . . . . . . . . . . Equalization Study Procedures . . . . . . . III. THE MEASUREMENT OF ASSESSMENT INEQUALITIES . . General Procedure . . . . . . . . . . . . . . The Data . . . . . . . . . The Counties Studied . . . . . . . . . . . Classification of Townships . . . . . . . . The Cities Studied . . . . . . . . . . . . The Measurement of Variations in Property Class Assessment Levels . . . . . . . . Property Classes Studied . Relative Importance of the Property Classes iii Page ii ix 12 12 12 15 17 21 26 26 29 31 35 37 42 42 42 43 49 SO 53 56 58 iv Page Limitations of the Study . . . . . . . . . . . . 67 Variations within Property Classes . . . . . . . . 67 Accuracy of State Appraisal Valuations . . . . . . 68 Related Studies . . . . . . . . . . . . . . 69 Assessment-Sales Value Ratio Studies . . . . . . . 69 Studies in Other States . . . . . . . . . . . . . . 71 Michigan Studies . . . . . . . . . . . . . . . . . 73 IV. VARIATIONS IN ASSESSMENT-APPRAISAL VALUE RATIOS . . . . . 78 Township Assessment Districts . . . . . . . . . 78 Average Assessment-Appraisal Value Ratios . . . . . 78 Variations in Real PrOperty Assessment Levels . . . 82 Variations in Personal Property Assessment Levels . 114 City Assessment Districts . . . . . . . . . . . . . 117 Average Assessment-Appraisal Value Ratios . . . . . 117 Variations in Real Property Assessment Levels . . . 119 Variations in Personal Property Assessment Levels . 122 Equalization of Local Assessments within Counties . . . 123 Eaton County . . . . . . . . . . . . . . . . . . . 124 Shiawassee County . . . . . . . . . . . . . . . . . 128 V. SUMMARY AND CONCLUSIONS . . . . . . . . . . . . . . . . . 133 Legal Restrictions . . . . . . . . . . . . . . . . . . 133 Assessment Practices . . . . . . . . . . . . . . . . . 135 Administrative Procedures . . . . . . . . . . . . . 135 Township Assessors . . . . . . . . . . . . . . . . 136 Assessment Inequalities . . . . . . . . . . . . . . 138 Township Assessment Districts . . . . . . . . . . . 138 City Assessment Districts . . . . . . . . . . . . 143 The Range of Adjusted Assessment Levels . . . . . . 145 Conclusions . . . . . . . . . . . . . . . . . . . . . . 149 LITERATURE CITED . . . . . . . . . . . . . . . . . . . . . . . . . 151 TABLE 1-1. 1-2. 1-3. l-4. 2-1. 3-3. 3-4. 3-5. 3-6. 3-7. 3-8. 4-1. 4-2. LIST OF TABLES State Tax Collections, Selected Years State and Local Property Tax Revenues, Selected Years. Total General Property Tax Levies in Michigan, Selected Years 0 O O O 0 O O O O O C O O O O O O I O O O O 0 General Property Taxes Levied by Local Governments in Michigan, Selected Years . . . . . . . . . . . . . Property Classification System of the Michigan State Tax Commission . . . . . . . . . . . . . . . . . General Property Tax Base in 21 Selected Michigan counties 0 O O 0 O O O O O O O I O O I O O 0 O O Q Total Assessed Valuations of Real and Personal Property in 21 Selected Michigan Counties, 1957 . . . . . . . Number of Rural, Urban, and Resort Townships and Number of Cities in 21 Selected Michigan Counties . . . . . Composition of the Real Property Tax Base, by Property Class, Within Township Assessment Districts in Eaton county 0 O O I O O O O O O O O O O O O O O O O I O 0 Composition of the Real Property Tax Base, by Property Class, Within Township Assessment Districts in Emmet County . . . . . . . . . . . . . . . . . . . . . . Composition of the Real PrOperty Tax Base, by Property Class, Within Township Assessment Districts in Genesee County . . . . . . . . . . . . . . . . . . Composition of the Real Property Tax Base, by Property Class, Within Township Assessment Districts in Ontonagon County . . . . . . . . . . . . . . . . Composition of the Personal Property Tax Base, by Property Class, Within Township Assessment Districts in Four Selected Michigan Counties . . . . . . . . Variations in Average Assessment-Appraisal Value Ratios by Township Group, for All Property . . . . . . . . Variations in Average Assessment-Appraisal Value Ratios by Township Group, for Real Preperty . . . . . . Page 39 46 48 51 59 61 62 64 66 79 81 vi TABLE Page 4-3. Variations in Average Assessment-Appraisal Value Ratios by Township Group, for Personal Property . . . . . . 81 4-4. Distributions of Adjusted Assessment-Appraisal Value Ratios of Farm Improved Real Estate in 314 Townships. 83 4-5. Distributions of Adjusted Assessment-Appraisal Value Ratios of Farm Vacant Real Estate in 310 Townships. . 85 4-6. Distributions of Adjusted Assessment-Appraisal Value Ratios of Business Improved Real Estate in 305 Townships and Business Vacant Real Estate in 142 Townships . . . . . . . . . . . . . . . . . . . . . . 89 4-7. Distributions of Adjusted Assessment-Appraisal Value Ratios of Industrial Real Estate in 183 Townships and Utility Real Estate in 161 Townships . . . . . . 90 4-8. Distributions of Adjusted Assessment-Appraisal Value Ratios of Residential Improved Real Estate in 81 Townships and Residential Vacant Real Estate in 76 Townships . . . . . . . . . . . . . . . . . . . . . . 96 4-9. Distributions of Adjusted Assessment-Appraisal Value Ratios of Suburban Acreage Improved Real Estate in 314 Townships . . . . . . . . . . . . . . . . . . . . 100 4-10. Distributions of Adjusted Assessment-Appraisal value Ratios of Suburban Acreage Vacant Real Estate in 300 TownShipa O O O O O O I O O O O O O O O O O O O O 101 4-11. Distributions of Adjusted Assessment-Appraisal Value Ratios of Suburban Platted Improved Real Estate in 202 Townships . . . . . . . . . . . . . . . . . . . . 104 4-12. Distributions of Adjusted Assessment-Appraisal Value Ratios of Suburban Platted Vacant Real Estate in 197 Townships . . . . . . . . . . . . . . . . . . . . 105 4-13. Distributions of Adjusted Assessment-Appraisal Value Ratios of Suburban Acreage Improved "B" Real Estate in 107 Townships . . . . . . . . . . . . . . . . . . 106 4-14. Distributions of Adjusted Assessment-Appraisal Value Ratios of Resort Acreage Improved Real Estate in 151 Townships . . . . . . . . . . . . . . . . . . . 109 4-15. Distributions of Adjusted Assessment-Appraisal Value Ratios of Resort Acreage Vacant Real Estate in 127 TownShips O O O O 0 O O O O O O O O O O O O O I O I O 110 TABLE 4-16. 4-17. 4-18. 4-19. 4-230 4-24. 4-25. 4-26. 4-27. 4-28. 5-1. Distributions of Adjusted Assessment-Appraisal Value Ratios of Resort Platted Improved Real Estate in 116 TownShips I I I I I I I I I I I I I I I I I I I Distributions of Adjusted Assessment-Appraisal Value Ratios of Resort Platted Vacant Real Estate in 104 Tomahips O I I I I I I I I I I I I I I I I I I I Distributions of Adjusted Assessment-Appraisal Value Ratios of Timber, Part Timber, and Cutover Lands in Townships . . . . . . . . . Distributions of Adjusted Assessment-Appraisal Value Ratios of Farm, Business, and Industrial Personal Property in Townships . . . . . . . . . . . . Distributions of Adjusted Assessment-Appraisal Value Ratios of Utility Personal Property and Pipelines. Variations in Average Assessment-Appraisal Value Ratios for All Property, Real Property, and Personal Preperty in 53 Cities . . . . . . . . . . . Distributions of Adjusted Assessment-Appraisal Value Ratios of Business Improved, Business Vacant, Industrial, and Utility Real Estate in Cities Distributions of Adjusted Assessment-Appraisal Value Ratios of Residential Improved and Residential Vacant Real Estate in 53 Cities . . . . . . . . . . Distributions of Adjusted Assessment-Appraisal Value Ratios of Business, Industrial, and Utility Personal Property in Cities . . . . . . . . . . . . . . . . . Assessment-Appraisal Value Ratios of Major Property Classes in Eaton County, 1958 . . . . . . Adjusted Assessment-Appraisal Value Ratios of Major Property Classes in Eaton County, 1958 . . . . . . Assessment-Appraisal Value Ratios of Major Property Classes in Shiawassee County, 1957 . . . . . . . Adjusted Assessment-Appraisal Value Ratios of Major Property Classes in Shiawassee County, 1957 . Average Adjusted Assessment Levels of 20 Classes of Real Property in 320 Townships . . . . . . . . . vii Page 111 112 113 115 117 118 120 123 125 127 129 131 140 TABLE 5-2. 5-30 5-4. 5-5. Average Adjusted Assessment Levels of 6 Classes of Real Pr0perty in 209 Rural Townships . Average Adjusted Assessment Levels of 6 Classes of Real Pr0perty in 74 Urban Townships . . . Average Adjusted Assessment Levels of 5 Classes of Personal Property in 320 Townships Average Adjusted Assessment Levels of 6 Classes of Real Property and 3 Classes of Personal Property in 53 Cities . . . . . . . . . . . . . . . viii Page 141 142 142 144 FIGURE 4-1. 4-2. 4-3. 4-4. 4-5. 4-6. 4-8. 4-9. 4-10. 4-11. 4-12. ix LIST OF ILLUSTRATIONS Page Geographic location of 21 study counties . . . . . . . . 44 Distribution of adjusted assessment-appraisal value ratios of Farm Improved Real Estate in 314 Townships . 87 Distribution of adjusted assessment-appraisal value ratios of Farm Vacant Real Estate in 310 Townships . . 88 Distribution of adjusted assessment-appraisal value ratios of Business Improved Real Estate in 305 Townships I I I I I I I I I I I I I I I I I I I I I I 9 1 Distribution of adjusted assessment-appraisal value ratios of Business Vacant Real Estate in 142 Townships . . . . . . . . . . . . . . . . . . . . . . 92 Distribution of adjusted assessment-appraisal value ratios of Industrial Real Estate in 183 Townships . . 94 Distribution of adjusted assessment-appraisal value ratios of Utility Real Estate in 161 Townships . . . 95 Distribution of adjusted assessment-appraisal value ratios of Residential Improved Real Estate in 81 Townships . . . . . . . . . . . . . . . . . . . . . . 98 Distribution of adjusted assessment-appraisal value ratios of Residential Vacant Real Estate in 76 TMShj-Ps I I I I I I I I I I I I I I I I I I I I I I 99 Distribution of adjusted assessment-appraisal value ratios of Suburban Acreage Improved Real Estate in 314 Twns hips I I I I I I I I I I I I I I I I I I I I 102 Distribution of adjusted assessment-appraisal value ratios of Suburban Acreage Vacant Real Estate in 300 Tmships I I I I I I I I I I I I I I I I I I I I 103 Distribution of adjusted assessment-appraisal value ratios of Suburban Platted Improved Real Estate in 202 Townships . . . . . . . . . . . . . . . . . 107 Distribution of adjusted assessment-appraisal value ratios of Suburban Platted Vacant Real Estate in 197 Townships . . . . . . . . . . . . . . . . . . . . 103 FIGURE Page 5-1. Range of adjusted assessment-appraisal value ratios in 320 Michigan townships . . . . . . . . . . . . . . . 146 5-2. Range of adjusted assessment-appraisal value ratios in 53 Michigan cities . . . . . . . . . . . . . . . . . 148 CHAPTER I INTRODUCTION One of the most pronounced changes in the economic character of the United States, especially over the past three decades, has been the rapid growth of both the absolute amount and relative importance of government revenues and expenditures in the nation's economy. The economic activities of the federal government, given impetus by efforts to combat the depression of the 1930's, have accounted for a substantial part of the increased importance of public finance. But, state and local governments have also felt the demand for the expansion of public facilities and services. At all levels of government the complex.of the nation's growing population has brought demands for social and public services which can be provided only by government. This demand has placed a heavy burden upon the tax base of the nation, and it has created a great deal of interest in the subject of taxation. The general purpose of the following study is to focus attention upon the general property tax in Michigan. The taxation of property has probably been subjected to more sustained criticism than has any other general form of taxation in the United States. However, despite serious faults, the general property tax still remains the basic source of tax revenue for local units of government. flature of the Study The Problem In the broadest sense, the general property tax is a tax on all forms of wealth, both tangible and intangible, levied at a uniform rate according to the prevailing market value of the property.1 However, in practice the general property tax varies in several respects from this general definition. First, many types of property are excluded from taxation entirely or are taxed at rates which differ from those applied to other types of property. There is little uniformity among states as to the types of property that are wholly or partially exempted from taxation. Second, given the legal requirements for property taxation within the state, the failure to uniformly assess the taxable property results in the inequitable treatment of some property owners. Disregarding the question of the "fairness" of the legal stipula- 2 the primary problem associated with the tions of the property tax, taxation of property is that of uniform property assessment. Alfred Marshall once commented that ”the difficulty of assessment, though un- doubtedly very great, is of a kind to be diminished rapidly by experience; the first thousand such assessments might probably give more trouble, and yet be less accurately made than the next twenty thousand."3 None- theless, the problem of uniformly assessing all property at the same percentage of current market value is still of major concern in Michigan today. le. Harold M. Groves, Financing Government (Fourth edition; New York: Henry Holt and Company, 1954), p. 43. 2The terms ”general property tax” and "property tax” will be used interchangeably hereafter. 3Alfred Marshall,_§£inciples of Economics (Eighth edition; London: Macmillan and Company, 1956), p. 663n. (First published in 1920). Objectives This study deals generally with the operation of the general property tax in Michigan and, more specifically, with the assessment practices of the assessing officers in the local tax districts. The objectives of the study are twofold: First, to review the legal and administrative aspects of the Michigan property tax system; and, second, to ascertain the extent to which certain classes of property are being either over- assessed or under-assessed relative to the assessment levels of other classes of property within the local assessment districts. An appraisal of the activities of Michigan's local assessors necessitates a brief study of the historical development of the current property tax system. Moreover, the criteria against which the quality of local assessment must be judged are determined by the legal require- ments for property taxation. The analytical portion of this study is concerned with the rela- tionships among the average assessment levels of different classes of real and personal property within each of the lOcal assessment districts in twenty-one Michigan counties. Although it is generally conceded that there is a wide variation in the average assessment levels of the various local districts, previous studies have not placed major emphasis upon the variations which exist among different property classes. The general hypothesis of the current study is that certain classes of property are, in a substantial majority of the cases, either over- assessed or under-assessed relative to the average assessment level of all classes of property within the local assessment district. Hence, it is 4 hypothesized that the owners of certain types of property are receiving inequitable treatment under current assessment practices. Historical Trends Property Taxation in the United States The general property tax has been, historically, a major source of revenue for both state and local governments. The federal government has levied a property tax on only three occasions,4 but the constitutional requirement that all direct federal taxes be levied upon the states in proportion to their population has prevented any extensive use of the property tax as a source of federal revenue. Prior to the 1930's state governments relied heavily upon the general property tax; but, as the demand for state governmental expendi- tures increased and the property tax delinquencies of the depression years substantially limited property tax receipts, the states were forced to seek new sources of revenue. As indicated in TABLE l-l, state tax revenues now result largely from general sales, use, and gross receipts taxes, and from personal and corporate income taxes. Although the general property tax now accounts for only a minor portion of state tax revenues, it has consistently provided local govern- ments with their only important source of tax revenue. A comparison of the relative importance of property tax revenue in state and local 1+Groves, 22. cit., p. 41. TABLE 1-1 State tax collections, selected years (in millions of dollars) b Sales use and Income Property gear Totala Gross Receipts Taxes Taxes#_ 1915 368 2 186 1922 947 98 348 1925 1,305 103 359 1930 2,108 1 233 345 1933 1,724 16 121 285 1935 2,217 284 159 248 1940 3,313 499 361 260 1945 4,307 776 809 276 1950 7,912 1,670 1,310 307 1955 11,584 6,864 1,821 412 1957 14,531 8,436 2,547 479 aExcluding unemployment compensation. bBoth corporate and personal. Source: United States Bureau of the Census, flistorical Statistics of the United States, 1789-1945 (Washington: United States Government Printing Office, l949);_§gntinuation to 1952 of Historical Statistics of the United States, 1789-1945 (Washington: United States Government Printing Office, 1954); and Statistical Abstract of the United States, 1956 and 1958 (Washington: United States Government Printing Office, 1956 and 1958). governmental finance is given in TABLE 1-2. Property taxes have pro- vided as much as 50 percent of all state tax revenues in the past, but in 1953 property taxes accounted for only 3.5 percent of the total state tax receipts. On the other hand, the general property tax has consis— tently provided local governments with about 90 percent of their total tax revenues. Many state governments have abandoned the general property tax altogether, thus leaving this area of taxation exclusively to local units of government. TABLE 1-2 State and local property tax revenues, selected years (in millions of dollars) Property Tax Receipts as a Percentage Properterax Receipts Total Tax Receipts of Total Tax Receipts Year State Local State Local State Local 1902 82 624 156 704 52.6 88.5 1913 140 1,192 301 1,308 46.5 91.1 1932 328 4,159 1,890 4,274 17.3 97.4 1946 249 4,737 4,937 5,157 5.1 91.7 1953 365 9,010 10,552 10,356 3.5 87.1 Source: Kenyon K. Poole, Public Finance and Economic Welfarg (New York: Rinehart and Company, 1956), p. 277. Insofar as the combined total tax revenue of the federal, state, and local governments is concerned, the relative importance of the general property tax has declined a great deal since the 1930's. This, of course, occurred as the federal and state governments turned to new taxes, es- pecially sales and income taxes, as sources of tax revenue.5 In 1956 property taxes yielded only 13 percent of all tax revenues in the United States.6 Property Taxation in Michigan General History. The general property tax has been an important source of revenue to both the state and the local governments in Michigan. 5See Mabel Newcomer, "The Decline of the General Property Tax," The National Tax Journal, Volume VI (March 1953), pp. 38-51. 6United States Bureau of the Census, Summary of Governmental Finances in 1956 (Washington: United States Government Printing Office, 1957), p. 20. In 1910 a total of $35.7 million in property taxes were levied in the state as a whole. Of this amount, $4.7 million was levied by the state government, and $31.0 million was levied by various local units of govern— ment. TABLE 1-3 gives the total amount of property taxes levied in the state by all governmental units, and the proportion of the total amount that was levied by the state government, for selected years since 1910. The total property tax levy increased rapidly following World War I, reaching a peak of $266.8 million in 1930. During this period the pro- portion of the total property tax levied by the state government declined slightly from a high of 16 percent in 1915 to 11 percent in 1930. TABLE 1-3 Total general property tax levies in Michigan, selected years (in millions of dollars) State Levy as a Percentage of .Xear__g_ Total Levy State Levy __ Total Levy 1910 35.7 4.7 13 1915 60.6 9.5 16 1920 140.4 17.4 12 1925 191.7 17.8 9 1930 266.8 29.5 11 1935 147.5 1940 166.8 1945 205.3 1950 342.1 1955 563.9 1957 ‘ 710.5 Source: Michigan State Tax Commission, ,Iwenty-Fifth Report: 1947-48 (Lansing, 1949) and Thirtieth Report: 1957-1958 (Lansing, 1959). The depression of the 1930's led to lower property values and a substantial increase in the number of property tax delinquencies. The inability of property owners to meet tax payments as property values and incomes dropped during the depression, along with the general plight of government financial conditions, resulted in a number of tax reform measures. In 1932 the state government assumed most of the cost of con- struction and maintenance of county and township roads. The following year a state sales tax was enacted, and the state government levied a general property tax for the last time in 1934. Since that time the general property tax has been levied solely by local units of government. However, the state has continued to levy a specific tax on certain utilities. The total assessed valuation of property subject to the general property tax rose steadily to a high of nearly $8.5 billion in 1930. The declining property values of the 1930's forced the total valuation down to a low of $5.7 billion in 1935.7 Since that time the size of the Michigan property tax base has increased in nearly all years. In 1958 the total tax base was just under $16 billion in assessed valuation.8 The Reliance of Local Governments on Properterax Revenue. Five different units of local government--counties, townships, cities, vil- lages, and school districts--depend upon property taxes as a major source of revenue. The total amounts of property taxes levied by these five governmental units in selected years since 1940 are given in TABLE 1-4. The total levies of townships and villages have been comparatively small. 7Part of the decrease in valuation was caused by the removal of tax-reverted lands from the local assessment rolls. 8Michigan State Tax Commission, Thirtieth Repogt: 1957-58 (Lansing, 1959), p. 66. TABLE 1-4 General property taxes levied by local govern- ments in Michigan, selected years (in millions of dollars) ‘Xgar Countya TognshipE, School City Village 1940 31.6 2.7 51.3 76.7 4.2 1945 35.1 3.2 71.6 90.9 4.4 1950 65.0 2.7 131.8 136.2 6.3 1955 102.3 8.6 260.2 184.2 8.5 1957 125.6 8.2 338.6 230.6 7.4 —- "-0- -“ aIncludes amount levied for county and covert roads. bIncludes amount levied for township highways. Source: Michigan State Tax Commission, Thirtieth Reporti_1957-58 (Lansing, 1959), p. 67. In 1957 somewhat less than one-half of the total levy was made by school districts. Cities were second in importance, followed by counties. Since 1940 the amount of property taxes levied by school districts has increased much more rapidly than have the amounts levied by other govern- mental units. In a sample of 143 Michigan townships Heneberry and Barlowe found that the general property tax levies, measured in terms of 1940 dollars, increased 1.8 times in 93 agricultural townships and nearly 6 times in 50 urbanized townships in the period from 1940 to 1955.9 Moreover, the relative amounts of taxes levied by local governmental units changed considerably during the same period.10 County taxes in the agricultural townships were more than one-half of the total levy in 1940, but by 9William H. Heneberry and Raleigh Barlowe, Property Tax Trends Affegty ing Michigan Farmers, Michigan Agricultural Experiment Station, Special Bulletin 421, 1958, pp. 8-11. lorbid. pp. 17-19. 10 1955 they accounted for less than two-fifths of the total. In the urban- ized townships the proportion of the total levied by the counties decreased from about one-third in 1940 to less than one-fifth in 1955. Township taxes became relatively less important in both the agri- cultural townships and the urbanized townships in the period from 1940 to 1955 although they continued to account for a larger percentage of the total tax levy in the urbanized townships than in the agricultural townships. In 1955 township taxes made up less than one-tenth of the tax load in the urbanized townships. On the other hand, school taxes became more important in both groups of townships during the period. Among the agricultural townships, school districts took less than two- fifths of the property tax revenues in 1940 and about three-fifths in 1955. During the same period school taxes increased from less than three-fifths to more than seven-tenths of the total levy in the urbanized townships. Since substantial amounts of local government revenues come from nontax sources, the importance of the property tax to local governments should also be considered in relation to total revenues from all sources. The following data are provided by a recent study.11 In the calendar year 1955 property taxes constituted more than 47 percent of the total revenue, from all sources, of Michigan county governments. State aid for highways was the second most important source of county revenue-- slightly less than 29 percent of the total. No other single source accounted for as much as 10 percent of the total revenue. 