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HomeMy WebLinkAbout031808 Residential Reassessment the appraisers' work and on the assessor's ability to respond to inquiries from stakehold- ers like city council in a timely fashion. · Management. The assessor's office appears well managed. It certainly is meeting its goals of efficiently completing annual reassessments with a minimal number of appeals. The number of appeals is approximates 0.2 percent of the total number of properties, about 1I1Oth of a typical rate. At the same time, the costs of assessment administration, as a percentage oftotal real estate tax revenues, is about 0.6 percent, which is about half the expected percentage. This is achieved by having an average workload, expressed as the number of parcels per employee of the assessor's office, of 4,200 parcels, when work- loads typically are in the range of2,500 to 3,000. The office's compact organization al- lows the assessor to evaluate and coordinate annual reassessment recommendations so that all categories of property are valued equitably. The assessor's office also does a credible job of communicating assessments, the assessment process, and other relevant information through a variety of media, including personal contact, printed materials, and the city's website, on which we found the neighborhood reports to be particularly exem- plary. · Valuation procedures. We separately examined the procedures used to appraise land, residences, and high-rise condominiums. As indicated above, we believe that the ap- praisal staff has the requisite skills and that professionally acceptable appraisal methods are being used. Specifically, the staff continuously monitors sales prices and construction costs and annually attempts to ensure that each year's reassessment is between 95 percent and 100 percent of the then-current market levels (bearing in mind that taxes are assessed in the following year). We did, however, identify a few areas in which procedural im- provements could be made. · Valuation pe,:formance. To verify our procedural evaluation, we made a separate, indus- try-standard "sales ratio study." Sales ratio studies are based on the premise that open- market, arm's-length sales of fee-simple interests in real property represent the best evi- dence of market values. In our ratio study, we compared the appraisals of residential properties that were sold recently to their sales prices. Three of the main things of inter- est in a sales ratio study are (I) the typical ratio of appraisals (assessments) to sales pric- es, as indicated by a measure of central tendency, such as the median; (2) the uniformity of individual ratios (that is, how closely they cluster about the typical ratio), which is in- dicated by a statistic known as the "coefficient of dispersion"; and (3) other patterns of non-uniformity (a statistic known as the "price-related differential" is used to determine whether low-value and high-value properties are assessed at equal fractions of market value). We confirmed that median ratios generally were within the target range. Equally important, coefficients of dispersion generally were less than the 10-15 percent that the profession considers acceptable in the appraisal of residential properties. We checked for the possibility that a number of common problems might affect the accuracy and equity ofresidential assessments, but found nothing of significance. We also noted that with the new CAMA system, the assessor's office is now in a position to make better use ofratio studies as an internal diagnostic tool. In conjunction with this, we recommend that use be made of a questionnaire designed to help determine whether each sale meets the criteria Almy, Gloudemans, Jacobs & Denne Final Report - Review a/Residential Reassessment Processes, City 0/ Virginia Beach v of a usable sale (ideally, such a declaration would be required when a deed was record- ed). · Information technology andfuture enhancements in performance. In RACS, the City of Virginia Beach is making a major investment in technology. As noted, the assessor's of- fice benefits from the new CAMA system. Further improvements in the accuracy of ap- praisals will require greater use of both statistical and spatial data analyses. This implies that the city should make necessary further modest investments in software and in train- ing, as well as ensuring that the assessor's office has easy access to specialists in using the city's geographic information system (GIS). In summary, we conclude that, while there are opportunities for improvement, the office of the real estate assessor currently does a credible, effective job of valuing residential properties at fair market value levels. Residential values closely track the market and exhibit good uniformity among properties. This achievement can be attributed to a well-planned and managed residential appraisal program, use of acceptable valuation methods, and a skilled and experienced staff. Almy, Gloudemans, Jacobs & Denne Final Report - Review a/Residential Reassessment Processes, City 0/ Virginia Beach VI 1. INTRODUCTION 1.1 Assignment The City of Virginia Beach asked Almy, Gloudemans, Jacobs & Denne (AGJD), property taxa- tion and assessment consultants, to review the reassessment processes employed by the City Real Estate Assessor. The review was made in two phases. In the first, we examined commercial reassessment processes. See our report, "Assessment Process Review: Commercial Reassess- ment Processes," dated March 12,2007. The commercial report examined the setting and man- agement practices of the assessor's office in more detail than this report does. This report focus- es on residential reassessment processes. It also reexamines staffing requirements in the light of residential appraisal workloads and changes in business processes associated with the new Reve- nue, Assessment, and Collection system (RACS). In addition, it evaluates ProVal, the new com- puter-assisted mass appraisal (CAMA) system that is a component of RACS. The residential reassessment review drew on our earlier visit to Virginia Beach and on a more recent visit to the City's offices in 28-30 November 2007. During that visit we interviewed management and residential appraisal staff; we reviewed developments since our last visit; and evaluated assessment procedures for residential properties. We also reviewed progress in the conversion from the former CAMA system to Pro Val, the new system. In preparation for our visit we reviewed property assessment statutes, forms, manuals, and other relevant documenta- tion. We also have had the opportunity to analyze data provided by the City and undertake "ratio studies" used to evaluate the accuracy and equity of residential property values. Prior to leaving the City we presented a verbal summary of our preliminary findings. This report contains our complete findings and recommendations. Below we briefly touch on the legal and institutional setting for real estate assessment. Section 2 discusses resource needs, staffing, and management. Section 3 discusses residential valuation procedures and methods and the new Pro Val CAMA system. Section 4 presents our ratio study analyses. Section 5 summa- rizes our conclusions and recommendations. 1.2 Setting In recent years, residential property values in the City of Virginia Beach (as with other parts of the Hampton Roads region and other parts of the nation) have risen rapidly. I With the current downturn in residential housing prices nationally, the future in Virginia Beach is unclear, but there are indications that the overall market is softening, particularly in the upper end of the mar- ket. As mandated by law, real property in Virginia Beach is reassessed annually at current market value. Annual assessments are to be completed by 31 January and become effective the follow- I For descriptions of the recent vibrancy of the residential market, see John L. Knapp, "Virginia's Real Property Tax," a paper presented at V ACO- VMI Property Tax Symposium, Richmond, Virginia, May 25, 2005. Also see Knapp, "How the Housing Boom Affects Virginia's Real Estate Taxes," The Virginia News Letter, vo\. 81, no. 5, October 2005. informal. Regarding appeals to the board of equalization, the Virginia code (' 58.l-3379(C)) provides: "The burden of proof shall be upon a taxpayer seeking relief to show that the property in question is valued at more than its fair market value, that the assess- ment is not uniform in its application, or that the assessment is otherwise not equalized. In order to receive relief, the taxpayer must produce substantial evi- dence that the valuation determined by the assessor is erroneous and was not ar- rived at in accordance with generally accepted appraisal practice. Mistakes of fact, including computation, that affect the assessment shall be deemed not to be in accordance with generally accepted appraisal practice." Recently, the City of Virginia Beach has enjoyed a remarkably low volume of appeals. Al- though it is dangerous to ascribe that fortunate circumstance to specific factors, the generally ac- curate and defensible assessments and the evident professionalism of the appraisal staffundoub- tedly contribute. The assessor notes that appeals increase when the market slows. There already is evidence that that is happening. Almy, Gloudemans, Jacobs