11Robert H. Pealy et al., "The General Property Tax," Michigan Tax Study: Staff Papggs (Lansing, 1958), pp. 196-199. 11 Nearly 67 percent of the total revenue of township governments came from state collected--locally shared receipts in the 1955 fiscal year. Property tax revenue contributed slighly less than 20 percent of the total. However, the total revenue for all townships amounted to only slightly over $25 million for the year. In the fiscal year 1955 the total revenue for 459 of 496 Michigan cities and villages was about $375 million. Property tax collections, which made up 38.4 percent of the total, were the largest single source of municipal revenue. Income from public utilities and other public enterprises accounted for 24 percent of the total and ranked as the second most important revenue source. ’\ )jMichigan school districts received approximately $438 million in revenue in the 1955 fiscal year. Property tax receipts were again the largest single source of revenue. About 47 percent of the total revenue of school districts came from property taxes. Nearly all of the other revenues resulted from state and federal school aid. With the exception of townships, which are relatively unimportant insofar as total revenues are concerned, the general property tax provides the largest single source of revenue for all local units of government in Michigan. Furthermore, property taxes are the only important source of tax revenue for all local governmental units. Al-’ though the comparative importance of the general property tax varies among the individual governments in each class, the over-all importance “7 l of property tax revenue to local governments is readily apparent. 12 CHAPTER II LEGAL AND ADMINISTRATIVE ASPECTS OF PROPERTY TAXATION IN MICHIGAN As a prerequisite to any study of taxation, attention must necessarily be given to the legal and administrative framework of the tax system in question. This is particularly important in the study of property taxation. The evolution of the Michigan property tax system merits review for two reasons: First, the present-day property tax procedures can be fully understood only as the result of legal modification and ad- ministrative interpretation throughout its long history. Second, the inequities of the existing preperty tax system are most readily measured as deviations from the legal requirements which govern the administration of property taxation. Legal Requirements The legal foundation of the general property tax system is comprised of constitutional restrictions, state statutes, and court interpretation of both constitutional and statutory provisions. Important modifications of the Michigan property tax system have occurred in all of these areas over the past fifty years. Constitutional Restraints State TaxingTPowers. The Michigan constitution deals extensively with the field of taxation. The taxation powers of the state government are implied by the nature of its existence. The state possesses all of the taxing powers which are not specifically prohibited by the federal constitution. And, of course, the taxing powers of the state government 13 may be further limited by the state constitution. The authority of the state to levy and collect taxes is inherent to the legislative branch of the state government. Local Taxing Powers. All units of local government within the state derive their authority from the state. Since the state cannot grant to local governments any powers which it does not have, all state (and federal) constitutional restrictions concerning taxation are, in effect, restrictions upon the local units of government as well. In light of these constitutional provisions the taxing powers of local governments are further established by the statutes of the state. Thus both the constitution and the legislature may act to limit local government taxing powers. The General PrOperty Tax. Article X of the Michigan constitution deals at some length with the subject of finance and taxation. Section 3 of Article x instructs that The legislature shall provide by law a uniform rule of taxa- tion, except on property paying specific taxes, and taxes shall be levied on such property as shall be prescribed by law: Provided, That the legislature shall provide by law a uniform rule of taxa- tion for such preperty as shall be assessed by a state board of assessors, and the rate of taxation on such property shall be the rate which the state board of assessors shall ascertain and determine is the average rate levied upon other preperty upon which ad valorem taxes are assessed for state, county, township, school and municipal purposes.1 Section 4 of Article X further states that "the legislature may by law impose specific taxes, which shall be uniform upon the classes upon which they operate". Thus the legislature is clearly authorized by the 1Italics mine. l4 constitution to levy both ad valorem (according to value) taxes and specific taxes upon selected classes of property. In addition, the constitution also provides that a state board of assessors shall be responsible for the assessment of certain public utility properties. These public utilities include, for the most part, railroads and rail- road properties, and telephone and telegraph companies.2 Section 3, Article X of the constitution obviously refers to the levy of a general property tax. It is important to note that the con- stitution calls for a "uniform rule of taxation". Hence, the constitu- tion prohibits the establishment of varying tax rates for different classes of property. However, property which is subject to a specific tax is exempt from this general provision. Section 4 of Article X expressly provides that specific taxes need be uniform only upon the class of property which is subject to a particular specific tax. This rate may be different from that applied in the levy of a general property tax. Some of the most important court decisions in the area of taxation have dealt with the question of whether or not a particular tax was a specific tax and, hence, not subject to the general rule of uniformity. With the exception of the uniformity provision the constitution permits the legislature wide latitude in selecting the procedures by which a general property tax shall be administered. And the state is free to determine which classes of property shall be subject to a general property tax. 2Michigan, Constitution, Article X, section 5. 15 The Level of Tax Assessments The General Properterax. The constitutional requirement that the legislature provide by law "a uniform rule of taxation, except on property paying specific taxes," is also a mmndate which requires that all classes of property subject to an ad valorem tax be assessed at the same proportion of current market value. Section 7, Article X of the constitution further states that "all assessments hereafter authorized shall be on property at its cash value? The term "cash value" has been defined by law as the usual selling:price at the place where the property to which the term is applied shall be at the time of assessment, being the price which could be obtained therefore at private sale, and not at forced action sale.3 Thus the task of the assessing officer is clearly defined. All property subject to ad valorem taxation must be assessed at a uniform level. And the required level of assessment is the actual cash value of the prOperty at the time and place of assessment. (In this connection the Michigan Supreme Court has ruled that all property, except that sub- ject to specific taxation, must be assessed at actual cash valueyr The court has further held that the assessment level of any class of property cannot be reduced arbitrarily and must be maintained at cash value.5 In the assessment of prOperty the assessing officer is also in- structed by law to "consider the advantages and disadvantages of location, 3Michigan, Compiled Laws (1948), section 211.27. Italics mine. 4§udson Hetor Car Company v. Qetroit, 282 Michigan 69 (1937). 5Hayes v. City of Jackson, 267 Michigan 523 (1934). 16 quality of soil, quantity and value of standing timber, water power and privileges, mines, minerals, quarries or other valuable deposits known to be available therein and their value.9F In the determination of actual cash value the assessor is required only to use his best judgment and information.7 However, the courts have also held that the assess- ment of property at any level other than Cash value is illegal and con- stitutes a violation of the assessor's oath of office.8 Specific Taxes. The constitutional provision for specific taxes, which need be uniform only upon the class of preperty subject to specific taxation, has permitted the enactment of several important taxes which could not have been imposed otherwise. But, the failure of the consti- tution to adequately distinguish between ad valorem and specific taxes has resulted in the challenge of nearly all specific taxes enacted by the state legislature on the grounds of unconstitutionality under the uniformity rule. It should be noted that the constitution does not limit the classes of property which may be taxed at specific rates. Special Assessments. Special assessments, as opposed to the general property tax, are ordinarily made to finance particular local improvements which will directly benefit certain property owners. Such assessments are usually computed on the basis of the estimated increase 6Michigan, Compiled Laws (1948), section 211.27. 7Cf. Peninsula Iron Company v. Crystal Falls, 60‘Michigan 510 (1886); and Meade v. Haines, 81 Michigan 261 (1890). awattles v. Legeer, 40 Michigan 624 (1879). 17 in property values which will result from the improvement for which the assessment was made. Public projects which are commonly financed by special assessments include drainage districts, sewer lines, water mains, and similar improvements. Since the increases in property values associated with specific improvements are not necessarily in proportion to current property values, the special assessment is not a tax on the full property value. Hence, the supreme court has held that the rule of uniformity, as required of general property taxes, is not directly applicable to special assessments made for a specific public improvement.9 Exemptions from the General Property Tax The Michigan constitution does not deal specifically with the question of exemptions in the levy of general property taxes; therefore the legislature has had a great deal of freedom in determining which classes of property are to be taxed. There are two principal reasons for exempting certain property classes from the general property tax: (1) to avoid double taxation of property upon which other types of taxes are levied and (2) to give preferential treatment to certain types of property. There is little uniformity among states as to the property classes which are exempt from the general property tax. Some states exempt all personal property from taxation and levy a general pr0perty tax only upon real property. Other states tax most classes of both real and 9Wood v. Village of Brockwood, 328 Michigan 507 (1924). 18 personal property. The general property tax is, by its broadest defi- nition, a tax on all forms of wealth. However, in practice many types of property are either completely or partially exempt from taxation. Although the list of exemptions varies greatly among states, the direct comparison of property tax exemptions is misleading when the exempt property classes are subject to other forms of taxation. General Exemptions. The General Property Tax Act of Michigan specifically provides That all property, real and personal, within the jurisdiction of this state, not expressly exempted, shall be subject to taxation. The list of exemptions to the general property tax in Michigan is quite extensive. Although the size of the tax base which is exempt from taxation is not accurately known, estimates range between 13 and 30 percent.11 The most important exemption from property taxation in the state is probably intangible personal property, which is new subject to specific taxation.12 In the 1957 fiscal year the state-levied intangibles tax accounted for nearly $24 million in state tax revenue. During that same period local units of government levied a total of about $622 million in property taxes. IQMichigan, ngpiled Laws (1948), section 211.1. 11Donna M. Werback, Tax Exemptions in the State of Michigan (Papers in Public Administration No. 2; Ann Arbor: Bureau of Government, University of Michigan, 1948), p. 7. 12Michigan, public Act 301, 1939, is amended. 19 Certain other classes of property are subject to specific taxes and, therefore, are exempt from the general prOperty tax. Most prominent among these exemptions are the personal prOperty of domestic bank and trust companies, the personal property of foreign insurance companies which is not held for investment purposes, motor vehicles upon which registration fees have been paid, grain taxed under the specific grain tax, gas and oil which is subject to a severance tax, and commercial forest reserves. In addition, special treatment is accorded farm food products held in public storage, goods stored in public facilities for shipment to other states, certain classes of boats and shipping vessels, private forest reserves, trailer coaches in parks, unregistered motor vehicles held by dealers, and wild or cutover lands. Real Property Exemptions. The General Property Tax Act, as amended, also grants complete exemption to certain classes of real property.13 Under the usual conditions of use, total exemption is given to all public property of the federal government and the state of Michigan. Complete exemption is also extended to all public lands and buildings owned by counties, townships, cities, villages, and school districts. In addition, the real estate of library, benevolent, charitable, educa- tional, and scientific institutions are wholly exempt from taxation. Also excluded from prOperty tax assessment are the real property of nonprofit organizations which is used for health or hospital purposes, the charitable homes of fraternal or secret societies, and the real estate (not to exceed 160 acres) owned by boy or girl scout organizations. 13Michigan, Public Act 206, 1893, section 7, as amended. 20 The usual exemption is applied to churches and parsonages, and to cemeteries. Other exemptions include the property of agricultural societies used as fair grounds, land dedicated to the public, and the grounds and armories of military organizations. The legislature has provided that certain war veterans and widows of veterans shall be extended a homestead exemption on real estate to the value of $2,000. Blind persons are also eligible for exemption of not more than $2,000 on real estate assessments. In addition, poor persons may be exempted from taxation of both real and personal property at the discretion of the local assessing officer and the local board of review. Personal Prpperty Exemptions. The legislature has authorized the exemption of certain classes of personal property from the general property tax.14 Total exemption is granted to the personal property of benevolent, charitable, educational, and scientific institutions; libraries and public reading rooms; patriotic associations and youth organizations; and organized or independent fire companies. Pensions receivable from the federal government and the property of Indians who are not citizens are also exempted. Extensive exemptions are granted to household personalty. The law expressly exempts the library, school books, family pictures, all clothing and one sewing.machine per family from taxation. Furthermore, each household is given an exemption on household furniture, provisions, and fuel to the value of $5,000. Mechanics tools to the amount of $500 are exempted, and a $500 exemption is granted to private businesses. 141bid. 21 Personal preperty exemptions are also extended to Michigan farmers. All sheep and swine not over six months old, and all horses, mules, and cattle not over one year old are totally exempted from taxation. Each farmer is granted an additional exemption to value of $1,000 on other farm personalty. According to one recent study, there are only a few cases of "dis- tinctive treatment" under the General Preperty Tax Act: (1) the use of a special formula in the valuation of low-grade ore properties and the central assessment of all mining properties by the State Geologist; (2) the computation of the value of the personal property of domestic insurance companies from.their annual reports to the Commissioner of Insurance, after the deduction of legal reserves; and (3) the optional use of average monthly valuations in the assessment of commercial and manufacturing inventories.15 PrOperty Tax Rate Lhmitations General Considerations. In most states, including Michigan, there is a constitutional or statutory limit to the general property tax rate which may be levied against the total assessed valuation within the local tax districts. There are two types of rate limitations which are com- monly used: (1) an over—all rate limitation which fixes the maxtmum aggregate rate which may be applied to all property valuations, and (2) a specific rate limitation which fixes the maximum rate which may be applied by each local unit of government. However, other types of rate 15Robert H. Pealy et al., "The General Property Tax”, Michiggn Tax Study: Staff Papers (Lansing, 1958), p. 205. 22 limitations are also in use. In some cases different rate limitations may be established for different property classes, or the limitation may be tied to the amount of the previous year's tax levy. In several instances the setting of tax rate limits have had un- desirable effects. For example, the state of Washington established a 40 mill rate limitation with the general belief that the maximum rate would be more than adequate. However, despite the legal stipulation that all property shall be assessed at 50 percent of current market value, there developed a tendency for the millage levy to be maintained at the maxi- mum rate of 40 mills while the assessment level was varied in order to 16 In this case the results of satisfy changing revenue requirements. the rate limitation were a general reduction of assessment levels, an annual adjustment of assessment levels as dictated by the amount of property tax revenue needed, and a fairly stable tax rate. his example illustrates the necessity of regulating both the tax rate and the assess- ment level if adequate control of the maximum property tax levy is to be achieved. The over-all property tax rate lbmitation is generally acknowledged to be more effective in holding down or reducing aggregate property tax .rates than are specific limitations. But the application of an over-all rate limitation requires that some sort of allocation system be employed to apportion the available millage among the various competing units of 16Maurice W. Lee, Tax Structure of the State of Washiggton (Economic and Business Studies, Bulletin No. 14; Pulhman: The State College of Washington, April, 1950), pp. 95-96. 23 local government. As pointed out by Groves, the over-all rate limitation also has the effect of limiting the freedom of the local citizenry in determining the amount of their own money which is to be spent on public services.17 Property tax rate limitations have been criticized on several counts, but most criticism has been based on two opposing arguments. Some have charged that the rate limitations have been ineffective in holding the property tax burden within a fixed limit. Although some flexibility is usually conceded to be necessary, the ease with which some limitations can be exceeded has brought forth agitation for more rigid limitations in some states. On the other hand, many are inclined to agree with the writer who concluded that / Since the severest forms of property tax lflmitations were introduced during and because of depression, the original reasons for setting a ceiling to property tax rates no longer exist. Where other taxes have been develOped to take the place of the property tax, however, the decline in the relative role of the latter is probably permanent. Even so, it would be desirable to remove the limitation. More revenues may be needed in the future, and it may bl necessary to exploit further thegpotentialities \ of the property tax. 8 T"' i Nonetheless, in some cases further exploitation of property taxation seems politically infeasible.19 \. 17Harold M. Groves, Financing Government (Fourth edition; Henry Holt and Company, 1950), pp. 90-91. »] 18Kenyon E. Poole, Public Finance and Economic Welfare, (New York: I Rinehart and Company, 1956), pp. 298-299. Italics mine. 19Recently, the decision of the selectmen in one New England com- munity to raise real estate taxes was countered with a special meeting of the citizens, who voted to dismiss all five selectmen from their ‘\\jobs. "Miscellany", Time, October 5, 1959, p. 15. 24 In Michigan the over-all tax rate limitation has been applied. The first rate limitation was established as a part of the general tax reform measures of the early 1930's; however since that time the legal interpretation of the limitation has changed somewhat. The Fifteen-Mull Limitation. In 1932 the Michigan constitution was amended to provide an over-all limitation to the tax rate which could be applied in the levy of general property taxes.20 The amend- ment specified that the aggregate taxes levied against property shall not exceed 1.5 percent (15 mills) of the assessed valuation of the taxable property. Funds required for the servicing of previously in- curred debt were excluded from the limitation. Furthermore, the amendment provided that the maximum rate could be increased to as much as 5 percent for a period not to exceed five years upon a two-thirds vote of the local electorate. At the time the original amendment was ratified, it was generally believed that the lS-mill limitation applied to the total millage levy of all assessing districts. The Michigan Supreme Court ruled in 1933, however, that municipalities were not automatically included under the lS-mill limitation.21 Nonetheless, municipalities could, by choice, amend their charters to come under the lS-mill limit. The public pressure for increased government spending in the 1940's, especially following World War 11, led to an amendment of the 15-mill 20Michigan, Constitution, Article X, section 21. 21School District of Pontiac v. City of Pontiac, 262 Michigan 338 (1933). ZS limitation in 1948. As amended, the rate limitation can now be in- creased to as much as 50 mills for a period not to exceed twenty years by a simple majority vote of the local electorate. The legislature further provided in 1949 that no municipality may include a rate limi- tation in its charter which reduces the aggregate rate of other local governments to less than 15 mills.22 Hence, municipalities are no longer included under the 15-mill limitation. Today the lS-mills are generally divided among the county, the townships, and the school districts. The lS-mill limitation also applies to ad hoc local govern- ments.23 However, the limitation does not affect the levy of special assessments.24 In addition, the 15-mi11 limitation may now be exceeded in the financing of certain school construction bonds. Municipal Tax Rate limitations. Cities and villages chartered under the "home-rule" section of the Michigan constitution have the option of including in their charters tax rate limitations of not more than 20 millsgs’2(gf no limitation is included in the charter, a statutory limitation of 10 mills is imposed) 'The tax limitation of a home-rule city may be increased to as much as 50 mills for a period not to exceed twenty years by a majority vote of the municipal electorate. 22Michigan, Compiled Laws (1948), section 211.107a. 2{School District of Pontiac v. City of Pontiac, 262 Michigan 338 (1933). 25952222 v. City of Sgginsw, 317 Michigan 427 (1947). 25Michigan, Statutes Annotated, section 5.2073. 26In villages not chartered under the home-rule section, the rate limitation is 12.5 mills. See Michigan, Compiled Laws (1948), sec. 78.26. 26 Administration of the General Property Tax Prior to the actual levy and collection of the general property tax there are three major steps in the valuation of property: (1) local assessment, (2) review of individual assessments, and (3) equalization of assessment valuations at both the county and state levels. We shall review the administrative procedures followed in these three steps and, in addition, examine rather closely the administrative functions of the state government which relate to the general property tax. “‘7 Local Assessment Procedures . General Responsibilities. In general, the assessment of prOperty for the purpose of taxation is accomplished by the local units of government throughout the United States. In a majority of states property assessment is carried out on a county basis, but in a sub- stantial number of states the townships, villages, and cities are the local assessment districts. A system of joint county and local government assessment is also employed in some states.27 The local assessing officer is responsible for listing each parcel of taxable property and its assessed valuation on the local tax roll. In Michigan, as in most states,(;ll property assessments are required to be at true cash valua. Barlowe noted in 1958, however, that five states call for assessment at some specified Percentage less than cash 27See Raleigh Barlowe, Land Resource Economics: The Political Econ of Rural and Urban Land Resource Use (Englewood Cliffs: Prentice- Hall, Inc., 1958), pp.553-554. 27 ,i. or market value and that three other states require the assessment of different classes of property at varying percentages of actual value.28 In some states the local assessing officer is required to meet certain minimum requirements concerning training and experience in property appraisal. Quite often such requirements are prerequisites for appointment to the position of assessor. In other states, however, the office of assessor is an elective position which requires few, if any, special qualifications. There is no doubt that the qualifications of local assessing officers vary widely throughout the country. ‘chal Assessment in Michiggg. In Michigan each township and city is a separate assessment district for the purpose of property taxation. Hence, there are nearly 1,500 assessing officers who are responsible for the assessment of taxable property in each of about 1,260 townships and 205 cities within the state. In addition, each village within the state also has an assessor who is responsible for the assessment of property within the village limit. However, the township assessor also assesses all prOperty within the villages of his assessment district, and the assessments made by the township assessor are used in the levy of all but village taxes. The task of property assessment in Michigan townships falls upon the duly elected township supervisor in each township. The regular term of the township supervisorbi: two years. Although the duties of the township assessing officer have been prescribed by law in some detail, there are no special qualifications necessary for election to the office of township supervisor. _._.- 281bid., p. 554 n. 28 The complexity of the assessment process and the amount of taxable property vary widely among the individual townships. The assessment of prOperty in some of the less populous northern townships requires only a fraction of the work necessary in the highly suburbanized townships adjacent to the larger cities of the state. In order to provide assis- tance to the township supervisors in districts where the assessment job has grown too large and complex for one individual, the legislature authorized, in 1957, the appointment of as many as two assessors to aid the township supervisor in the valuation of property. Township supervisors can also receive assessment assistance from other sources. Each county board of supervisors has the authority to establish a department to assist in carrying out its duties as the county board of equalization.29 This department may then assist the local assessing officers. Moreover, the State Tax Commission has general supervisory jurisdiction over all local assessing officers in the state. In this capacity the commission provides technical assistance to the local assessors and, in addition, distributes an Assessor's Manual to each assessor. This manual was first published in 1955 as a uniform guide which could be followed by all assessors. The assessment of property in Michigan cities may be accomplished by either elected or appointed assessing officers. Municipalities are free to determine the qualifications and method of selection for the assessor positions. In 1957 the assessor was an appointed official in ”Michigan, Public Act 30, 1956, section 34. 29 72 of 85 Michigan cities with populations of 5,000 or more.30 The length of term varies for both elected and appointed municipal assessors. Duties of the Local Assessor ,y,,afThe local assessing officer is responsible for the valuation of all taxable property within the local assessment district, with the exception gof property which is assessed by the State Board of Assessors (public J utilities) and the State Geologist (mining property). Constitutional and statutory provisions clearly instruct that all assessments be made at actual cash value. The legislature has further provided that "if any supervisor or other assessing officer of any township or city shall willfully assess any property at more or less than what he believes to i' be its true cash value, he shall be guilty of a misdemeanor."31 However, \ an assessing officer cannot be held liable for errors made in property 32 1 valuation when exercising his best judgment. All property, except for merchants' and manufacturers' inventories, is to be assessed on the basis of its valuation as of December 31.33 Assessments of both farm and business personalty are computed from.sworn inventory statements, which are submitted annually. Review of Individual Assessments Any Michigan property owner who is dissatisfied with the valuations placed upon his property by the local assessor has the right of appeal. 30Pealy et al., lgg.‘gig., p. 210. 31Michigan, Compiled Laws (1948), section 211.116. Italics mine. 3282292 v.,gggggg, 81 Michigan 261 (1890). 33Michigan, Public Act 201, 1958. 30 And, of course, assessment appeals may be based upon charges of irregular or fraudulent assessment as well as over-assessment. The review of individual assessments is carried on at both the local and state level. Local Review. The first recourse open to the protesting property owner is an appeal to the local board of review. Each local assessment district has a board of review which considers all assessment appeals. In addition, the local review board has the responsiblity of ascertaining the correctness of the local tax roll. Since the hearing of an appeal may be delayed in some cases, the appellant property owner is usually wise to pay his taxes under protest and then proceed with the appeal. It is important that the appeal he filed in the manner specified by law. The courts have ruled that failure to appeal an assessment is the equivalent of an admission that the assessment is correct, in the absence of fraud.34 The legislature has specified that the township board of review shall be composed of the township supervisor and two tax-paying electors 35 The composition of municipal review boards is not of the township. uniform; however the local assessor is generally a member of the board.36 State Review. After an assessment appeal has been acted upon by the local review board, the assessment may be further appealed to the State Tax Commission if the property owner so desires. The State Tax 34First National Bank v. St. Joseph; 46 Michigan 526 (1881). 35Michigan, Compiled Laws (1948), section 211.28. 36For a most detailed discussion see Robert H. Pealy, A Comparative Study of Property Tax Administration in Illinois and Michiggg (Michigan Governmental Studies, No. 33; Ann Arbor: Bureau of Government, Institute of Public Administration, University of Michigan, 1956), pp. 78-82. 31 Commission is the final source of redress open to property owners in most cases. The Michigan Supreme Court has ruled that the action of the commission is final and not subject to review by the courts except in the case of fraudulent assessment.37 Equalization of Assessment Districts \/“ \. \"' \ -1} Although the assessment of all prOperty is to be made at true cash value, individual assessors differ in their opinion of what con- lstitutes cash value. In actual practice, assessment valuations are usually far different from the current market values of approximately : identical properties. Moreover, most local assessors readily admit that they do not attempt to assess at more than a fraction of current market values. Since the actual percentage of current market values represented by the assessed valuations in each assessment district vary, it is necessary to adjust the assessed valuations of the local districts. Only in this way can the tax burden of governmental units which overlap several assessment districts be fairly distributed. This is the general purpose of the equalization process in which the assessed valuations of local assessment districts are adjusted so that the total valuations of every district represent the same proportion of current market values. In Michigan, equalization is effected, first, among the local assessment districts within each county and, second, among the counties. 37Twenty-Two Charlotteilnc. v. Detroit, 294 Michigan 275 (1940). 32 Equalization Among Local Assessment Districts. Within each county thegggpnty board of supervisdrs is directed by law to function as the county board of equalization and, hence, is responsible for adjusting the assessments of each local district to assure that all are ”equally and uniformly assessed at true cash value."38 The first step in equali— zation at the county level is to ascertain the average percentage of market value at which the property within each local district has been assessed. The county board of equalization then must adjust the total, locally assessed valuations of each district in such a way that the county equalized valuations for each district represent the same per- centage of current market values. In determining the average assessment levels for each local assess- ment district the county equalization board may rely upon the advice of a county equalization department. Wayne County has maintained a staff to aid in the equalization process for a number of years, and trained appraisal personnel are now employed in Genesee, Oakland and some other counties. However, in the majority of counties, which lack equalization staffs, the equalization board can obtain technical assistance from the State Tax Commission. It is important to note that county equalization consists only of adjusting total assessment valuations and is not concerned with the adjustment of individual property valuations. Hence, the equalization process is not a substitute for the review of individual property assessments. As previously mentioned, equalization at the county level 38Michigan, Compiled Lap; (1948), section 211.34. 33 is necessary for the equitable distribution of the tax burden of over- lapping governmental units. For example, the portion of county taxes assigned to each local assessment district is determined by the portion of the total county valuation which is derived from each district. And, although the law specifies that equalization is to be at true cash value, the percentage of current market value represented by the equalized valuations is unimportant insofar as the equitable distribu- tion of local taxes is concerned. The local tax burden will be fairly distributed as long as all assessments are made at the same percentage of market value. No doubt the county equalization process cannot be accurately accomplished without the adjustment of at least some of the total assessed valuations reported by the individual assessment districts; however the valuations determined by the local assessors are often accepted without change by the county board of equalization. In 1958, nineteen counties equalized at the assessed valuations of the local districts.39 Equalization Amggg Counties. The legislature has provided that a state board of equalization shall be responsible for the determination of relative levels of assessment valuations in Michigan counties and shall establish state equalized valuations accordingly. The purpose of state equalization is to adjust the total, county equalized valuation of each county so that the state equalized valuations established for each county represent the same percentage of current market value. In 39Michigan State Board of Equalization, Proceedings: Session of 1958 (Lansing, 1959), p. 6. 34 general the process of equalization at the state level is concerned only with the adjustment of total, county equalized valuations and not with the valuations of individual assessment districts within the counties. Hence, state equalization is not, in theory, a repetition of equaliza- tion among local districts, which is accomplished by the county equalization boards. In actual practice, however, the State Tax Cons mission has found it necessary to conduct detailed equalization studies within the various counties. The state of Michigan does not levy a general property tax, but state equalization is important for several reasons: First, a portion of state school aid is distributed on the basis of state equalized valuations. Second, a number of important legal restrictions on property taxation, including rate limitations, are now computed on the basis of state equalized valuations. In 1944 the Michigan Supreme Court ruled that the tax rate limitations should be applied to the county equalized valuations.40 Since county equalized valuations were generally higher than assessed valuations, this ruling expanded the general prOperty tax base. The court further held, in 1954, that the term ”assessed value" in the lS-mill limitation shall be the value as equalized by the State Board of Equalization and that the use of state equalized valuations in computing tax bills is necessary in all counties 41 where school districts overlap county boundaries. In 1954 this ruling AOSt. Ignace Treasurer v. Mackinac County Treasurer, 310 Michigan 108 (1944). 41Pittsfield School District v. Hashtenaw County Board of Super- visors, 341 Michigan 338 (1954). 35 affected sixty-seven of Michigan's eighty-three counties.42. The use of state equalized valuations provided a still greater expansion in the size of the tax base. The State Tax Commission The state administrative functions in connection with the general property tax rest primarily with three closely related state agencies: (1) the State Board of Equalization, (2) the State Board of Assessors, and (3) the State Tax Commission. The State Tax Commission is composed of three members, who also serve as members of the State Board of Assessors. In addition, the governor is an ex officio member of the assessing board. The State Tax Commissioners also fill three of the five positions on the State Board of Equalization. The remaining two positions are held by gubernatorial appointees subject to senate con- firmation. Neither of the boards has a permanent staff, and both rely upon the State Tax Commission for the performance of administrative and field work. general Responsibilities. The State Tax COmmission has been given the following general responsibilities: 1. Supervisory jurisdiction over local assessing officers. 2. Consultation with assessing officers to provide assistance. 3. Adjudication of appeals from local assessed valuations of property, both real and personal. 4. Compile statistics of assessment and taxes levied for the State Tax Commission, the State Board of Equalization, and the State Board of Assessors. The Commission furnishes to the State Board of Equalization each year its recommendation of equalized value for each county. Ln 42Pealy, 125. cit., p. 82. 36 6. As provided in Section 211.34 Compiled Laws of 1948, as amended, a member of a Board of Supervisors who objects to the county equalization report as adopted may register an appeal with the State Tax Commission. 7. A final order of County Tax Allocation Boards is subject to appeal to the State Tax Commission on the basis of a material mistake of fact, fraud or error of law.43 In addition to the above duties, the State Tax Commission is also re- quired to appraise certain state-owned conservation lands each year and is often called upon to make appraisals prior to the purchase or sale of real estate by the state. According to the State Tax Commission, the bulk of its work consists of the appraisal of property, either because of individual assessment appeals or to ascertain the correct valuations of taxable property within townships and cities. The latter information is required both in the case of appeal from the report of a county board of equalization and in the determination of state equalized values which are to be recommended to the State Board of Equalization. The State Board of Assessors. As noted previously, the State Board of Assessors is responsible for the assessment of the operating property of railroads, telephone and telegraph companies, union stations, pull- man car leasing, and other railroad properties. These public utilities are exempt from the general property tax and are subject to a specific tax. The applicable tax rate is the average rate at which all other property throughout the state was taxed in the preceding year. The average rate is now computed on the basis of state equalized valuations. 43Michigan State Tax Commission, Thirtieth Report: 1957-1958 (Lansing, 1959), p. 5. 37 In practice the assessment of property subject to the average-rate tax is accomplished by the field staff of the State Tax Commission. The State Board of Equalization. Each year the State Tax Commission recommends total equalized valuations for each county to the State Board of Equalization. After a hearing at which representatives of the counties may comment on the recommended state valuations, the equalization board determines the state equalized valuations. In both 1957 and 1958 the recommendations of the State Tax Commission were accepted without change.44 Equalization Studngrocedures The State Tax Commission conducts detailed county equalization studies upon both appeals from the county equalization report and its own volition to gather information necessary in recommending state equalized valuations to the State Board of Equalization. Since the facilities of the commission are limited, the amount of equalization work which can be completed each year depends upon the number of individual assessment appeals received annually. The general increase in the number of assessment appeals over the past ten years has made it impossible for the State Tax Commission to achieve its goal of studying each county at five year intervals. Currently about six equalization studies are being completed each year. _§roperty Classification. The first step in the equalization study process is the classification of all taxable property. The State Tax 44Michigan State Board of Equalization, Proceedings: Session of 1958 (Lansing, 1959). 38 Commission has developed a classification system whereby all real and personal property is listed under one of the classes given in TABLE 2-1. The property classes are, for the most part, self-descriptive.45 All land with buildings is classified as improved property, and all land without buildings is classified as vacant property. Between 1948 and 1957 the State Tax Commission completed property classification in 46 sixty-four of the state's eighty-three counties. Sample Appraisal Method. The second step in the studies is the actual appraisal of individual parcels of proPerty. The State Tax Com- mission uses the sample appraisal method in conducting equalization studies. According to the commission, "this method achieves the most satisfactory results."47 The field staff of the commission completes detailed appraisals of 10 to 15 percent of the property in each assess- ment class. The state appraised valuations of the sample properties in each class are compared to their respective locally assessed valuations. An assessment-appraisal value ratio is then computed for each property class within the local assessment district. This ratio expresses the local assessment valuation of the sample properties as a percentage of the state assessed valuations of the sample. The equalization study is 45A description of each major property class is included in the following chapter. 46Pealy, et al., loc. cit., p. 207. 47Michigan State Tax Commission, Thirtieth Report: 1991;;2§§ (Lansing, 1959), p. 49. TABLE 2-1. 39 PrOperty classification system of the Michigan State Tax Commission. Classes of Real PrOperty (1) Farm improved (18) Resort platted vacant (2) Farm vacant (19) Business acreage improved (3) Timber (20) Business acreage vacant (4) Part timber (21) Business platted improved (5) Cutover land (22) Business platted vacant (6) Suburban acreage improved ”B" (23) Industrial improved (7) Suburban acreage improved (24) Industrial vacant (8) Suburban acreage vacant (25) Utility improved (9) Suburban platted improved (26) Utility vacant (10) Suburban platted vacant (27) Mines (11) Residential acreage improved (28) Mineral lands (12) Residential acreage vacant (29) Quarries (13) Residential platted improved (30) Fraternal (14) Residential platted vacant (31) Private estates (15) Resort acreage improved (32) Conservation Department lands (l6) Resort acreage vacant (33) Recreational (l7) Resort platted improved Classes of Personal Property (1) Business personal (7) Pipelines (2) Industrial personal (8) Buildings on leased land (3) Utility personal (9) Boats (4) Oil wells and equipment (10) Signs (5) Gas wells and equipment (11) Farm personal (6) Oil or gas field equipment Source: Michigan State Tax Commission, Assessor's Manual (Lansing, 1958), pp. 238-240. 40 completed by applying the assessment-appraisal value ratio of each property class to the total, locally assessed valuation of each class. The valua- tions thus derived are the State Tax Commission's estimates of ”actual cash value.” The Determination of Actual Cash Value. The appraisal valuations placed on prOperty by the State Tax Commission are often referred to as true, or actual, cash values. However, the commission does not purport to appraise at 100 percent of current market values. In an effort to gain more information about prOperty values the commission collected a large number of actual sale records in the early 1940's. More than 60,000 property transfers, covering the period from 1939 to 1941, were examined by the commission, and more than 65 percent of the sales were 48 verified by mail. In studying the sales data the commission carefully screened out all forced sales and intra-family transfers. It also eliminated all sales "reflecting inflationary values."49 In addition to the study of sales data, the commission also conducted field appraisals of certain classes of property which were inadequately represented in the sample of actual transfers. 0n the basis of both sales and appraisal data, assessment-sales value ratios were computed, by property class, for use in determination of state equalized valuations.50 48Michigan State Tax Commission, TwentyrFifth Report: 1947-1948 (Lansing, 1949), p. 11. 491b1d. 500:. Pealy, loc. cit., pp. 102-103. 41 The State Tax Commission used the sales and appraisal data to com- pute a scale of "1941 true cash values." The commission continued to use the 1941 value scale through the war years in computing state equalized valuations so as to "prevent a repetition of the 1933 debacle on property valuations."51 In 1947 the state equalized on the basis of 80 percent of 1941 values. The percentage was increased to 90 percent in 1948 and 100 percent in 1949. By 1953 the state equalized valuations had risen to about 110 percent of 1941 values. As it became evident that real estate values would continue their upward movement, the commission finally abandoned the 1941 value scale. Using a 1955 scale of values, state equalization was effected at 47 percent in 1956 and 50 percent 1957. Today the state equalized valuations are approximately 50 percent of current market values. 51Michigan State Tax Commission, Twenty-Fifth Report: 1947-1948 (Lansing, 1949), p. 28. 42 CHAPTER III THE MEASUREMENT OF ASSESSMENT INEQUALITIES Two major topics will be considered in the following chapter: (1) the methodology of the current study of variations in the assessment levels of different classes of property and (2) a review of past studies dealing with property tax assessment practices. Attention will also be focused on the limitations of the current study. General Procedure This study is primarily concerned with the measurement of variations in the property tax assessment levels of different classes of both real and personal property. Most of the data used in the analysis of assess- ment variations are derived from county equalization studies completed by the State Tax Commission during the past five years. As opposed to most assessment studies, the analysis is not based upon actual, or esti- mated, market transfer prices of prOperty. The Data In the process of conducting county equalization studies the State Tax Commission has compiled a vast amount of useful information concerning local assessment valuations. The following analysis is based upon data provided by 21 county equalization studies which were completed and released by the State Tax Commission from January 1, 1955 to July 1, 1959. This sample includes all counties for which studies were completed between January 1, 1956 and July 1, 1959, inclusive, and two of the counties studied in 1953. 43 The following information was obtained from the equalization studies: (1) a legal and physical description of the sample properties which were appraised by the field staff of the State Tax Commission within each assessment district, (2) the locally assessed and state appraised valua- tion of each prOperty included in the sample, (3) the total locally assessed valuation of each class of property within the individual assessment districts, and (4) the total state equalized valuation of each property class, which was computed from the assessment-appraisal value ratio of the sample properties in each class. Since local assess- ment is accomplished at the township and city level, the above data were available for all property classes within each of the 320 townships and 53 cities included in the 21 counties studied. The Counties Studied The counties included in the following analysis are listed in TABLE 3-1. All of the counties, with the exception of Berrien, Ontonogan, and Genesee counties, were studied by the State Tax Commission upon its own volition. The other three counties were studied as a result of appeals from the actions of the county boards of equalization. Geographic Distribution. The geographic distribution of the counties included in the study is shown in FIGURE 3-1. The distribution over both the lower and upper peninsulas of the state is fairly uniform with the exception of the northwestern portion of the lower peninsula. And the sample counties represent most of the important geographic areas of the state. 44 MICHIGAN FIGURE 3-1. Geographic location of 21 study counties 45 The counties selected for use in this study were chosen because they have recently been the object of State Tax Commission equalization studies. No attempt was made to select counties on the basis of location- There is no reason to believe that the geographic location of any county would significantly affect the assessment levels of I different property classes. PrOperty Tax Base. The counties selected for study provide a good sample insofar as the relative sizes of their respective property tax bases are concerned. The total state equalized valuation of all taxable property in Wayne county far exceeds that of any other single county. In 1958 slightly less than 38.8 percent of the total state equalized valuation of the state was in Wayne county.1 Only 17 other counties had state equalized valuations which amounted to as much as 1 percent of the total state equalized valuation. Macomb county has the largest property tax base of the 21 counties studied (TABLE 3-1). The state equalized valuation in Macomb county was $1,185.1 million in 1958. This was 5.35 percent of the state total. Keweenaw county, with a state equalized valuation of $7.4 million, had the smallest tax base of the sample counties -- only 0.03 percent of the total state equalized valuation. The total state equalized valuation for all counties was $22,154 million in 1958.2 The 21 counties included in this study accounted for 23.16 percent of the total state valuation. 1Michigan State Tax Commission, Thirtieth Report: 1957-1958 (Lansing, 1959), p. 53. 21bid. 46 TABLE 3-1. General property tax base in 21 selected Michigan counties, 1958 (In millions of dollars) Assessed County State Percentage of Rank Among County Valuation Equalized Equalized Total State all Valuation Valuation Valuation Counties Macomb 577.9 592.6 1185.1 5.35 3 Genesee 720.2 1106.3 1106.3 4.99 4 Ingham 390.7 558.8 591.5 2.67 6 Saginaw 273.4 413.0 516.2 2.33 8 Berrien 186.3 401.2 402.2 1.82 11 Ottawa 124.8 245.8 245.8 1.11 17 Midland 151.6 199.3 199.3 0.90 19 Allegan 79.6 90.0 140.1 0.63 20 Shiawassee 57.2 90.0 128.3 0.58 21 Van Buren 59.1 59.4 118.7 0.54 24 Gratiot 51.6 93.4 93.4 0.42 28 Eaton 61.2 65.9 84.4 0.38 31 Barry 34.8 70.0 70.0 0.32 38 Delta 62.4 64.2 64.2 0.29 41 Menominee 37.1 37.4 51.2 0.23 47 Emmet 30.8 43.2 43.2 0.19 53 Ontonagon 13.7 31.8 31.8 0.14 60 Ogemaw 14.6 18.1 26.3 0.12 66 Luce 10.0 10.1 12.9 0.06 78 Oscoda 6.2 11.7 11.9 0.05 79 Keweenaw 5.9 7.3 7.4 0.03 82 Totalsa 2954.2 4933.4 5130.2 23.16 aDetails may not add to Source: (Lansing, 1959), pp. 52°53. totals because of rounding. Michigan State Tax Commission, Thirtieth Report: 1957-1958 47 It is important to note the differences between the total locally assessed valuations, the total county equalized valuations, and the total state equalized valuations for each county, as shown in TABLE 3-1. In 1958 the total assessed valuation for the sample counties was only 57.6 percent of the total state equalized valuation. However, the total county equalized valuation was 96.2 percent of the total state valuation. Since the early 1930's the amount of personal prOperty, in the state as a whole, has grown faster than the amount of real property.3 In 1915 personal property made up 19.7 percent of the total assessed value of all taxable property in the state. This percentage increased gradually to 22.5 percent in 1920. From 1920 to 1933 the prOportion of personalcy declined to a low of 15.8 percent in 1933. Since that time the percentage of personal property has increased steadily to a high of 31.1 percent in 1957. The proportion of personal property valuation in the counties under study was 26.6 percent in 1957 (TABLE 3-2). This was somewhat lower than the state average of 31.1 percent. Only Genesee county, with 31.3 percent of its assessed valuation composed of personalty, had more personal preperty than the state average. However, the average state percentage is somewhat misleading because of the high proportion of personal preperty in the large Wayne county valuation. In 1957 per- sonalty contributed 36.5 percent of the Wayne county assessed valuation. 3Ibid., p. 66. 4Ibid., p. 88. 4 48 TABLE 3-2. Total assessed valuations of real and personal property in 21 selected Michigan counties, 1957 (In millions of dollars) Assessed Realty as a Assessed Personalty as Total Valuation of Percentage Valuation of a Percentage Assessed County Real Property of Total Personal of Total Valuation Valuation Property Valuation Macomb 397.5 71.3 159.7 28.7 557.2 Genesee 465.3 68.7 212.2 31.3 677.5 Ingham 257.7 70.4 108.1 29.6 365.8 Saginaw 200.0 74.6 68.1 25.4 268.1 Berrien 133.8 73.2 49.0 26.8 182.8 Ottawa 93.7 77.2 27.6 22.8 121.3 Midland 113.6 81.6 25.7 18.4 139.3 Allegan 63.3 80.9 15.0 19.1 78.3 Shiawassee 41.7 76.1 13.1 23.9 54.9 Van Buren 47.1 83.7 9.2 16.3 56.2 Gratiot 36.4 73.0 13.5 27.0 49.9 Eaton 51.9 87.2 7.6 12.8 59.5 Barry 27.8 81.7 6.2 18.3 34.1 Delta 28.3 77.9 8.0 22.1 36.3 Menominee 26.6 72.9 9.9 27.1 36.5 Emmet 22.3 83.4 4.4 16.6 26.7 Ontonagon 12.8 92.4 1.0 7.6 13.8 Ogemaw 10.2 79.7 2.6 20.3 12.8 Luce 8.7 90.3 0.9 9.7 9.6 Oscoda 4.9 80.0 1.2 20.0 6.1 Keweenaw 3.8 86.7 0.6 13.3 4.4 Totalsa 2047.5 73.4 743.8 26.6 2791.3 aDetails may not add to totals because of rounding. Source: Michigan State Tax Commission, Thirtieth Report: 1957-1958 (Lansing, 1959). 49 As shown in TABLE 3-2, the proportion of personal prOperty in the sample counties ranged from a low of 7.6 percent in Ontonagon county to a high of 31.3 percent in Genesee county. Note that three of the five upper peninsula counties -- Ontonagon, Luce, and Keweenaw counties -- had extremely small amounts of personalty relative to the total assessed valuation of all property. In general the relative importance of personal prOperty depends upon the population and the degree of indus- trialization within the county. Composition of the Tax Base. The relative amounts of different types of property which comprise the total amounts of real and personal property within the sample counties vary a great deal. Obviously, the varying degrees of urbanization and industrialization are reflected in the Composition of the tax base. Also, the geographic and climatic variations among the study counties and their effect upon agriculture, timber, and resort activities are important factors in determining the composition of the tax base. Moreover, the variations among townships are even greater than those among counties. This is partially due to the fact that the tax rolls of seme townships include the property of village residents. Classification of Townships Prior to the analysis of assessment variations the 320 townships under study were classified as either rural, urban, or resort townships. In the absence of current information concerning township populations, the grouping was accomplished on the basis of the composition of the real property portion of the total township tax base as determined by the State Tax Commission. The major classes of real property were first categorized as rural, urban, or resort preperty. The township classification was then determined according to the category which made up the largest percentage of the total realty valuation. In classifying the townships, 16 specific property classes were grouped into the three general categories. The rural properties included the following: (1) farm improved, (2) farm vacant, (3) timber, (4) part timber, and (5) cutover lands. Seven property classes were included in the urban category: (1) residential improved, (2) residen- tial vacant, (3) suburban acreage improved "B", (4) suburban acreage improved, (5) suburban acreage vacant, (6) suburban platted improved, xw-‘N‘ and (7) suburban platted vacant real estate. The classes of resort property included the following: (1) resort acreage improved, (2) re- sort acreage vacant, (3) resort platted improved, and (4) resort platted vacant real estate. The classification of townships resulted in 209 rural townships, 74 urban townships, and 37 resort townships. TABLE 3-3 indicates the number of rural, urban, and resort townships in each county. All of the counties were represented in the rural town- ship category; and, with the exception of Oscoda and Ogemaw counties, all were represented in the urban township category. However, only 13 of the 21 counties had townships in the resort township group, and seven of these 13 had only one resort township. The Cities Studied A total of 53 cities were included within the 21 counties under study (TABLE 3-3). Macomb county, which has nine cities, and Berrien 51 TABLE 3-3 Number of rural, urban, and resort townships and number of cities in 21 selected Michigan counties k County Number of Number of Number of Total Number Number Rural Twps. Urban TWps. Resort Twps. of Twps. of Cities Allegan 19 5 0 24 3 Barry 9 1 6 16 l Berrien l4 7 l 22 7 Delta 8 3 3 14 2 Eaton 14 2 0 16 4 Emmet 4 1 ll 16 2 Genesee 5 12 1 18 5 Gratiot 16 1 0 l7 2 Ingham l3 3 0 16 4 Keweenaw 3 2 O 5 O Luce 2 1 1 4 0 Macomb 5 7 l 13 9 Menominee 11 2 1 l4 1 Midland 10 6 0 l6 2 Ogemaw 10 0 4 14 2 Ontonagon 9 l 1 11 0 Oscoda 2 0 4 6 0 Ottawa 10 6 l 17 3 Saginaw 17 10 0 27 1 Shiawassee l4 2 0 l6 4 Van Buren 14 2 2 l8 1 Totals 209 74 37 320 53 52 county, which has seven cities, made up about 30 percent of the sample. Four of the counties had no cities. The cities included in the sample represent a wide range as to the sizes of their respective tax bases. In 1957 the city of Flint had the largest state equalized valuation of the sample -- $639 mil- lion.5 Flint ranked second only to Detroit, which had a total valuation of $5,096 million, among all Michigan cities. Second in importance among the sample cities was Lansing, with a valuation of $329 million in 1957. Laingsburg, Olivet, and Rose City had the lowest valuations among the sample cities. The 1957 state equalized valuation of Rose City was only $380,950. Seven of the cities studied had valuations in excess of $200 million in 1957. As is the case with townships, the composition of the prOperty tax base in the study cities varies greatly. Some of the cities are primarily residential areas and have, therefore, only a small propor- tion of personal property in their total tax base. For example, in 1956 the city of St. Clair Shores, in Macomb county, had a state equalized valuation of $144.4 million, but only 4.1 percent of this amount was comprised of personal property. The majority of the valua- tion, in this case, was composed of residential real estate. On the other hand, the city of Flint, in Genesee county, had a state equalized valuation of $607.9 million in 1956, and personalty made up slightly more than one-third of that amount. The large amount of personalty in Flint was due to the importance of industry in the city. Industrial 5 Ibid., pp. 96-101. 53 personal property alone contributed 24.7 percent of the total tax base and represented 73.4 percent of the total amount of personal property from all sources. These cases illustrate the extremes among the sample cities and are indicative of the diversity of the municipal prOperty tax bases being considered. The Measurement of Variations in Property Class Assessment Levels The measurement of variations in the assessment levels of the various classes of real and personal prOperty is based upon the data obtained by the State Tax Commission in its study of the sample counties. The assessment-appraisal value ratio for each class of prOperty was available for every local assessment district studied. This ratio expresses the total locally assessed valuation of all property in a specified class as a percentage of the state appraised valuation of that prOperty class. Thus an assessment-appraisal value ratio of 50 for improved residential property indicates that the locally assessed valuation of all improved residential property within the district was 50 percent of the total state appraisal valuation of the same property. The assessmentvappraisal value ratio for a specific class of property is an average for all parcels of property within that class. Variations among the assessment-appraisal ratios of different parcels within a single class are not evident when dealing with the ratio for the property class as a whole. And, as noted previously, the assess- ment-appraisal value ratios have been computed on a sample appraisal basis. 54 In addition to the assessment-appraisal value ratios for each prOperty class, the equalization study data also revealed the agggage d ragig§_for all real property and all personal prOperty within each y‘ assessment district. The average assessment-appraisal value ratios were computed from the totals of the assessed valuations and the state appraised valuations of all real property, and of all personal property, within each local district. For example, the average assessment-appraisal value ratio for real property, within a specific district, expresses the total assessed valuation of all real property as a percentage of the state appraised valuation of all real property. The average assessment-appraisal value ratio of personal preperty was computed in the same manner. Comparison of Assessment-Appraisal Value Ratios. Marked dif- ferences among the assessment-appraisal value ratios of the various property classes exist within each of the local assessment districts. The variations in the assessment levels of the different property classes are measured as the deviation of the assessment-appraisal value ratio of each class of property from the average assessment- appraisal value ratio for the district. In order to compare the deviations with those of other districts it is first necessary to 3 ‘ r! I convert all of the deviations to comparable bases. This is accomplished / by multiplying the ratio for each property class by 100 over the 7 average assessment-appraisal value ratio. These adjusted ratios are then comparable in terms of a 100 percent assessment. In the case of the real property classes, the adjusted ratios for each class are computed by using the average assessment-appraisal 55 value ratio for all real property within the local districts. Similarly, the average ratios for all personal property are used to compute the adjusted ratios for the classes of personalty. All calculations are rounded to the nearest one-tenth of 1 percent. It is apparent that an adjusted ratio of 100 indicates that the prOperty class in question is assessed at the same pr0portion of the state appraised valuation as the average of all, say, real property. Hence, an adjusted ratio of more than 100 indicates that the class is over- assessed relative to the average assessment level, and an adjusted ratio of less than 100 is indicative of under-assessment. The Distribution of Adjusted Assessment-Appraisal Value Ratios. In the following chapter the distribution of the adjusted assessment- appraisal value ratios of specific property classes are considered as evidence of a tendency for local assessors to over-assess or under- assess particular types of property. A symetrical distribution of ad- justed ratios around 100 reveals a lack of uniformity among the treatment accorded a specific property class, but such a distribution provides no evidence of a general tendency toward over-assessment or under-assess- ment. On the other hand, a distribution centered around, say, an adjusted ratio greater than 100 indicates that the class of property being studied is, on the average, over-assessed. In order to determine the distributions of the adjusted ratios, the ratios are grouped into class intervals oflo percentage points. When- ever the adjusted ratio is exactly 100, the value of the observation is divided between the classes on either side of 100 percent. The median adjusted ratio for each property class is computed from the grouped data. Property Classes Studied 56 In all, 20 different classes of real property and five classes of personal property are considered. These classes include all major classes of both realty and personalty in the 320 townships and 53 cities under study. ” ""‘\ r/" Real Property. The classes of real property are described below: 1. Farm Improved Farm Vacant Timber Part Timber Cutover Land Suburban Improved Suburban Improved Suburban Vacant Suburban Improved Acreage IIBII Acreage Acreage Platted A parcel containing over 5 acres, used partially or wholly as farm land, with farm buildings. A parcel of over 5 acres used partially or wholly as farm land, without farm buildings. Lands, the major part of which are stocked with forest products of merchantable type and size. Lands, the major part of which were stocked with merchantable forest products that have been partially cut. Cutover forest lands with little or no merchantable products, marsh lands or other barren waste land. Found mostly north of Townline 16. Land of the cutover type of over 5 acres and usually will be parcels of 20 acres or more and used as a homesite. Found mostly north of Townline 16. A parcel of unplatted land of 5 acres or less with a home or garage and located outside of an incorporated village or city. A parcel of unplatted land of 5 acres or less zoned for homesites or most likely to be used as such and located outside of an incorporated village or city. A parcel of platted land, outside of an incorporated village or city, that has a house or garage on it. 10. 11. 12. ‘13. 14. 15. 16. 17. 18. 19. 20. Suburban Platted Vacant Residential Improved Residential Vacant Resort Acreage Improved Resort Acreage Vacant Resort Platted anroved Resort Platted Vacant Business Improved Business Vacant Industrial Utility 57 Any parcel of platted land, outside of an incorporated village or city, zoned for residential or most likely to be used for homesites. Any parcel of platted or unplatted land, within the corporate limits of a village or city, of 5 acres or less, which has a house or garage on it. Any parcel of platted or unplatted land, within the corporate limits of a village or city, of 5 acres or less, which is zoned or most likely to be used for a homesite. A parcel of unplatted land on which is situated living quarters or garage. Located in an area used predominantly for recreational purposes. A parcel of unplatted land in an area used predominantly for recreational purposes. A parcel of platted land on which is situa- ted living quarters or garage. Located in an area used predominantly for recreational purposes. A parcel of platted land that has no struc- ture on it. Located in an area used pre- dominantly for recreational purposes. A parcel of platted or unplatted land which is used for commercial purposes (wholesale, retail, or service), with buildings. A parcel of platted or unplatted land which is in an area zoned or most likely to be used for business purposes. A parcel of land on which is situated buildings used for manufacturing and pro- cessing purposes, or land zoned or most likely to be used for manufacturing purposes. A parcel of land occupied by a utility type structure such as a generating plant, pump- ing stations, switches, substations, ware- houses, or compressing stations; and parcels of land necessary to a utility company or right of way, flowage land, equipment storage areas, etc. 58 Personal Property. The five classes of personal property are des- cribed below: 1. Busines Personal The inventories of merchandise, and the equipment and fixtures found on preperties classified as business. 2. Industrial Personal The inventories of finished goods, goods in process of manufacture, raw materials, . supplies, equipment, fixtures, etc. found on properties classified as industrial. 3. Utility Personal Gas and electric transmission and distri- bution systems, substation equipment, supplies, fuel oil, coal, parts, etc. 4. Pipelines Transmission lines of gas~or oil trans- porting companies. 5. Farm Personal All livestock, equipment, and produce not specifically exempt by law. Relative Importance of the Property Classes As noted previously, the composition of the property tax base varies considerably among the local assessment districts, but some indication of the over-all importance of the different property classes can be ob- tained from the State Tax Commission equalization studies. Four of the 21 sample counties were selected for comparison of the township assess- ment district tax bases: (1) Eaton, (2) Emmet, (3) Genesee, and (4) On- tonagon counties. These counties are, in general, representative of the different types of county property tax bases found among the sample counties. The following comparisons are based upon the state appraisal valuations of the local tax bases. .Real Property; Eaton county is primarily an agricultural area, and nearly 50 percent of the total real property tax base is composed of farm improved real estate (TABLE 3-4). Among the 14 rural townships, 59 TABLE 3-4 Composition of the real property tax base, by property class, within township assessment districts in Baton county (In thousands of dollars) 14 Rural Townships 2 Urban Townships Total all Townships Property Class Dollars Percent Dollars Percent Dollars Percent Res. I. 2,599 6.7 1,523 7.8 4,122 7.1 Res. V. 103 0.3 20 0.1 123 0.2 Bus. I. 1,769 4.6 925 4.7 2,695 4.6 Bus. V. 20 0.1 57 0.3 77 0.1 Farm I. 24,675 63.6 3,702 18.9 28,377 48.6 Farm V. 3,105 8.0 692 3.5 3,797 6.5 Industrial 538 1.4 170 0.9 707 1.2 Utility 33 0.1 S (a) 38 0.1 Sub. Ac. I. 4,510 11.6 2,494 12.8 7,005 12.0 Sub. Ac. I. "B" sub. Ac. V. 195 0.5 86 0.4 281 0.5 Sub. P. I. 791 2.0 8,899 45.5 9,690 16.6 Sub. P. V. 72 0.2 689 3.5 760 1.3 Resort Ac. I. 87 0.2 87 0.1 Resort Ac. V. 13 (a) 13 (a) Resort P. I. 84 0,2 84 0.1 Resort P. V. 13 (a) 13 (a) Timber Part Timber Cutover Other 184 0.5 294 1.5 479 0.8 Totalsb 38,792 100.0 19,556 100.0 58,349 100.0 8Less than 0.05 percent. bDetails may not add to totals because of rounding. 60 farm improved real estate made up about 64 percent of the total valuation, while farm vacant real estate was only 8 percent of the total. Suburban acreage improved realty was the most important class of suburban property in the rural townships. In the two urban townships farm improved real estate contributed less than 20 percent of the total valuation, and the bulk of the suburban realty valuation was in the suburban platted improved class. Industrial and utility real estate were relatively unimportant in the county, and there were no timber, part timber, or cutover lands listed on the tax rolls. It should be noted, in all cases, that the vacant realty classes made up only a small portion of the total valuation. In Emmet county, 11 of the 16 township assessment districts were classified as resort townships; therefore resort property contributed the largest share of the total valuation for the county (TABLE 3-5). Resi— dential and suburban real estate were of lesser importance. However, industrial real estate valuations were more than 20 percent of the total. In the four rural townships farm improved real estate was nearly 52 per- cent of the total and farm vacant property about 11 percent. Again the relative size of the vacant class valuations should be noted. Genesee county is highly urbanized in comparison to the other three counties, and approximately 50 percent of the total real property valua- tion within the county comes from suburban preperty (TABLE 3-6). Subur- ban platted improved real estate made up about 32 percent of the total valuation, and suburban acreage improved real estate valuations were about 14 percent of the total. Industrial realty contributed nearly 18 percent of the total valuation. In the four rural townships, farm improved real estate and farm vacant real estate valuations were about 61 TABLE 3-5 Composition of the real property tax base, by property class, within township districts in Emmet county (In thousands of dollars) 4 Rural Twps. 1 Urban Twp. 11 Resort Twps. Total All Twps. Dollars Percent Dollars Percent Dollars Percent Dollars Percent Preperty Class Res. 1. 161 23.7 359 1.9 520 2.5 Res. V. 4 0.6 44 0.2 48 0.2 Bus. 1. 71 5.4 224 32.9 1,102 5.9 1,396 6.8 Bus. V. l (b) 1 0.2 9 0.1 11 0.1 Farm I. 682 51.6 73 10.8 2,147 11.6 2,902 14.1 Farm V. 148 11.2 36 5.2 267 1.4 451 2.2 Industrial 4,230 22.8 4,230 20.6 Utility (a) (b) (a) (b) 3 (b) 4 (b) Sub. Ac. 1. 34 2.6 55 8 1 763 4.1 852 4.1 Sub. Ac. 1. "B" 45 3.4 17 2.5 522 2.8 584 2.8 Sub. Ac. V. 2 0.1 6 0.9 64 0.3 72 0.4 Sub. P. I. 14 1.1 55 8.0 347 1.9 415 2.0 Sub. P. V. l 0.1 2 0.3 77 0.4 80 0.4 Resort Ac. 1. 69 5.2 4 0.6 3,410 18.4 3,483 16.9 Resort Ac. V. 83 6.3 568 3.1 651 3.2 Resort P. I. 2,467 13.3 2,467 12.0 Resort P. V. 2 0.2 252 1.4 254 1.2 Timber Part Timber 18 1.3 18 0.1 Cutover 96 7.2 41 6.0 261 1.4 397 1.9 Other 57 4.3 1,682 9.1 1,739 8.5 Totalsc 1,322 100.0 680 100.0 18,575 100.0 20,576 100.0 8Less than $500 bLess than 0.05 percent cDetails may not add to totals because of rounding. 62 TABLE 3-6 Composition of the real property tax base, by preperty class, within township assessment districts in Genesee county (In thousands of dollars) 5 Rural Twps. 12 Urban T929- 1 Resort Twp; Total All Twps. Property Class Dollars Percent Dollars Percent Dollars Percent Dollars Percent Res. 1. 782 4.2 10,602 5.1 11,384 5.0 Res. V. 56 0.3 564 0.3 620 0.3 Bus. 1. 868 4.7 14,022 6.8 157 3.9 15,048 6.6 Bus. V. 17 0.1 1,725 0.8 1,742 0.8 Farm 1. 8,803 47.5 19,714 9.6 1,184 29.5 29,700 13.0 Farm V. 1,755 9.5 3,041 1.5 273 6. 5,070 2.2 Industrial 59 0.3 40,794 19.8 25 0.6 40,878 17.9 Utility 15 0.1 507 0.2 522 0.2 Sub. Ac. 1. 3,435 18.6 28,565 13.8 153 3.8 32,153 14.0 Sub. Ac. 1. "B" Sub. Ac. V. 138 0.7 1,941 0.9 9 0.2 2,088 0.9 Sub. P. I. 2,214 12.0 71,590 34.7 64 1.6 73,868 32.3 Sub. P. V. 266 1.4 7,040 3.4 31 0.8 7,338 3.2 Resort Ac. I. 17 0.1 767 0.4 259 6.5 1,044 0.5 Resort Ac. V. 1 (a) 156 0.1 23 0.6 181 0.1 Resort P. I. 4,108 2.0 1,602 39.9 5,710 2.5 Resort P. V. 635 0.3 215 5.4 850 0.4 Timber Part Timber Cutover Other 91 0.5 625 0.3 17 0.4 733 0.3 Totalsb 18,516 100.0 206,397 100.00 4,013 100.0 228,926 100.0 8Less than 0.05 percent. bDetails may not add to totals because of rounding. 63 48 percent and 10 percent, respectively, of the total realty valuation. But, even in these townships, suburban property valuations were more than 30 percent of the total. Ontonagon county is representative of the upper peninsula areas where a significant portion of the property tax base is composed of mining and timber property. Therefore, although nine of the 11 township assessment districts were classified as rural townships, they are not, primarily, agricultural areas. This is evident from the relatively small valuations in the farm real estate classes (TABLE 3-7). On the other hand, both timber and cutover lands accounted for more than 10 percent of the total county real estate valuation. In addition, most of the residual valuation, listed under "other" real estate, was made up of mining property valuations. Industrial real estate was relatively unimportant in the county, but utility real estate contributed more than 7 percent of the total valuation. In summary, it is evident that the vacant real estate classes are much less important than the other classes in terms of total valuations. However, in the rural townships, where about 50 percent of the total valuation is composed of farm improved real estate, farm vacant real estate makes up approximately 10 percent of the total. This, of course, is not the case in the few rural townships where timber and cutover lands are significant. Most of the suburban realty valuation in the rural townships is found in the suburban acreage improved class, while suburban platted improved property accounts for the largest part of the suburban property valuation in urban townships. Both industrial and utility real estate are more important in the urban townships than in the rural 64 TABLE 3-7 Composition of the real property tax base, by property class,within township assessment districts in Ontonagon county (In thousands of dollars) Preperty Class Res. 1. Res. V. Bus. I. Bus. V. Farm 1. Farm V. Industrial Utility Sub. Ac. Sub. Ac. Sub. Ac. Sub. P. I. I. V. 1. Sub. P. V. Resort Ac. 1. Resort Ac. Resort P. I. Resort P. V. Timber Part Timber Cutover Other Totalsc "B" V. 9 Rural Twps. 1 Urban Twp. 1 Resort Twp. Total All Twps. Dollars Percent Dollars Percent Dollars Percent Dollars Percent 469 10 1,575 191 138 1,143 324 190 22 684 77 141 67 15 1 1,647 465 1,574 2,579 11,311 ‘1,794 120 732 22 249 64 272 20 103 127 7 61 29 17 32 32 39 24 19 415 18 H H O 9 co m‘OHO‘VHO‘NNHNNWHNNWHH H Nub-l-‘AOOHOGOHNOHr-dwO-b n>ra 100.0 4,197 8Less than 0.05 percent. bLess than $500. cDetails may not add to totals because of rounding. a~ no a: H O‘DOOCOOOOHOWNOO‘HMONN bOUGwmm-FNLDNOUIUIUIMOUIbw 100.0 72 11 102 (b) 67 148 183 113 87 96 82 992 \l U n: viva la ooooHOOObooa‘AOOI-I abhac\$~¢~a\m>O\u>~4\atordrd 9.7 8.3 100.0 1,794 120 1,273 32 1,835 256 512 1,164 494 326 34 894 112 340 212 53 42 1,758 484 2,085 2,680 16,500 H 00 NW H O‘NNCOOHNOU‘ONWNUHHON p—s NowuwwwHNJ-‘NOOHHGHNN r-Ir-I 100.0 65 townships. In all cases the relative importance of the different property classes varies considerably among the townships within each county. The total valuations of the real property tax bases in the city assessment districts are made up largely of residential improved, busi- ness improved, and industrial real estate. In most of the cities, residential improved real estate accounts for the largest portion of the total realty valuation, followed by business unproved realty and indus- trial prOperty in that order. The vacant classes are much less important in terms of the total valuation. Personal Property. The compositions of the personal property tax base within the township assessment districts of Eaton, Emmet, Genesee, and Ontonagon counties are given in TABLE 3-8. The composition of the real property tax base is clearly reflected by that of the personalty base. In Eaton county, which is mainly an agricultural area, farm personal property accounted for about 45 percent of the total personal property valuation. Industrial personalty made up less than 6 percent of the total. Emmet county is an important resort area, and the large amount of personalty valuation included under "other" personal property came chiefly from cottages on leased land, which are assessed as personal property. Industrial personal preperty contributed approximately 25 percent of the Emmet county personalty valuation. And farm personalty was only 6 percent of the total. Highly urbanized Genesee county derived more than 73 percent of its personalty valuation from the assessment of industrial personal property. Business personalty accounted for about 13 percent of the total and utility personalty about 6 percent. Farm personalty made up about 5 66 TABLE 3-8 Composition of the personal property tax base, by property class, within township assessment districts in four selected Michigan counties (In thousands of dollars) Eaton County Emmet County Genesee County Ontonagon County Property Class Dollars Percent Dollars Percent Dollars Percent Dollars Percent Industrial 451 5.9 648 25.5 69,761 73.7 1,136 Business 1,374 18.1 220 8.7 12,062 12.7 1,011 Utility 2,229 29.3 348 13.7 5,810 6.1 869 Farm 3,387 44.5 152 6.0 4,839 5.1 1,114 Pipelines 259 110.2 376 0.4 Other 164 2.2 910 “35.9 1,877 2.0 92 Totalsa 7,604 100.0 2,538 100.0 94,725 100.0 4,223 ‘Details may not add to totals because of rounding. percent of the total. In Ontonagon county the personalty valuation was divided among industrial, utility, business, and farm personalty in a fairly uniform manner. Only two of the four counties listed pipelines on their personalty tax rolls. Among the city assessment districts there was little uniformity in the relative importance of the three major classes of personal property. In general, within each city either industrial or business personalty led in importance, followed by utility personal property. The relative importance of industrial and business personalty varied considerably among the districts. 26.9 23.9 20.6 26.4 2.2 100.0 67 Lmnitations of the Study As is the usual case, there are certain limitations in the inter- pretation of the following analysis. These limitations are due to both the nature of the data employed and the methodological procedure described above. The current study is based, as previously noted, upon data ob- tained from State Tax Commission equalization studies. There was no attempt toward a random selection of Michigan assessment districts. Rather, the study includes all of the counties which have recently been the object of equalization studies. However, the large number of counties included in the sample and the relative size of the state property tax base represented lead to implications which are applicable to the entire state. Variations Within Property Classes Although the present study is not intended to deal with assessment variations within specific property classes, it should be remembered that such variations exist. Hence, an adjusted assessment-appraisal value ratio which is greater than 100 for a particular property class in a local assessment district does not preclude the possibility that some preperties within the class may actually be under-assessed rather than over-assessed. An adjusted ratio of more than 100 only indicates that a specific property class is, on the average, over-assessed relative to the assessment levels of all other classes of property within the district. 68 Accuracy of State Appraisal Valuations The validity of the analysis depends in a large part upon the accuracy of the data obtained from the State Tax Commission equalization studies. Since the Commission relies upon a sample appraisal method in conducting equalization studies, the accuracy of both the sampling technique and the appraisal valuations determined by the Commission should be considered. Insofar as the sampling technique is concerned, there is no apparent reason to question the validity of using a random sample comprising a minimum of 10 percent of the property valuation in each class. None- theless, the sampling method employed by the Commission cannot be taken as a complete re-assessment of all property. The sampling method will result in assessment-appraisal value ratios which only approximate the true ratios. The use of state appraised valuations as a standard for measuring the accuracy of local assessments is also open to question. The State Tax Commission does not attempt to appraise at current market values. However, equalization at full value is not a requisite of equitable taxa- tion. The Commission has, in general, a staff with more professional experience and training in appraisal work than have the local assessment districts. In addition, the Commission staff presumably value all property in a uniform manner. Hence, state appraised valuations for any group of local assessment districts should represent a more nearly uniform per- centage of current market values than the collective valuations of local 888888021 . 69 Related Studies No doubt the history of property taxation is no more diverse than the studies dealing with its many facets. In general, studies of property taxation have dealt with one, or more, of three broad areas: (1) the relationship of assessed valuations to some other measure of value; (2) the relationship of the amount of property taxes paid to the produc- tivity of the taxed property, or, more generally, to individual or firm income; and (3) the legal and administrative aspects of property taxation. The present study is primarily concerned with the first of these areas although it necessarily involves a discussion of legal and administrative aspects as well. ‘Assessment-Sales Value Ratio Studies As noted earlier, actual sales data have served as the basis for the level of appraisal valuations used by the State Tax Commission in Michi- gan. A number of other states make much greater use of transfer prices in the determination of cash values than does Michigan. Actual sale prices have also been used quite extensively in the study of variations in assessment levels. The methodology of assessment-sales ratio studies is usually very similar to that of the current study. However, the use of sales data has several disadvantages. Since the assessed valuation of any specific parcel of prOperty may be either above or below the average assessment level of similar parcels, a technique involving a random sample of properties would presumably yield the most valid estimate of the average assessment level. However, assessment-sales ratio studies can be based only upon a sample chosen 70 from among the properties which have been sold.within a selected time period. Hence, a random sample of the properties is not possible. Since studies of this type usually purport to show only general tendencies, this objection is somewhat less important than others. A second problem lies in the determination of valid sale prices. Federal revenue stamps, attached to deeds, have often been used in esti- mating the market value of property. The reliability of property value estimates derived from federal revenue stamps is discussed in most studies using this method.6 Even when the possible error associated with the use of federal revenue stamps is recognized, however, the bonafide sales still must be distinguished from abnormal sales. The extreme cases are easily identified, but the selection of a division point between bonafide and abnormal sales is completely arbitrary. The use of sales data involves additional shortcomings when the researcher desires to study all property classes. Federal revenue stamps can be used only in estimating real estate values. Estimates of the current sales value of personalty are much more difficult to obtain. Also, some classes of property are seldom represented on the market. Thus, an adequate sample is difficult to obtain even with some classes of realty. Although the disadvantages are important, assessment-sales ratio studies provide, on the whole, very useful information. The methodology 6See, for example, Raleigh Barlowe and Othmar A. Limberger, "Rela- tionship of Tax Assessed Valuations to the Sales Values of Real Properties, Ingham County, Michigan, 1950-S3,” Quarterly Bulletin, Michigan Agricul- tural Experiment Station, Volume 39, No. 1 (August, 1956), pp. 143-162. 71 of the current study is similar to that employed in studies which rely upon sales values or privately appraised values; and it has, therefore, many of the same strengths and weaknesses. In relying upon State Tax Commission appraised valuations, the analysis of this study is, in effect, based upon appraisals which represent a selected percentage of current market values, as determined by the Commission. The use of state appraised valuations does, however, have the important advantage of providing a uniform sampling of all classes of both real and personal property. Studies in Other States Many of the early studies of property taxation were largely con- cerned with informing the public about the local tax structure. Con- siderable attention was also directed toward the property tax burden of farm owners in the 1920's and 1930's. A 1926 research report con- cluded, for example, that the Missouri farm tax problem had reached serious proportions.7 This report included a comparison of appraisal- sale value ratios for rural and urban properties which indicated that farm property was generally over-assessed relative to urban real estate. In the same year a study of the farm tax situation in North Dakota was published.8 7C. 0. Brannen and S. D. Gromer, Taxation of Farms in Missouri, Missouri Agricultural Experiment Station, Research Bulletin 93, Nevem- ber, 1926. 8R. Wayne Newton and Alva H. Benton, Some Tax Problems of North Dakota Farmers, North Dakota Agricultural Experiment Station, Bulletin 203, October, 1926. 72 Brannen noted, in 1928, that Arkansas farms tended to be assessed at a higher proportion of earnings than other types of property and suggested that income be considered in the valuation of farm real estate.9 Weaver also found that farm real estate and mining properties were being assessed at a higher percentage of net income than other types of property in Pennsylvania.10 In addition, he found agricultural property to be over-assessed relative to urban property. The early studies of prOperty taxation dealt primarily with the situation of farm property owners. Later studies began to take a more comprehensive view of the property tax system. A 1939 study of assess- ment inequalities in Arkansas provided a rather systematic study of local assessment procedures.11 The study found that low-valued real estate was consistently over-assessed relative to more valuable property. This proved true of both urban and farm property. Farm property was also found to be assessed at higher levels than residential property, and residential real estate was, in turn, assessed at higher levels than business property. The Arkansas study also attempted to measure the 9C. O. Brannen, The Farm Tax Problem in Arkansas, Arkansas Agricul- tural Experiment Station, Bulletin 223, February, 1928. 10?. P. Weaver, The Rural Tax Problem in Pennsylvania, Pennsylvania Agricultural Experiment Station, Bulletin 263, March, 1931. 11Estal E. Sparlin, Inequalities in the Arkansas Property Tax Assessment System, Arkansas Agricultural Experiment Station, Bulletin 369, January, 1939. 73 quality of local assessments from the standard deviation of assessment- appraisal value ratios. However, this was accomplished on the basis of property classes and no effort was made to compare the quality of assess- ments among districts on the basis of total taxable property. More recent research reports have confirmed the tendency of local assessors to over-value farm realty relative to other types of real property.12 Moreover, the assessment bias favoring high-valued property was substantiated by a number of studies.13 Other studies have dealt largely with the general administration of general prOperty taxes and the determination of the tax burdens of various social groups.14 Michigan Studies The tax structure of the state of Michigan has been the object of numerous research studies. Although criticism is still being directed 12See, for example, C. C. Taylor, Farm Real Estate Assessment in Georgia, Georgia Agricultural Experiment Station, Bulletin N. S. 22, April, 1956; Walter E. Chryst and Frank Miller, Assesmment of Property for Tax Purposes in Missouri, Missouri Agricultural Experiment Station, Re- search Bulletin 490, February, 1952; C. C. Taylor and G. H. Aull, Assess- ment of Farm Real Estate for Tax Purposes in South Carolina, South Carolina Agricultural Experiment Station, Bulletin 416, January, 1954; Robert O. Sinclair and E. H Loveland, Properterax Assessments in Vermont, Vermont Agricultural Experiment Station, Bulletin 606, March 1958; W. W. Armentrout and Tyler F. Haygood, Property Tax Assessment in West Vigginia, West Virginia Agricultural Experiment Station, Bulletin 358, March, 1953; and Arthur J. Walroth, "Equalization of Property Taxes in an Urban-Rural area," Land Economics, Volume XXXIII, No. 1 (February, 1957), pp. 47-54. 13Taylor, loc. cit.; Armentrout and Haygood, loc. cit., Taylor and Aull, 10c. cit., and Chryst and Miller, loc. cit. 14See, for example, Harold C. Halcrow, L§£§Ct of Property Taxation on Connecticut Agriculture, Storrs Agricultural Experiment Station, Bulletin 321, February, 1956; Wilfred H. Pine, Farm and City Real Estate Tax in Kansas, Kansas Agricultural Experiment Station, Bulletin 382, September, 1956; John Thompson and.Max Myers, The South Dakota Farmer and His Taxes, South Dakota Agricultural Experiment Station, Circular 128,'May, 1956; and C. C. Taylor and G. H. Aull, Property Tax Problems in the Southeast, South Carolina Agricultural Experiment Station, Bulletin 414, January, 1954. 74 at the Michigan property tax system, recent studies have not protested as vigorously as did Newton and Hedrick in 1928. The following state- ments, from their conclusions regarding farm real estate assessment practices in Michigan, exemplify their vehemence: In conclusion it may be said that the Michigan system of assessing and equalizing property for taxation, as established by law, is so complicated that it is hardly understandable, so impractical that officials charged with its administration have long since abandoned all attempts to enforce its features, and so unsuited to a modern society that nobody particularly cares to see it enforced. The Michigan property tax is characterized by property descriptions that do not describe, assessors who do not assess, supervisory officials who do not supervise, equalizations which create inequalities, and a legal standard of values which is avowedly abandoned, being replaced by three substitute values, each different, and at least two of them frequently made by the same board of three men.1 The lengthy report by Newton and Hedrick was concerned primarily with the legal and administrative aspects of prOperty taxation. They were less concerned with variations in assessment levels than with assessment errors due to negligence, omission of some preperty from the tax rolls, and the failure of local assessors to re-appraise property each year. A later study by Cline in 1940 dealt with the general effect of taxation on Michigan farmers.16 This report included a detailed study of property tax trends in 200 agricultural townships. However, major atten- tion was directed at changes in tax rates, the size of the township tax 15R. Wayne Newton and W. 0. Hedrick, Farm Real Estate Assessment Practices in Michigan, Michigan Agricultural Experiment Station, Special Bulletin 172, February, 1928, p. 71. 16Denzel C. Cline, Michigan Tax Trends as Related to Agriculture, Michigan Agricultural Experiment Station, Special Bulletin 301, February, 1940. 75 bases, and the composition of the tax base. The relationship of farm taxes to the level of farm incomes was also emphasized. Further attention was directed to the administration of preperty taxation in later studies. Dickerson, in 1944, studied the role of the state government in supervising local taxation. He found, as had Newton and Hedrick nearly 20 years before, that "it is freely admitted by assessors that most of the valuations are copied from the previous year's roll."17 Dickerson concluded, in part, that Michigan assessment dis- tricts are too small and too numerous. A more recent monograph on property tax administration was published in 1951.18 A detailed comparative study of property tax administration in Michigan and Illinois concluded that neither the Michigan nor the Illinois system provided equitable treatment of property owners under the existing tax laws.19 Two major reasons were given: First, there are too many local assessment districts within the states; and, second, local assessors do not use uniform assessment procedures.20 A recent study of a selected group of above-average commercial farms revealed that property taxes in Michigan increased by 256 percent from 1939 to 1956 and that during the period 1948 to 1956 real estate taxes 17Milton B. Dickerson, State Supervision of Local Taxation and Finance in Michigan, Michigan Agricultural Experiment Station, Special Bulletin 327, April, 1944, p. 20. 18claude R. Tharp, Property Tax Administration (Michigan Pamphlet No. 22; Ann Arbor: Bureau of Government, Institute of Public Administration, University of Michigan, 1951). 19Robert H. Pealy, A Comparative Study of Property Tax Administration in Illinois and Michiggg (Michigan Governmental Studies, No. 33; Ann Arbor: Bureau of Government, Institute of Public Administration, University of Michigan, 1956). 201bid., p. 113. 'U-EV-“FW 76 increased more rapidly than land values.21 A more comprehensive study of property taxation, by Heneberry and Barlowe in 1958, was also con- cerned with the trends in tax rates, the assessment levels, and the relationship of farm real estate taxes to both land values and farm income.22 Comparisons between selected groups of rural and urbanized townships indicated that, while preperty taxes increased three-fold in agricultural townships during the period 1940 to 1955, urban township property taxes increased eleven-fold during the same period. Three reasons were given for the rapid increase in property taxes within urban townships: (1) the rise in the general price level, (2) the addition of new property to the tax roles, and (3) the increased demand for public services.2 In 1956 an assessment-sales value study of Ingham county found wide variations in the assessment-sales value ratios both within and between assessment districts.24 For example, the assessment-sales value ratios for the middle 50 percent of the sample properties ranged from a low of 10.5 in Meridian township to a high of 25.7 in Leslie township. The study also indicated that rural property was, on the 21Charles Beer and Raleigh Barlowe, "Impact of Fraperty Taxes on Michigan Farmers, 1939-1956," Quarterly Bulletin, Michigan Agricultural Experiment Station, Volume 40, No. 1 (August, 1957), pp. 176-180. 22William H. Heneberry and Raleigh Barlowe, Property Tax Trends Affectinngichigan Farmers, Michigan Agricultural Experiment Station, Special Bulletin 421, 1958. 23Ibid., pp. 9-10. 24Barlowe and Limberger, loc. cit. ’77 average, over-assessed relative to the property in suburbanized and urbanized areas. However, variations in the assessment-sales value ratios of specific property classes were not examined. An extensive study of the Michigan tax structure was compiled by the research staff for the 1958 Michigan Tax Study.25 One chapter of the report was specifically concerned with the general property tax and several other sections are closely related to the subject of property taxation.26 The chapter on the general property tax provides a rather complete summary of legal and administrative trends in property taxation. It also compares the Michigan property tax system with those of adjacent states and brings together the findings of several different research studies dealing with various phases of property taxation. 25Michigan Tax Study: Staff Papers (Lansing, 1958). 26See Robert H. Pealy, 5t_gl., "The General Property Tax," ibid., Chapter 5. Also see Raleigh Barlowe, ”Impact of State and Local Taxes on Michigan Farmers," ibid., Chapter 3. 78 CHAPTER IV VARIATIONS IN ASSESSMENT-APPRAISAL VALUE RATIOS Township Assessment Districts Average Assessment-Appraisal Value Ratios Although major attention will be directed to the variations in the assessment levels of different classes of property, the range of average assessment-appraisal value ratios among the assessment districts should be noted. Assessment at any percentage of current market values will result in the equitable treatment of property owners as long as all prOperties within each district are assessed at the same percentage and equalization among districts is accurately accomplished. As we shall see, however, there is a wide range of assessment-appraisal value ratios among the various property classes within each individual assessment district. The State Tax Commission found that personal prOperty was assessed, on the average, at a higher percentage of true cash value than was real property in 168 of the 320 townships included in this study. However, in a number of cases, the assessed valuations of certain classes of personal property were adjusted upward by the local assessors during the period in which the equalization studies were in progress; thus the average assessment-appraisal value ratios of personal property were artificially increased. When these increases are eliminated, real property was actually assessed at a higher percentage of cash value than was personalty in 196 of the 320 townships. 79 This SUggests a tendency for local assessors to under-value per- sonal property relative to real property. On the basis of average county valuations, the State Tax Commission is reported to have found that personal prOperty was under-assessed in 49 of 63 counties studied over the past 10 years.1 The current study indicates that any tendency for local assessment officials to under-value personalty may be rela- tively less important now than in the past. All Property. A general increase in the level of local assessment 2 valuations was evident from the median assessment-appraisal value ratios for all preperty in rural townships (TABLE 4-1). The median ratios for rural townships were 42 percent in 1955, 51 percent in 1956, 54 percent in 1957, and 61 percent in 1958.3 Since fewer townships TABLE 4-1 Variations in average assessment-appraisal value ratios, by township group, for all property No. of Twps. more No. of Highest Lowest Median than 10 Percentage Range TWPB- 33‘10 Ratio Ratio Points from Median Rural Twps. 1955 29 62.4 30.0 32.4 42.2 5 1956 70 101.8 30.2 71.6 51.0 19 1957 82 73.5 30.8 34.7 5412 27 1958 28 77.3 40.3 37.0 60.6 8 Urban Twps. ' 1 4.7) I '-b y 1955-58 74 83.3 18.4 64.9 43.9 21 Resort Twps. ' 1955-58 37 83.3 32.1 51.2 53.9 18 1Robert H. Pealy £3 21., "The General Property Tax," gichigan Tax §tudyz Staff Papers (Lansing, 1958), p. 207. 2The terms "assessment level" and "assessment-appraisal value ratio” are used synonymously. 3The years given indicate the calendar year in which the study of the townships, by the State Tax Commission, was completed. 80 were included in the urban and resort groups, these townships were not listed by year of study. It should be noted, however, that the median assessment-appraisal value ratio for all urban townships was only 44 percent. The difference between the highest and lowest assessment-appraisal value ratio for townships within each of the six groups shown in TABLE 4-1 was more than 30 percentage points in each case. In the rural township groups 59 of the 209 rural townships were assessed at average levels which were more than 10 percentage points from the median ratios. Among the 74 urban townships, 21 townships were assessed at more than 10 per- centage points from the median ratio, and 18 of the 37 resort townships had ratios more than 10 percentage points from the median ratio for the group. It is apparent that a wide variation existed in the average assessment levels of the townships studied. The over-all range from 18 percent to 102 percent means that assessments in the highest township were five and one-half times those in the lowest townships. Real Prgperty. When only the real property valuations of the town- ships were considered, the variations in the average assessment-appraisal value ratios were similar to the variations of the ratios for all property. As shown in TABLE 4-2, the median assessment-appraisal value ratios for realty were higher than the median ratios for all property in four of the six township groups. It should be noted, however, that the lowest ratio, the highest ratio, and, hence, the range of assessment levels for real property were approximately the same as the corresponding values for all property. This was to be expected since real property comprised an ex- tremely large proportion of the total prOperty valuation in most of the townships. 81 TABLE 4-2 Variations in average assessment-appraisal value ratios, by township groups, for real property No. of Twps. more Ngé :f “Ritizt ngziz Range Median than 10 Percentage p ' Ratio Points from Median Rural TWps. 1955 29 67.0 32.2 34.8 46.6 6 1956 70 102.0 30.8 63.2 51.0 19 1957 82 72.6 29.0 43.6 54.6 24 1958 28 77.1 39.5 37.6 62.8 9 .,i<,u Urban Twps. 7 1955-58 74 80.3 20.7 59.6 45.4 25 Resort Twps. 1955-58 37 82.3 32.1 50.2 50.4 20 Personal Property. The average assessment-appraisal value ratios of personal property revealed that there was greater variation among townships in the assessment of personalty than in the assessment of real prOperty (TABLE 4-3). ‘In the groups of rural townships studied in 1955 TABLE 4-3 Variations in average assessment-appraisal value ratios, by township group, for personal property No. of Twps. more No. of Highest Lowest Range Median than 10 Percentage TWPS' Ratio Ratio Ratio Points from.Mbdian Rural Twps. 1955 29 103.6 6.2 97.4 24.3 9 1936 70 92.3 24.5 67.8 5238 23 1957 82 105.1 20.8 84.3 60.6 48 1958 28 81.5 9.2 72.3 51.8 10 f. V") 3' 5 Urban Twps. . .. 1955-58 74 84.7 7.8 76.9 40.5 42 Resort Twps. 1955-58 37 86.2 14.0 72.2 69.0 30 82 and 1958, and in the group of urban townships, the lowest ratios for personalty were less than 10 percent. The bias introduced into the distribution of personalty ratios because of increases in the assessed valuation of personal prOperty during the course of the equalization study was eliminated in determining the values given in TABLE 4-3. If this had not been done, the ranges of assessment-appraisal value ratios would have been somewhat larger. Further evidence of the greater varia- tion of personal property ratios was given by the larger number of town- ships, in each group, which were assessed at more than 10 percentage points from the median ratios. Variations in Real Property Assessment Levels Data from 320 Michigan townships revealed significant variations in the average assessment-appraisal value ratios for different classes of real property. Although there was a wide variation within each class of property, certain property classes were, in a substantial majority of the cases, either over-assessed or under-assessed relative to other classes. The following comparisons were based upon the adjusted assessment- appraisal value ratios of specified property classes. As previously noted, all ratios were converted to the equivalent of a 100 percent assessment for real property. Since all townships did not have property listed under each classification, the number of townships included in the comparison of individual prOperty classes varied. Also, in the few cases in which the assessment-appraisal value ratio of a particular property class were estimated rather than determined by actual appraisals, the estimated ratios were excluded from the comparisons. 83 Farm Real Estate. All farm real estate, with the exception of timber and waste lands, is included as either a farm improved property or farm vacant property. The median adjusted assessment-appraisal value ratio for farm meroved property was 98 percent for 314 townships ‘\y/ // (TABLE 4-4). Farm improved real estate was under-assessed in 56 percent of the townships. TABLE 4-4 Distributions of adjusted assessment-appraisal value ratios of farm improved real estate in 314 townships — Rural Urban Resort All 2:222:66 Townships Townships Townships Townships No. Percent No. Percent No. Percent No. Percent 0 - 9.9 10.0 - 19.9 1 0.5 l 0.3 20.0 - 29.9 30.0 - 39.9 40.0 - 49.9 1 1.4 l 0.3 50.0 59.9 1 0.5 2 2.8 1 2.9 4 1.3 60.0 69.9 5 2.4 1 1.4 4 11.4 10 3.2 70.0 - 79.9 10 4.8 2 2.8 3 8.6 15 4 7 80.0 - 89.9 21 10.1 11 15.3 3 8.6 35 11.1 90.0 - 99.9 92.5 44.7 13 18.1 6 17.1 111.5 35.5 100.1 - 110.0 57.5 27.8 12 16.7 4 11.4 73.5 23.4 110.1 - 120 O 13 6.3 19 26.4 6 17.1 38 12.1 120.1 - 130.0 4 1.9 4 5.6 2 5.7 10 3.2 130.1 - 140.0 1 0.5 1 1.4 2 5.7 4 1.3 140.1 - 150.0 2 2.8 2 5.7 4 1.3 150.1 - 160.0 1 0 5 3 4.2 1 2.9 5 1.6 160.1 - 170.0 1 1.4 l 0.3 170.1 - 180.0 180.1 - 190.0 1 2.9 1 0.3 190.1 - 200.0 Greater than 200.0 Totalsa 207 100.0 72 100.0 35 100.0 314 100.0 Median Ratios 97 105 101 98 3Details may not add to totals because of rounding. 84 1‘ .‘ —. .._.-—1 Since farm ’ proved property hide up a large proportion of the total valuation of all real property in most of the townships, the median ratio would not be expected to differ greatly from 100 percent, especially within the rural townships. When all townships were con- sidered as a group, 59 percent of the townships were within the range of 90 to 110 percent. The median ratios were 97 percent, 105 percent, and 101 percent for \( /\ rural, urban, and resort townships, respectively. This lends some sup- port to the hypothesis that farm improved real estate is under-assessed in rural townships and over-assessed in urban and resort townships. )4 However, as in all of the comparisons, the distribution of the ratios should be noted. Although farm improved property was under-assessed in 63 percent of the rural townships, 72 percent of the adjusted ratios were within 10 percentage points of 100 percent. There was greater variation in the assessments made in the urban and resort townships. .-......-..___~_ . .r' \_‘ Farm vacant propertyxwas over-valued by local assessors in most town- ”a“ _ . ,_.~ ships by a substantial amount (TABLE 4-5). The median adjusted assess- \ ,‘Q 1" \~ \ '7 ! ment levels for rural, urban, and resort townships were 133 percent, 141 percent, and 133 percent, respectively. The median assessment level for all townships was 134 percent. Farm vacant real estate was over- assessed in 92 percent of the townships; and, in only 13 percent of the cases did the adjusted ratios fall within 10 percentage points of the 100 percent level. There was no apparent difference in the assessment of farm vacant property among the three groups of townships. The general over-assessment 85 TABLE 4-5 Distributions of adjusted assessment-appraisal value ratios of farm vacant real estate in 310 townships Rural Urban Resort All Adjusted Townships Townships Townships Townships Ratio No. Percent No. Percent No. Percent No. Percent 0 - 9.9 10.0 - 19.9 1 0.5 1 0.3 20.0 - 29.9 1 1.4 1 0.3 30.0 - 39.9 1 0.3 40.0 - 49.9 1 3.1 1 0.3 5040 - 59.9 60.0 - 69.9 1 0.5 1 0.3 70.0 - 79.9 1 0.5 3 4.2 1 3.1 5 1.6 80.0 - 89.9 1 0.5 3 4.2 4 1.3 90.0 - 99.9 6 2.9 4 5.6 1 3.1 11 3.5 100.1 - 110.0 22 10.6 4 5.6 4 12.5 30 9.7 110.1 - 120.0 28 13.5 6 8.5 3 9.4 37 11.9 120.1 - 130.0 37 17.9 11 15.5 5 15.6 53 17.1 130.1 - 140.0 25 12.1 3 4.2 3 9.4 31 10.0 140.1 - 150.0 31 15.0 7 9.9 38 12.3 150.1 - 160.0 21 10.1 7 9.9 28 9.0 160.1 - 170.0 10 4.8 6 8.5 3 9.4 19 6.1 170.1 - 180.0 9 4.3 6 8.5 3 9.4 18 5.8 180.1 - 190.0 4 1.9 2 2.8 2 6.2 8 2.6 190.1 - 200.0 5 2.4 2 2.8 4 12.5 11 3.5 Greater than 200.0 5 2.4 6 8.5 2 6.2 13 4.2 Totals8 207 100.0 71 100.0 32 100.0 310 100.0 Median Ratios 133 141 133 134 aDetails may not add to totals because of rounding of farm vacant real estate was evident in all of the township groups and in all periods over the past five years. A comparison of the over-all assessment levels of farm.improved and farm vacant real estate is facilitated by FIGURE 4-1 and FIGURE 4-2. It is readily apparent that greater variation exists among the assessment 86 levels of farm vacant property and that farm vacant property is, on the whole, greatly over-assessed. Business Real Estate. Among 305 townships the median assessment \J level of business improved real estate was 92 percent (TABLE 4-6). For {\ all townships, this class of property was under-assessed in 64 percent of the districts. The range 90 to 110 percent contained only 32 per- cent of the observations. Business improved realty was under-assessed, on the average, in 54 all township groups. The median adjusted ratios were 91 percent in rural townships, 94 percent in urban townships, and 93 percent in resort townships. In the urban township group 41 percent of the observations were within 10 percentage points of the 100 percent level. Assessments were less uniform among the other districts. Business vacant real estate was, in general, under-assessed even ‘f; more than improved business property. The median assessment level of business vacant realty was 86 percent for 142 townships (TABLE 4-6). Omitted from the sample were 23 townships in which the assessment-appraisal value ratios were derived from estimates rather than actual appraisals. There was little difference in the treatment given to business vacant realty among the township groups. The range of assessment levels was somewhat larger for business vacant property than for business improved property (FIGURE 4-3 and FIGURE 4-4). In the case of vacant business realty only 15 percent of the observations were within 10 percentage points of the 100 percent assessment level. However, business vacant property was undersassessed in only 62 percent of the townships as compared to 64 percent for 87 com om.“ ow: OFS 03 on." 0.1 and ONH cm: 2: cm ow as oo 0% emannssoa «an em museum Hood vo>ouaEHrauem mo seamen osaop Henweuaaenueoaenonne mounsfims mo coausoauunan 338 335.43 .Hn¢ MKDUHh on on 0N 0H P m L P o o nlulllt m usofiwnonno 7LT. ”M‘” ""7'736135w‘“"—_777 “—7-"77777777 unnameonnduuomc: L Two. f.OH. TmH. new. {mN. rom. rmm. uoraaodoad 88 «mamncsou on ea museum Hoax unmoe> Shem mo nowueu o=He> Henwonmawuucoannoene mouesnvo mo coauanqnunan .Nue mMDOHm oases acumen: com 03 0.3 o: on: one. 03 02 ON." o: 03 om cm 9” we em as on pal 3 o a L r r e . ¢ _ _ 1 VIII. E O _ _ rIII. _ _ .umo. com .111. _ owsu _ wousowu ” ll+ln rod. _ _ _ . _ u m 1%.". " rIL _ _ ,Iom. _ _ seams: .umm. unmanmomno noosnnonmouaaH nnmcamsm mo noauwu osae> Homaeummouuaoamnoeno vounonvm mo commanwuunqn .muo uxDon cause 33:23 oom omH omH ohH ooH omH cog on“ cam on 004 om cm on 00 on as om om CM 0 Lu? 4P “1 — p L —l L SN r . rll o tha . . nouwsnc . . " r8. . _ . _ I . _ oH . _ u . Ina "m . o _ .w a 1 _ low. n. . 0 - U . seams: rmN. unoammonnduno>o ueosmmmmn mmocannm no moauwu ooae> Henaowamenunoamnoune commonvs mo coauonquunwm .quq mmson 033m 35 33¢ oom oma 0mm ohm owH onH cam omH oma 04H OOH om ow on ow .n on on em oH o L oou some noumono r1! r1. unoammonmduno>o ---—-‘-----‘----‘7 cases: uooEmmoum Hweamwmmmuuaoaeemnem vaunanom mo commanquuawa enumeazoa me cw mumunm 33a nannies. .mue mmDuHh cow owe owa 05H owH onH oqa omH ONH OaH o_H 0a ow Om cm on oe on ON a” o — _ _ " [.mo. . _ . _ :2. In _ . _ _ .unH. . . suave; 1.0m. unmemmmmmo ucoammomm Hmnamnmmouumosanmww mounnmom mo coausnwuumaa «mamenzoa Hoa ca ouwueu Seem venue—Di oom omH owH one God omH Oda omH ONH oHH ooH co ow On 00 on on on flm . t . . 0H _ .ond meuHm o a ooN away noummuu will: J _ fl _ _ ” _ cameo: unmamnoeao ucuammoen Homuoummsnusoaueoueo oouunnve mo coeunowuueaa .nue mmDon sauna oouennu< cow oma omH cum cos cmH oeH OMH omH caa ooH om cm on cm on oe on em 0H 0 r r P L a P _ Lj _ _ _ _ o FLI: “ IL _ _ “ Imo. _ . _ u :8. _ . _ " Ina. _ _ _ _ (ION. . . . _ “ rm“. » . . rowan: rom. unmaneoeuo unoaenonn Hoaunooanom no common some» Hoefloummouunoaneonoo wounanow mo coausowuumwn .wse mmaoam 33m noun: :2 com omH omH ONH ooH omH oea oma ONH oHH o H oo cm on Co on as on o~ 0H 0 . . P .l a F L '7 _ + p 0 com :2» E _ . u _ no mono a n . , u u no. _IIIJ_ . “ IIIII, _ . _ u.oH . p _ — e _ 1.mH . Sodom: u.oN. 1 mm. ucoammomwo unoammoumonmaH swooped oneusnmm mo seamen some» Heeamummo-uooaeaoenm oeuesfioo mo oowusoanuawm .muq museum owned oeunnfio< own- ova WWW owe owH omH cam. omH ONH cam 00H 6m ow on .0 on go om om cm 0 o .ILIIE 4. - - i . _ " Inc. _ . u _ M nod . _ A . . u .3. . _ . " row. _ m 11 1mm. gamma Von. ucoaemommdauopo ucoameouednwooem uoraxodOJJ 103 moweessoa con cw ouounm Hood undoe> omnouu< odounoom no nowuou enaop Honamummmauooaeooeee mounnflom mo ooaumoawuean .oH-e museum cause 33%: com omH omH cud oMH omH qu omH QNH cam ooH cm on fir 00 on we on ow ma 0 [IllmvlhurllLu _ _ J n _ T . _ _- 8N “ - menu _ uuumowo _ will! convex I uooaenoeuo usoaeuounduuoocs o no. 0H. ma. ON. mm. uornzodoxa 104 Among 202 townships, suburban platted improved real estate was under- assessed in 73 percent of the districts (TABLE 4-11). The median assess- ment level was 90 percent. The median assessment levels in the rural, urban, and resort township groups were 88 percent, 92 percent, and 100 percent, respectively. All of the observations were within the range from 30 to 170 percent, and 32 percent of the observations were within 10 percentage points of the 100 percent level. TABLE 4-11 Distributions of adjusted assessment-appraisal value ratios of suburban platted improved real estate in 202 townships Rural Urban Resort All Townships Townships Townships Townships ‘Adjusted Ratio No. Percent No. Percent No. Percent No. Percent 0 ~ 9.9 10.0 "’ 1909 20.0 - 29.9 30.0 - 39.9 2 1.7 2 1.0 40.0 - 49.9 5 4.2 1 1.6 1 4.5 7 3.5 50.0 - 59.9 4 3.4 4 2.0 60.0 - 69.9 10 8.4 5 8.2 2 9.1 17 8.4 70.0 - 79.9 16 13.4 9 14.8 2 9.1 27 13.4 80.0 - 89.9 30 25.2 12 19.7 3 13.6 45 22.3 90.0 - 99.9 21 17.6 20.5 33.6 3 13.6 44.5 22.0 100.1 - 110.0 11 9.2 7.5 12.3 2 9.1 20.5 10.1 110.1 - 120.0 7 5.9 6 9.8 3 13.6 16 7.9 120.1 - 130.0‘ 5 4.2 3 13.6 8 4.0 130.1 - 140.0 5 4.2 2 9.1 7 3.5 140.1 - 150.0 1 0.8 1 0.5 150.1 - 160.0 1 0.8 l 0.5 160.1 - 170.0 1 0.8 1 4.5 2 1.0 170.1 - 180.0 180.1 - 190.0 190.1 - 200.0 Greater than 200.0 Totalsa 119 100.0 61 100.0 22 100.0 202 100.0 median Ratios 88 92 100 90 8Details may not add to totals because of rounding. 105 Suburban platted vacant real estate was under-assessed in 53 percent of the 197 townships (TABLE 4-12). The median assessment levels were 105 percent in the rural townships, 80 percent in the urban townships, and 155 percent in the resort townships. It is important to note the similarities between these medians and the medians for suburban acreage vacant real estate. TABLE 4-12 Distributions of adjusted assessment-appraisal value ratios of suburban platted vacant real estate in 197 townships Rural Urban Resort All Townships Townships Townships Townships Adjusted Ratio No. Percent No. Percent No. Percent No. Percent 0 - 9.9 10.0 - 19.9 20.0 - 29.9 2 1.7 2 1.0 30.0 - 39.9 6 5.2 6 3.0 40.0 - 49.9 3 2.6 3 5.0 l 4.7 7 3.6 50.0 - 59.9 9 7.8 6 10.0 15 7.6 60.0 - 69.9 9 7.8 9 15.0 18 9.1 70.0 - 79.9 10 8.6 12 20.0 2 9.5 24 12.2 80.0 - 89.9 6 5.2 7 11.7 3 14.3 16 8.1 90.0 - 99.9 9 7.8 8 13.3 17 8.6 100.1 - 110.0 8 6.9 1 1.7 9 4.6 110.1 - 120.0 4 3.4 3 5.0 l 4.7 8 4.1 120.1 - 130.0 4 3.4 5 8.3 1 4.7 10 5.1 130.1 - 140.0 7 6.0 3 5.0 1 4.7 11 5.6 140.1 - 150.0 4 3.4 1 1.7 l 4.7 6 3.0 150.1 - 160.0 4 3.4 1 4.7 5 2.5 160.1 - 170.0 6 5.2 l 4.7 7 3.6 170.1 - 180.0 3 2.6 l 4.7 4 2.0 180.1 - 190.0 1 0.9 l 4.7 2 1.0 190.1 - 200.0 2 1.7 1 1.7 l 4.7 4 2.0 Greater than 200.0 19 16.4 1 1.7 6 28.6 26 13.2 Totalsa 116 100.0 60 100.0 21 100.0 197 100.0 Median Ratios 105 80 155 96 8Details may not add to total because of rounding. 106 The distributions of the assessment levels of suburban platted im- proved and suburban platted vacant property are presented graphically in FIGURES 4-11 and 4-12. As expected, improved property was again more uniformly assessed than the vacant property class. The final class of suburban real estate was suburban acreage im- proved "B". For the 107 townships the median assessment level of this class was 94 percent, and under-assessment occurred in 63 percent of the townships (TABLE 4-13). The median assessment levels for rural, urban, and resort townships were 93 percent, 94 percent, and 95 percent respectively. TABLE 4-13 Distributions of adjusted assessment-appraisal value ratios of suburban acreage improved "B" real estate in 107 townships Rural Urban Resort All Townships Townships Townships Townships Adjusted Ratio No. Percent No. Percent No. Percent No. Percent 0 9.9 10.0 19.9 20.0 29.9 30.0 39.9 40.0 49.9 2 3.3 2 8.0 4 3.7 50.0 59.9 3 4.9 1 4.8 2 8.0 6 5.6 60.0 69.9 9 14.8 1 4.8 4 16.0 14 13.1 70.0 79.9 6 9.8 4 19.0 1 4.0 11 10.3 80.0 89.9 7 11.5 2 9.5 2 8.0 11 10.3 90.0 99.9 12 19.7 6 28.6 3 12.0 21 19.6 100.1 110.0 4 6.6 2 9.5 4 16.0 10 9.3 110.1 120.0 4 6.6 1 4.8 4 16.0 9 8.4 120.1 130.0 5 8.2 l 4.8 l 4.0 7 6.5 130.1 140.0 3 4.9 3 2.8 140.1 150.0 1 1.6 2 9.5 1 4.0 4 3.7 150.1 160.0 1 1.6 l 0.9 160.1 170.0 1 1.6 1 4.8 2 1.9 170.1 180.0 2 3.3 2 1.9 180.1 190.0 190.1 200.0 Greater than 200.0 1 1.6 1 4.0 2 1.9 Totals8 61 100.0 21 100.0 25 100.0 107 100.0 Median Ratio 93 94 95 94 8Details may not add to totals because of rounding. 107 ooN 0mg owH 05H 00H OmH oofi omH ONH oHH OOH ca cm as oo Om co on em a v.-. -z- gill - -7536. p ‘1 emannnsoa NON ca ououou Hood oupoumau_oouumflm cannonsm mo seamen undue Hangoummssuooaeeoues oouesnom mo ooausaauunan 632 R: 33... L .Hauo MMDUHm p 0H _ o unoaneoemdnuo>o L A “iii-dd..— cowooz unnameomo oouooam nomusonm mo mowusu seas» snowshoes-ungaueoeeo ooueofivs mo coausoauueam .Naue museum 633* “633.264 com omH owH ow” com omfi oqa emu 0mm Cad OOH om ow On on on oo on ON b 0H . o o TL. Q « IL ‘ . . . _ . . com “ menu . umumouo “ _ 1 _ . _ . chaos: umoammmomo unoEmmommhi 53 100.0 Median Ratios 101 8Details may not add to totals because of rounding. Residential Vacant All Cities No. O‘J-‘O‘O‘ONQH u 53 Percent l-‘Ht-‘t-‘l-I HNHHQUU‘H . O O. p-s UUWUONHW U" s N p—s ‘D 1.9 100.0 122 Variations in Personal Property Assessment Levels Three major classes of personal property made up the bulk of the personalty valuations in the municipal assessment districts: (1) busi- ness, (2) industrial, and (3) utility personal property. The adjusted assessment levels were computed on the basis of a 100 percent assess- ment for personalty within each city. Bgsiness Personal PrOperty. The median adjusted assessment level of business personal property was 105 percent (TABLE 4-24). Business personalty was over-assessed in 58 percent of 50 cities, but 42 percent of the observations were in the range from 90 to 110 percent. The assessment levels in three cities were estimated. The assessment levels ranged from 60 to more than 200 percent. Industrial Personal Proper_y. Industrial personal property was under-valued by local assessors in 63 percent of 46 municipal districts (TABLE 4-24). The median assessment level was 90 percent. Five cities had no industrial personalty, and assessment levels were estimated in two cities. The ratios of 18 cities were within 10 percentage points of the 100 percent assessment level, and all of the ratios were within the range from 40 percent to 150 percent. Utilitngersonal Property. Among 39 cities the median assessment level of utility personal property was 118 percent (TABLE 4-24). This property class was over-assessed in 59 percent of the city assessment districts. The estimated ratios of 14 cities were excluded from con- sideration. The ratios of only 6 cities were within 10 percentage points of the 100 percent assessment level. TABLE 4-24 123 Distributions of adjusted assessment-appraisal value ratios of business, industrial, and utility personal property in cities Business Industrial Utility Personalty Personalty Personalty All Cities All Cities All Cities Adjusted Ratio No. Percent No. Percent No. Percent 0 - 9.9 10.0 - 19.9 20.0 - 29.9 1 2.6 30.0 - 39.9 40.0 - 49.9 1 2.2 2.6 50.0 - 59.9 1 2.2 1 2.6 60.0 - 69.9 3 6.0 4 8.7 70.0 - 79.9 3 6.0 7 15.2 6 15.4 80.0 - 89.9 2 4.0 10 21.7 3 7.7 90.0 - 99.9 13 26.0 6 13.0 4 10.3 100.1 - 110.0 8 16.0 12 26.1 2 5.1 110.1 - 120.0 9 18.0 2 4.3 2 5.1 120.1 - 130.0 1 2.0 4 10.3 130.1 - 140.0 1 2.2 4 10.3 140.1 - 150.0 2 4.0 2 4.3 150.1 - 160.0 3 6.0 3 7.7 160.1 - 170.0 2 4.0 2 5.1 170.1 - 180.0 2 5.1 180.1 - 190.0 1 2.0 190.1 - 200.0 2 4.0 l 2.6 Greater than 200.0 1 2.0 3 7.7 Totals8 50 100.0 46 100.0 39 100.0 Median Ratios 105 90 118 8Details may not add to totals because of rounding. The wide variations in the assessment levels of different property classes within the individual local assessment districts are particularly significant to the problem of county-wide equalization. gqpalization of Local Assessments Within Counties It is clear that the county equalization boards face a much more difficult task than the mere adjustment of the total assessment valuations of each dis- trict within the county. If the county equalization board were to correct 124 only the total valuations and the over-all average assessment levels of each district, the equalized valuations would, in no way, lessen the variations in the assessment levels of the different property classes. Two counties have been selected to illustrate the difficulties of county-wide equalization. Eaton County The actual assessment-appraisal value ratios of the major property classes in Baton county are given in TABLE 4-25. These data were pro- vided by a State Tax Commission equalization study which was conducted in 1958. The assessment levels of industrial real estate in the town- ship assessment districts and of farm.improved, farm vacant, suburban acreage improved, suburban platted improved, and farm personal property in the city assessment districts were excluded from the table because these classes (and the other classes not shown in the table) account for relatively small proportions of the total valuations. Also, some of the local districts had no property in the residential improved, suburban acreage improved, suburban platted improved, and the industrial personalty classes. The average assessment levels of all real property in Eaton county, by assessment districts, ranged from 46.8 percent in Delta township to 77.1 percent in Kalamo township. And the average assessment levels of personal property ranged from 33.9 percent in Sunfield township to 79.0 percent in Kalemo township. This means, for example, that personal property in Kalamo township was, on the whole, assessed at more than twice the level of personalty assessments in Sunfield township. The C) n]. 0.50 5.00 0.00 0.00 0.00 0.50 0.00 0.00 uo>000 0.50 0.00 0.00 0.00 0.~0 5.00 5.00 0.00 00000 venue 0.00 0.00 0.05 0.00 0.05 5.00 0.~5 0.05 ev0aem oouwm 0.00 0.00 5.05 0.00 0.00 0.00 0.00 5.00 ouuo0ne£o eo0u00 0.50 0.00 0.00 0.00 0.00 0.50 0.00 0.00 0.00 0.00 eu0on 0.00 0.00 0.05 0.00 0.00 0.00 5.00 0.000 0.00 0.50 os>o0000 m00eeoaOH menu: 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 noe0s03 0.00 5.~0 0.00 0.000 0.00 0.00 0.00 0.00 0.00 0.00 cou0e3 0.00 5.00 0.00 «.00 0.00 0.50 0.00 0.00 0.00 0.00 0000>usoauo> 0.00 0.00 0.N0 5.00 0.50 0.00 0.00 0.00 0.00 0.00 0.00 00o0wosm 5.00 0.50 0.05 0.00 5.00 0.00 0.00 0.50 0.00 0.00 unexom 0.00 0.00 5.00 0.05 0.00 5.00 5.00 0.00 5.00 0.05 ~.~0 ev0oc0 0.05 0.55 0.00 0.05 0.55 0.00 0.00 0.~00 0.05 0.00 oaw0nx 0.00 0.00 0.00 0.05 5.00 0.00 5.00 ~.00 0.05 0.50 0.00 :00360 0.00 0.00 0.00 0.05 0.05 0.00 0.00 0.05 0.05 000000 souem 0.00 0.00 0.50 0.00 0.05 0.~0 0.00 0.00 0.00 0.00 :Ouem 0.00 0.00 0.00 0.00 5.00 0.50 0.00 0.00 0.00 0.0m neueono 0.00 0.00 0.05 0.00 0.00 0.00 5.00 0.05 0.05 0.00 0oaumo 0.00 0.00 0.05 0.00 0.00 0.00 0.00 0.00 0.05 00000xoon0 0.00 0.00 0.00 0.00 0.05 0.000 5.00 0.00 0.00 0.00 0.05 condom em0eao3oa 0eusa muuomoum .nom .nom .uom .uom huuomoum hu0so¢ .080 .030 useoe> .maH .050 .080 0meounem 00¢ seem 00000»: .esm .0o0 uo0uue00 noosmmomm< sensuoum 0esomuom 0000 000 .0:0 .m.0:0 .o<.nsm anew lush .090 .000 muuemoum 0eom 0000 .hussou nauom =0 moeue0o zuuonoum homes no mO0ueu oa0m> 0we0eunmwauceaneoem< 0~u0 00049 over-all variations in realty assessment levels ranged from 25.9 percent for business improved real estate in Chester township to 115.1 percent for suburban platted improved real estate in Benton township. Personalty assessment levels ranged from 18.2 percent for business personal property in Delta township to 103.5 percent for farm personalty in Eaton township. It is apparent that equitable taxation could not be achieved without equalization. Although equalization can be carried out at any uniform level, let us assume that the Eaton county board decided to equalize at 100 percent of the state appraisal valuations and upon the basis of average assessment levels of both real and personal property within each local district. The equalization board must first determine the average assessment levels within each district and then adjust the total realty valuation and the total personalty valuation of each district upward to the 100 percent level. But the equalization board has thus made no corrections for the variations in the assessment levels of different property classes within each district. After equalization at the 100 percent level, the assessment levels in Eaton county would be as shown in TABLE 4-26. The average equalized assessment levels of all real property and of all personal property, within each assessment district, are at the 100 percent level; but the variations among the assessment levels of the different property classes persist. How does this affect the equitable distribution of the tax burden? 127 00000000 00:00000 huuomoum 0000 0.000 0.000 0.000 0.55 0.000 0.000 0.50 0.000 uo>000 o.oO0 o.m0 0.000 0.00 o.oo0 n.aa c.000 o.mm «mean 00000 0.000 0.05 0.000 0.00 0.000 0.00 0.000 0.00 000000 :ouem 0.000 0.000 0.000 0.00 0.000 0.00 ~.5~0 0.00 000000000 000000 0.000 0.00 0.500 0.00 0.000 0.000 0.00 0.000 5.500 0.55 00000 0.000 0.50 5.000 0.00 0.00 0.000 5.55 0.000 0.000 0.00 0.00 00350000 000n0csou 0000: 0.000 0.05 0.000 0.00 0.000 0.00 0.00 0.000 0.000 0.000 5.000 0000003 0.000 0.000 0.00 0.050 0.00 0.000 0.00 0.000 0.00 0.50 03003 0.000 0.500 0.000 0.00 0.00 0.000 5.00 0.000 0.000 0.00 0.50 0000>unosuo> 0.000 0.55 0.000 0.000 0.00 0.000 0.00 0.00 0.000 0.000 0.05 0.00 00000030 0.000 0.00 0.000 0.50 0.000 0.000 0.00 0.000 0.000 0.55 0.000 000x00 0.000 0.00 5.~0 0.500 0.000 0.000 0.05 0.00 0.000 0.000 0.00 000000 0.000 0.00 5.~00 5.00 0.000 0.00 0.00 0.000 0.50 0.55 080000 0.000 0.05 0.000 0.000 0.000 0.000 0.00 0.00 5.000 0.00 0.05 000500 0.000 0.000 0.50 0.000 0.000 0.00 0.000 0.00 0.00 000000 nouem 0.000 0.000 0.00 0.00 0.000 5.000 0.00 0.000 «.000 0.50 00000 0.000 0.50 0.000 0.000 0.000 0.00 0.50 5.000 5.00 0.50 0000050 0.000 0.00 0.000 0.00 0.000 0.00 0.00 0.000 0.000 0.00 005000 0.000 0.50 0.000 0.000 0.000 0.00 0.000 0.50 0.000 0000000000 0.000 0.000 0.000 0.00 0.000 0.000 0.50 0.000 0.00 0.05 0.000 000000 000000308 00000 AMHeQOnm .000 .000 .000 .000 00000000 0&0000 .060 .080 ucmoa> .030 .030 .050 00000000 000 5000 0000000 .020 .000 0000 000 .000 .m.esm .o<.0sm 3000 sham .050 .000 00000000 0008000000 0000 .000200 c0000 :0 0000000 00000000 00008 no 000000 es0w> 000000000u0003000000 veumanv< 00.0 00009 128 At the outset it should be recognized that if the county equaliza- tion board has correctly equalized at the 100 percent level (or any other uniform level), county-wide taxes will be equitably distributed among the local assessment districts. Furthermore, if the board has correctly adjusted both the total realty valuations and the total personalty valua- tions of each district to the 100 percent level, county-wide taxes will be equitably divided between real and personal property within each district. Tax inequities still remain, however, among the different property classes. Hence, in Chester township business real estate is paying only 37 percent of its rightful tax burden, while farm vacant real estate is paying 132 percent. In Benton township business improved real estate is taxed at only 76 percent, and suburban platted improved real estate is taxed at 163 percent. Business personalty in Delta township is paying only 38 percent of its fair tax load, while business personalty in Eaton township is paying 172 percent of its fair burden. In addition, it should be noted that in every local district farm vacant real estate is being over-taxed and suburban acreage improved real estate is being under- taxed. The inequities of equalization based upon only average realty and personalty assessment levels are obvious. Moreover, the assessment levels of the property classes omitted from the comparison vary even more than those of the major classes, and the inequities of the equalization system are even greater than shown. ghiawassee County The actual assessment-appraisal value ratios of the major property classes in Shiawassee county are given in TABLE 4-27. This county was 129 0.00 0.00 0.00 0.00 0.00 5.50 0.00 0.50 000030 0.00 0.00 0.00 0.00 0.00 , 0.00 0.00 0.00 0000000000 0.00 0.00 0.00 0.00 0.00 0.00 5.00 0.00 000000 0.00 0.05 0.00 0.00 0.00 0.00 0.00 0.50 0000000 000000 0.00 0.00 0.05 0.00 5.0 0.00 5.00 0.00 0.00 0.00 0.00 0.00 00000 0.00 0.00 0.00 0.00 0.50 0.00 0.00 0.00 0.00 0.00 0.00 000000000 000000309 0000: 0.00 0.50 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.50 00300003 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 5.00 5.00 0.00 000300> 0.00 0.00 0.00 0.00 0.00 0.00 0.50 5.00 5.50 0.00 00000> 0.05 0.05 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 5.00 0.00 0000030000 0.55 0.05 0.00 0.00 0.00 0.00 0.05 0.00 000000 0.00 0.00 0.55 0.50 0.00 0.00 0.00 0.00 0.00 0.00 0.00 00:0 0.00 5.00 0.00 0.50 0.00 0.00 00.00 0.00 0.00 0.50 0.00 000030 0.00 0.50 0.05 0.00 0.00 0.00 0.00 0.00 0.00 00000 302 0.8 0.2 0.2 0.: 0.00 0.3 0.00 0.00 0.3 0.00 003.003: 5.00 0.00 0.00 0.00 0.05 0.00 0.00 0.00 0.00 0.00 0.00 00000000 0.00 0.50 0.50 0.00 0.00 0.00 0.00 0.00 0.00 000000000 0.00 0.00 0.00 0.00 0.00 5.50 5.00 0.00 0.00 0.50 0.00 0.00 000:0 0.05 0.00 0.00 0.00 0.00 0.00 0.50 0.00 0.50 0.00 0000000000 0.05 0.00 0.55 0.05 5.00 0.50 0.00 0.00 300004 000000300 00000 \NU000000 .000 .000 .000 .000 00000000 000000 .maw, xwmam. uc0o0> .0mm» .0amww.0am 008850 :0 E00 .3030: .000 .000 030 004 .000 .0500 .3500 3000 .800 .30 .30 0300000 05.000304 00000000 00000000 00000000 0000 5000 .000000 0000030000 00 0000000 00000000 00008 00 000000 00000 000000000u000800000< 50-0 0000B 130 studied by the State Tax Commission in 1957. Again the assessment levels of industrial real estate in the township assessment districts and of farm improved, farm vacant, suburban acreage improved, suburban platted improved, and farm personal property in the city assessment districts were omitted from the table. In Shiawassee county the average realty assessment levels ranged from 29.0 percent in Owosso township to 50.9 percent in the city of Durand. The average personalty assessment levels ranged from 23.6 percent in Venice township to 83.9 percent in Middlebury township. Among the major classes of real property, the assessment levels ranged from 19.3 percent for suburban platted improved real estate in Middlebury township to 73.0 percent for farm vacant real estate in Sciota township. Personalty assessment levels ranged from 4.7 percent for industrial personal property in Perry township to 87.1 percent for business personalty in the city of Laingsburg. The effect of county-wide equalization at the 100 percent level for total realty and total personalty valuations is shown in TABLE 4-28. The total county valuation, as equalized, is fairly distributed among the local assessment districts, but the tax burden is inequitably distributed among the pr0perty classes within each district. Thus, for example, in Hiddlebury township suburban platted improved real estate is taxed at only 46 percent of its fair tax share, while farm vacant property is taxed at 157 percent. In Perry township the equalized assessment level of industrial personal property is only 12 percent, and the equalized assessment level of utility personal property is 187 percent of the average equalization level. The equalized assessment levels in the city of 131 00000000 00000000 hw00000m 0000 0.000 0.mm m.m00 0.50 0.000 0.0m «.nn0 5.000 000030 0.000 n.05 0.500 0.00 0.000 0.00 m.0m n.000 0000000000 0.000 5.550 m.n00 0.«m 0.000 0.00 m.«00 m.n00 000000 0.000 ¢.mm0 «.mm 0.00 0.000 «.00 «.50 0.000 0000000 000000 0.000 n.00 n.5m0 0.05 5.00 0.000 0.05 0.m5 0.0«0 m.nm 0.000 0.m00 00000 0.000 0.mm 0.050 0.00« n.00 0.000 0.00 «.5w 5.500 0.nm n.000 000000000 000000309 00000 0.000 5.0m 0.«00 0.55 0.000 0.000 5.«m 0.0«0 0.00 0.05 00000003 0.000 0.0n0 m.m¢0 «.00 n.0m 0.000 ¢.m5 n.mm n.0«0 0.«00 0.000 0.00 000500> 0.000 0.05 5.05« 5.00 0.000 {.mm 0.000 0.0«0 o.m00 0.00 00000> 0.000 m.«00 m.mw 0.00 0.50 0.000 0.mm 0.05 n.0n0 0.00 «.000 m.mm 0000030000 0.000 w.mm n.000 0.000 5.00 «.«w 0.0n0 n.00 000000 0.000 0.00 0.50« 5.55 0.50 0.000 0.00 n.000 0.000 0.00 0.000 0000 0.000 m.nm 0.m00 5.nn0 0.00 0.000 0.«00 0.00 «.000 «.0m n.0n0 000030 0.000 0.0m «.wn0 n.m0 0.000 «.00 «.000 0.00 n.000 00000 302 0.000 0.50 m.mm 5.mw 0.000 w.n0 0.05 n.0n0 0.000 0.0m 000000000: 0.000 0.000 0.mm0 «.50 0.5m0 0.000 0.0m 0.000 «.00 0.000 w.omH 00000003 0.000 0.00 0.000 «.«m 0.000 n.00 m.«00 n.000 «.m00 000000000 0.000 0.0w 0.0m o.mo 0.0m 0.000 0.0m 5.«00 0.00 «.mm m.wm 0.000 00000 0.000 0.50 0.00 5.00 0.000 0.00 0.0m 0.0«0 0.0m 5.m00 0000000000 .0.000 m.m0 n.m00 0.000 0.000 0.00 «.HmH n.mm 30000< 000000308 00000 ‘Nw000000 .000 .000 .000 .000 H0000000 000000 .mamw .mmm. 000u0> . am} «mmm .nmm» 00000000 00080000qfl 00000000 000 8000 0000000 .000 .000 0000 004 .000 .m.000 .u<.00m B000 B000 .000 .000 5nm0 .000000 0000030000 00 0000000 00000000 00n08 00 000000 00000 000000000-0003000000 00000fi0< w«-¢ 00009 132 Corunna ranged from 45 percent for industrial personal property to 193 percent for utility personalty. Eaton and Shiawassee counties were selected from the group of sample counties only to demonstrate the problems associated with county-wide equalization. Examination of the other counties would reveal substantially the same picture. In summary, it is evident that equalization based only upon the average local assessment levels, even when the averages are correctly determined, does not assure the equitable treatment of property owners. At best, equalization based upon average assessment levels merely results in the equitable distribution of the total county valuation among the local assessment districts as a whole. Some property classes will still bear excessive shares of the tax burden within each local district. Furthermore, equalization based upon detailed studies, such as those conducted by the State Tax Commission, does not eliminate the inequities which exist within the assessments of particular property classes. Equalization cannot eliminate all assessment inequities, and equalization is not a substitute for assessment appeals by the individual property owners. 133 CHAPTER V SUMMARY AND CONCLUSIONS The general pr0perty tax is the major source of revenue for local governments in Michigan. Although the pr0perty tax is no longer a source of state governmental revenue, nearly all of the local governmental tax receipts come from property taxation. moreover, property taxes comprise the largest single source of both tax and non-tax revenues for school district, county, city, and village governments in Michigan. The serious faults of the general property tax are widely recognized, but it seems certain that local governments will continue to rely heavily upon property tax_receipts in the future. Complete abandonment of pr0perty taxation is extremely unlikely and, for the most part, of doubt- ful merit. Thus it is essential that the weaknesses of the existing property tax system be corrected insofar as possible and that every effort be made to secure equitable treatment for all property owners. Legal Restrictions As noted in Chapter II, the legal framework of the Michigan property tax system is based upon constitutional restraints, state statutes, and court interpretation of both constitutional and statutory provisions. In summary, the Michigan constitution requires that all general property taxes be levied in a uniform manner. ‘This provision has two effects: First, within each individual assessment district, all classes of property subject to ad valorem taxation must be taxed at the same rate. 134 Second, the uniformity provision also necessitates the assessment of all taxable property at the same percentage of actual market value. Assessment is required, by the constitution, to be at true cash value, which has been further defined as the price which could be obtained for the property in normal market sale. It is important to note, however, that the general uniformity requirement does not apply to property sub- ject to specific taxation. Numerous classes of property are exempted by law from the general prOperty tax. In addition, certain property classes are given special tax treatment for a variety of reasons. Aside from the usual exemptions, the most important exemption in terms of total valuation is probably in- tangible personal property. This property class, and others of lesser importance, are subject to specific taxes and, hence, are exempt from the general property tax. The most notable of the remaining exemptions are those granted to household personal property. Due to the large exemption given to each family, household personal property is, in most instances, completely exempt from taxation. In Michigan, as in most states, there is a constitutional limit to the general property tax rate. An over-all, lS-mill limitation is placed upon the aggregate property tax levy of all local governments except municipalities. Thus the 15 mills are commonly divided among the county, townships, and school districts. Certain other rate limitations apply to the tax levies of cities and villages. In all cases the rate limita- tions presuppose assessment at true cash value. Assessment Practices Administrative Procedures Each city and township in Michigan is a separate assessment district for the purpose of property taxation. Township assessment is the respon- sibility of the elected township supervisor. municipal governments are free to provide for assessment as they desire, and the assessor is an appointed official in.most of the larger cities. The local assessor is responsible for the valuation of all taxable property at true cash value. If any property owner is dissatisfied with the assessment valuation placed upon his preperty, the assessment may be appealed to a local board of review, which Operates in each local assessment district. Further appeal, to the State Tax Commission, is possible if the action of the local review board is unsatisfactory to the appellant property owner. In the absence of fraudulent assessment, cases involving assessment appeal generally will not be heard in the courts. Equalization of local property assessments is carried out at both the county and state levels. Equalization within the county is necessary for the equitable distribution of the taxes levied by governmental units which overlap the boundaries of local assessment districts. Although the state government does not levy a general property tax, state-wide equalization is important because most legal restrictions on pr0perty taxation are now based upon state equalized pr0perty valuations. Also, a portion of the state school aid is distributed to local communities on the basis of state equalized valuations. The state administrative responsibilities in the supervision of property taxation rest with the State Tax Commission, the State Board of Equalization, and the State Board of Assessors. Both boards rely upon the State Tax Commission for the performance of administrative and field work. The activities of the State Tax Cmmmission consist primarily of property appraisals necessitated by individual assessment appeals, appeals from the reports of county equalization boards, and in the detenmination of property valuations which are to be recommended to the State Board of Equalization. Each year the State Tax Commission completes detailed equalization studied in about five or six Michigan counties. These studies are based upon actual field appraisals of 10 to 15 percent of the local assessments of each major property class within the individual assessment districts. ‘TownshipgAssessors Some insight into the characteristics and attitudes of township assessors was gained from a brief questionnaire mailed to the supervisors of the 320 townships studied in the preceding chapter. About one-third of the questionnaires were returned. Although it was not possible to compare the assessment levels within the individual districts with the characteristics of the local assessing officials, some useful information was obtained. As expected, the occupations of township supervisors vary a great deal. A substantial number of the supervisors in rural communities are farmers or retired farmers. Both the age and length of service of the supervisors cover a wide range. Host of the officials have resided in their local community for many years. 137 Nearly all of the supervisors indicated that they attempt to assess at some level ranging from one-fifth to one-third of current market values. Thus local assessments are made at about one-half of state equalized valuations which, in turn, represent approximately 50 percent of prevailing market values. Although a few supervisors listed their occupation as real estate broker, in most cases the local assessors have had no professional experience in appraisal work other than as township assessor. However, in some of the districts professipnal appraisers have been employed on either a full or part-time basis to aid in property assessment. Two local assessors reported that they purposely assess residential property at a lower percentage of current market value than that applied in the assessment of business and industrial property. This, of course, is an obvious violation of the uniformity requirement. In addition, a few assessors boasted that they were assessing at levels either higher or lower than those of the other assessors in their respective counties. While a few supervisors expressed dissatisfaction with the work of professional appraisers in their area, some said that a complete appraisal of property by professional appraisers would serve as a useful guide in their work. One local assessor concluded: I will agree that a county-wide appraisal by professionals would be desirable, contingent upon the use of a uniform percentage of it by every assessor in the county as the assessed valuation of each property. That would prevent favors to his political friends which is a common practice now. That plan would require some new legislation which would be very hard to get on the statute books. 138 Assessmentggggqualities This study has utilized data from 21 Michigan counties to examine more closely the assessment levels within individual districts. These data were obtained from equalization studies conducted by the State Tax Commission over the past five years. Included in the 21 counties were 320 townships and 53 cities. Township Assessment Districts Among the 320 township assessment districts, average local assess- ment levels varied widely. The median average assessment levels of six township groups - four rural township groups, one urban township group, and one resort township group - were generally about 50 percent of the state appraised valuations. But, the average assessment levels varied by more than 30 percentage points within each of the six groups. Real property was found to be assessed at a higher percentage of cash value than was personal property in 196 of the 320 townships. Real property made up the larger share of the total property valua- tion within the townships, and variations in the real pr0perty assess- ment levels were similar to the variations for all property. The average assessment levels of personal pr0perty, however, varied much more than those of real property. The range of personalty assessment levels was more than 60 percentage points in each of the six township groups. In the groups of rural townships studied in 1955 and 1958, and in the urban township group, the lowest personalty assessment levels were less than 10 percent of the state appraisal valuations. 139 Within each township assessment district the average assessment levels of 20 classes of real pr0perty were compared with the average assessment level of all real property in the individual district. These data were then used to determine the extent to which certain property classes were either under-valued or over-valued relative to the average realty valuations. In order to aggregate the assessment levels of each property class, the assessment-appraisal value ratios of each district were adjusted to the equivalent of a 100 percent assessment for real property on the basis of state appraised valuations. A sumary of the average adjusted assessment levels of the 20 major classes of real property is presented in TABLE 5-1. When a tolerance of 10 percentage points is allowed, over-assessment is indicated by the pro- portion of the townships in which the adjusted assessment level was greater than 110 percent, and under-assessment is indicated by the pro- portion assessed at less than 90 percent of the state appraisal valuations. Thus, for example, cutover lands were over-valued by local assessors in 86.7 percent of the townships and under-valued in only 3.7 percent. The median adjusted assessment level of cutover lands was 147 percent. The data clearly indicate that township assessors tended to over- value cutover lands, farm vacant real estate, and lands upon which timber has been partially cut. It is equally clear that local assessors tended to under-value suburban acreage improved real estate. When a median assessment level of greater than 105 percent is taken as indicative of a tendency toward over-assessment, we find that local assessors tended to over-value five classes of real property: (1) cut- over lands, (2) farm vacant real estate, (3) part-timber lands, (4) utility 140 TABLE 5-1 Average adjusted assessment levels of 20 classes of real prOperty in 320 townships Median Pr0portiOn of Proportion of Pr0perty Class Assessment Sample Assessed Sample Assessed Level at More than 110 at Less than 90 Percent Percent Percent Percent Percent Cutover Lands 147 86.7 3.7 Farm Vacant 134 82.5 4.1 Part Timber 133 74.3 11.5 Utility 129 60.8 27.9 Suburban Acreage Vacanta 121 56.9 28.0 Residential Vacanta 105 45.9 32.8 Resort Platted Improveda 103 37.9 30.2 Resort Acreage Vacanta 101 44.0 44.1 Resort Platted Vacant 98 35.5 39.4 Timber 98 33.5 42.9 Farm Improveda 98 20.1 20.9 Industrial 96 35.0 44.3 Suburban Platted Vacanta 96 42.1 44.6 Residential Improved 95 17.2 37.0 Suburban Acreage Improved ”B" 94 28.0 43.0 Business Improved 92 21.7 46.1 Suburban Platted Improved 90 17.4 50.6 Resort Acreage Improved 88 22.5 53.0 Business Vacant 86 32.9 52.1 Suburban Acreage Improved 85 7.0 61.1 aAlso compare TABLE 5-2 and TABLE -53. real estate, and (5) suburban acreage vacant real estate. In the same fashion we find that local assessors tended to under-value six classes of real property: (1) suburban acreage improved real estate, (2) business vacant real estate, (3) resort acreage improved real estate, (4) suburban platted improved real estate, (5) business improved real estate, and (6) suburban acreage improved "B" real estate. The average adjusted assessment levels of six classes of real pro- perty differed significantly between the rural and urban townships. Among 141 209 rural townships four classes of potential homesite property were assessed at a median adjusted level of 105 percent or greater: (1) sub- urban acreage vacant real estate, (2) resort acreage vacant real estate, (3) residential vacant real estate, and (4) suburban platted vacant real estate (TABLE 5-2). These same four property classes were assessed TABLE 5-2 Average adjusted assessment levels of 6 classes of real property in 209 rural townships Median Proportion of Proportion of Property Class A‘sgggment Sample Assessed Sample Assessed Level at More than 110 at Less than 90 Percent Percent .EEEEEEE ESEEEEE EEEEEEE Suburban Acreage Vacant 126 61.4 25.0 Resort Acreage Vacant 108 49.3 44.0 Residential Vacant 107 46.8 31.9 Suburban Platted Vacant 105 46.4 38.9 Resort Platted Improved 98 35.2 40.5 Farm Improved 97 9.2 18.3 at median adjusted levels of 97 percent or lower among 74 urban townships (TABLE 5-3). Also, the median assessment levels of resort platted imr proved real estate were 105 percent in the urban townships and 98 percent in the rural townships. And the median assessment levels of farm improved real estate were 105 percent in the urban townships and 97 percent in the rural townships. Thus the data suggest that assessors in predominately rural areas value potential homesite property at higher levels and farm improved real estate at lower levels than assessors in urban districts. 142 TABLE 5-3 Average adjusted assessment levels of 6 classes of real property in 74 urban townships Median Proportion of Proportion of Assessment Sample Assessed Sample Assessed PrOperty Class Level at More than 110 at Less than 90 Percent Percent Percent Percent Percent Resort Platted Improved 106 38.1 19.1 Farm Improved 105 41.8 23.7 Suburban Acreage Vacant 97 36.1 41.7 Residential Vacant 96 42.3 38.5 Resort Acreage Vacant 85 22.2 55.6 Suburban Platted Vacant 80 23.4 61.7 The average adjusted assessment levels of the five major classes of personal property are given in TABLE 5-4. There was a tendency for local assessors to over-value two classes of personal property: (1) pipe- lines, and (2) utility personal property. Two personalty classes were under-valued in more than 50 percent of the cases: (1) farm personal property, and (2) industrial personal property. The median adjusted TABLE 5-4 Average adjusted assessment levels of 5 classes of personal property in 320 townships Median Proportion of PrOportion of Assessment Sample Assessed Sample Assessed Property Class Level at More Than 110 at Less Than 90 Percent Percent Percent Percent Percent Pipelines 139 78.6 3.2 Utility 124 60.1 19.3 Business 92 32.8 47.6 Farm 81 19.6 60.8 Industrial 80 2.0 56.4 143 assessment level of the remaining class, business personalty, was 92 percent. This class of personal property was under-valued in 47.6 per- cent of the cases, but it was also over-valued in 32.8 percent of the districts. These comparisons of personalty assessment levels were based upon the equivalent of a 100 percent assessment for all personal property within each township. City Assessment Districts Among the 53 city assessment districts, the average assessment levels for all property ranged from 34.0 percent to 85.8 percent of the state appraised valuations. The median assessment level was 52.6 percent. There was little difference between the average assessment levels of real and personal property. On the whole, average assessment levels were somewhat more uniform among the cities than among the townships. The assessment-appraisal value ratios for all real property in 31 of the 53 cities were within 10 percentage points of the median realty ratio. In the case of personal property, however, the ratios of only 15 cities were within 10 percentage points of the median personalty ratio. The average adjusted assessment levels of the 6 major classes of real prOperty and the 3 major classes of personal property are given in TABLE 5-5. Again a tolerance of 10 percentage points is allowed. And the comparisons of realty and personalty classes are based upon the equivalent of a 100 percent assessment for real and personal property, respectively. 144 TABLE 5-5 Average adjusted assessment levels of 6 classes of real property and 3 classes of personal property in 53 cities Median Proportion of Proportion of Sample Assessed Sample Assessed As a ent Property Class 1:3,; at More Than 110 at Less Than 90 Percent Percent Percent Percent Percent Real Property Utility 140 71.0 21.1 Industrial 101 26.5 26.5 Residential Improved 101 7.6 7.6 Business Improved 100 28.3 26.5 Residential Vacant 91 28.3 49.1 Business Vacant 84 28.4 56.6 Personal Property Utility 118 53.4 30.9 Business 105 42.0 16.0 Industrial 90 10.8 50.0 Utility real estate, with a median adjusted assessment level of 140 percent, was over-valued by local assessors in 71 percent of the cities and under-valued in only 21.1 percent. 0n the other hand, business vacant real estate and residential vacant real estate were both under- valued by local assessors in a substantial majority of the cities. The median assessment level of residential vacant real estate was 91 percent, and the median assessment level of business vacant real estate was only 84 percent. The other three property classes were assessed, on the average, very close to the 100 percent level. The median adjusted assessment levels of utility personal property, business personal preperty, and industrial personal property were 118 percent, 105 percent, and 90 percent, respectively. Thus, there was some 145 tendency for local assessors to under-value industrial personalty and over-value business and utility personal property within the 53 city assessment districts. The Range of Adjusted Assessmenthevels The range of the adjusted assessment-appraisal value ratios of each property class was quite large. And, more importantly, in most instances the range of the middle 50 percent of the adjusted assessment levels was also substantially large. The ranges of the adjusted assessment-appraisal value ratios of the major property classes in the 320 township assess- ment districts are shown in FIGURE 5-1. In order to emphasize the range of the middle 50 percent of the adjusted assessment levels and the median assessment levels, the portion of the total range beyond 200 percent is not shown. The upper end of the total range was more than 10 times the 100 percent assessment level in the extreme cases, but the proportion of the adjusted ratios which exceeded 200 percent was small in nearly all property classes. However, it should be noted that more than 25 percent of the adjusted assessment-appraisal value ratios for utility real estate and for pipelines were above the 200 percent level. In general, the extremely low and extremely high adjusted assessment levels were observed in local assessment districts where the particular property class accounted for a relatively small proportion of the total valuation. And, although the variations in the assessment levels of different property classes within the individual assessment districts were somewhat larger in some districts than in others, the evidence was not sufficient to conclude that any particular group of local assessors 146 Adjusted Assessment Level V ’I I I I I II I*f* I I I 0 20 40 60 80 100 120 140 160 180 200 Real Property Farm Imp. Farm V. Bus. Imp. Bus. V. Industrial Utility Res. Imp. Res. V. Sub. Ac. Imp. Sub. Ac. V. Sub. P. Imp. Sub. P. V. Sub. Ac. Imp. "B" Resort Ac. Imp. Resort Ac. V. Resort P. Imp. Resort P. V. Timber Part Timber Cutover Lands Personal Property Farm Per. Bus. Per. Ind. Per. Utility Per. Pipelines 22272 Lower and upper 25 percent |:] Middle 50 percent [:I:] Median FIGURE 5-1. Range of adjusted assessment-appraisal value ratios in 320 Huchigan Townships 147 or any particular area was responsible for the wide variations in assess- ment levels. Rather, the lack of uniform assessments was generally prevalent in all local assessment districts. The ranges of the adjusted assessment-appraisal value ratios of the major property classes in the 53 city assessment districts are shown in FIGURE 5-2. The portion of the total range beyond the 200 percent level is not shown. And it should be noted that more than 25 percent of the adjusted assessment-appraisal value ratios for utility real estate were above the 200 percent level. In both the township and the city assessment districts, utility real estate and utility personal property were the least uniformly assessed of the major property classes. The adjusted assessment levels of pipelines also varied considerably in the township assessment districts. And, in both township and city districts, potential homesite properties were less uniformly assessed than the corresponding classes of improved real estate. The nature of the data employed in the current study does not permit any judgment of the relative quality of local assessments among the dis- tricts. Although the extent of the variations in the assessment levels of different property classes within the local districts may suggest something about the quality of local assessment, valid judgment requires knowledge of the variations in assessment levels within, as well as among, the prOperty classes. Hence, the present study has refrained from any attempt to appraise the relative quality of local assessments among the assessment districts. Real Pr0perty Bus. Imp. Bus. V. Industrial Utility Res. Imp. Res. V. Personal PrOperty Bus. Per. Industrial Per. Utility Per. Adjusted.As 148 sessment Level I I I T’ 'T‘ I O 20 40 60 80 10 T T I T’ I 0 120 140 160 180 200 //////// //// ////////// f/// / ////////////3 3 /////////// /// /// / j ////////////§ //; ///./////fl //// ///z //////// ///////§ ‘ Lower and upper 25 Middle 50 percent Median percent FIGURE 5-2. Range of adjusted assessment-appraisal value ratio in 53 Michigan cities. 149 Conclusions Property owners in Michigan now bear a substantial portion of the burden of financing local governmental units, and it is very unlikely that this burden will be diminished in the near future. Hence, it is essential that the weaknesses of the current general property tax system be minimized. At the present time most local assessors are attempting to assess property at some level in the range from one-fifth to one-third of existing market values. These locally assessed valuations are, in most cases, increased during the process of county and state equalization. And state equalized valuations represent about one-half of current market values. It must be noted, however, that inequalities in local assessment valuations are not eliminated in the equalization process. Equalization is not a substitute for the appeal of individual property assessment valuations. Moreover, even when assessment appeals are successful, tax inequities will still remain if certain classes of property are valued at a percentage of current market value which differs from that applied in the valuation of other property classes. For example, among the counties included in this study the assessment of all farm vacant real estate at exactly the median level of that class would still have treated the owners of farm vacant real estate unfairly because the median level was more than 30 percentage points higher than the average assessment level of all real prOperty. Hence, in the median case, these property owners were being over-taxed by more than 30 percent. Many individuals and groups have taken positions opposing any in- crease in the lS-mill prOperty tax rate limitation. If an effective limitation on property tax rates is desired, however, equal emphasis must 150 be given to the level of state equalized valuations. Under the existing legal requirements there is nothing, except the discretionary actions of the State Tax Commission and the State Board of Equalization, to prevent the increase of state equalized valuations to levels approaching full market value. This, of course, would be the equivalent of approximately doubling the lS-mill limitation. Although a rapid rise in the state equalization level is not likely, the increasing pressures upon the lS-mill limit will probably result in a gradual rise of state equalized valuations. It is not within the scape of this study to suggest changes in the present administration of the general property tax. Rather, emphasis has been placed upon the existing structure of the Michigan property tax sys- tem and, more specifically, upon the variations in the average assessment levels of different classes of both real and personal property in a sample of 21 Michigan counties. More information concerning the variation of assessment levels within each prOperty class would indeed be valuable. And further study of the assessment procedures followed by local assessors would be necessary before suggesting substantial changes in therresent system. Nonetheless, some property owners are receiving inequitable treatment under the current property tax assessment system. Whether these inequities can be reduced most efficiently by the use of more trained appraisers within each local district, conversion to a county-wide assessment system, in- creased scope of State Tax Commission activities, or in some other manner is subject to further study. No doubt a combination of several actions will prove desireable. But the important point is that changes of some fashion are needed if equitable treatment of all property owners is to be achieved. 151 LITERATURE CITED Armentrout, w. w., and Tyler F. Haygood. Property Tax Assessment in West Virginia. West Virginia Agricultural Experiment Station, Bulletin 358, March, 1953. Barlowe, Raleigh. ”Impact of State and Local Taxes on Michigan Farmers," Michigan Tax Study; Staff Papers (Lansing, 1958), ch. 3. , Land Resource Economics: The Political Economy of Rural and Urban:Land Resource Use. Englewood Cliffs: Prentice-Hall, Inc., 1958. , and 0thmar A. Limberger. "Relationship of Tax Assessed Valuations to the Sales Value of Real Properties, Ingham County, Michigan, 1950-53,” anrterly Bulletin. Michigan Agricultural Experiment Station, Volume 39, No. 1 (August, 1956), pp. 143-162. Beer, Charles, and Raleigh Barlowe. "Impact of Preperty Taxes on Michigan Farmers, 1939-1956,” Qparterly Bulletin. Michigan Agricultural Experiment Station, Volume 40, No. 1 (August, 1957), pp. 172-180. Brannen, C. O. The Farm Tax Problem in Arkansas. Arkansas Agricultural Experiment Station, Bulletin 223, February, 1928. , and s. D. Gromer. Taxation of Farms in Missouri. Missouri Agricultural Experiment Station, Bulletin 93, November, 1926. Chryst, Walter E., and Frank Miller. Assessment of Property for Tax Purposes in Missouri. Missouri Agricultural Experiment Station, Research Bulletin 490, February, 1952._ Cline, Denzel C. Michigan Tax Trends as Related to Aggiculture. Michigan Agricultural Experiment Station, Special Bulletin 301, February, 1940. Dickerson, Milton B. figate Supervision of Local Taxation and Finance in Michigan. Michigan Agricultural Experiment Station, Special Bulletin 327, April, 1944. Groves, Harold M. Financing Government. Fourth edition, New York: Henry Holt and Company, 1954. - Halcrow, Harold C. Impact of ProPerty Taxation on Connecticut Agriculture. Storrs Agricultural Experiment Station, Bulletin 321, February, 1956. Heneberry, William H., and Raleigh Barlowe. Property Tax Trends Affectigg Michigan Farmers. Michigan Agricultural Experiment Station, Special Bulletin 421, 1958. 152 Lee, Maurice W. Tax Structure of the State of Washington. Economic and Business Studies, Bulletin No. 14. Pullman: The State College of Washington, April 1950. Marshall, Alfred. Principles of Economics. Eighth edition: London: Macmillan and Company, 1956. (First published in 1920). Michigan, Compiled Laws (1948). Michigan, Constitution. Michigan, Public Act 206, 1893, as amended. Michigan, Public Act 301, 1939, as amended. Michigan, Public Act 30, 1956. Michigan, Public Act 201, 1958. Michigan Reports, selected volumes. Michigan State Board of Equalization. Proceedings: Session of 1958. (Lansing, 1959). Michigan State Tax Commission. Twenty-fifth Report: 1947-1948. (Lansing, 1949). . Thirtieth Report: 1957-1958.(Lansing, 1959). Michigan, ggatutes Annotated. Newcomer, Mabel. "The Decline of the General Property Tax,” The National Tax Journal, Volume VI (March, 1953), pp. 38-51. Newton, R. Wayne, and Alva H. Benton. Some Tax Problems of North Dakota Farmers. North Dakota Agricultural Experiment Station, Bulletin 203, October, 1926. , and W. O. Hedrick. Farm Real Estate Assessment Practices in Michi an: Michigan Agricultural Experiment station, Special Bulletin 172, February, 1928. Pealy, Robert H. A Comparative Study of Property_Tax Administration in Illinois and Michiggg. Michigan Governmental Studies, No. 33. Ann Arbor: Bureau of Government, Institute of Public Administration, University of Michigan, 1956. _, gs; _a_l_. "The General Property Tax,” Michigan Tax Study: Staff Papers (Lansing, 1958), ch. 5. 153 Pine, Wilfred. Farm and City Real Estate szes in Kansas. Kansas Agricul- tural Experiment Station, Bulletin 382, September, 1956. Poole, Kenyon E. Public Finance andigconomic Welfare. New York: Rinehart and Company, 1956. Sinclair, Robert 0., and E. H. Lovelando Property Tax Assessments in Vermont. Vermont Agricultural Experiment Station, Bulletin 606, March, 1958. Sparlin, Estal E. Inequalities in the Arkansas Property Tax Assessment System. Arkansas Agricultural Experiment Station, Bulletin 369, January, 1939. Taylor, C. C. Farm Real Estate Assessment in Georgia .Georgia Agricultural Experiment Station, Bulletin N. S. 22, April, 1956. , and G. R. Aull- Assessment of Farm Real Estate in South Caro- lina. South Carolina Agricultural Experiment Station, Bulletin 416, January, 1954. , and . PropertyoTax Problems in the Southeast. South Carolina Agricultural Experiment Station, Bulletin 414, January, 1954. Tharp, Claude R. ‘groperty Tax Administration. Michigan Pamphlet, No. 22. Ann Arbor: Bureau of Government, Institute of Public Administration, University of Michigan, 1951. Thompson, John, and Max Myers. The South Dakota Farmer and His Taxes. South Dakota Agricultural Experiment Station, Circular 128, May, 1956. Time, October 5, 1959. United States Bureau of the Census. gymmaryiof Governmental Finances in 1956. Washington: United States Government Printing Office, 1957. Walroth, Arthur J. "Equalization of Property Taxes in an Urban-Rural Area," Land Egpnomics, Volume XXXIII, No. 1 (February, 1957), pp. 47-54. Weaver, F. P. The Rural Tax Problem in Pennsylvania. Pennsylvania Agricultural Experiment Station, Bulletin 263, March, 1931. ‘Werback, Donna M. Tax Exemptions in theigtate of Michiggg. Papers in Public Administration, No. 2. Ann Arbor: Bureau of Government, University of Michigan, 1948. . V- ., fln-"r I . x-L. 29 199"! “1’ W T . I .4: .meBF 5‘ ” “ v “4"“ 11.5, *“ \ {ELK fi‘lhv‘ ‘ ”*"‘ R0033 USE CEBU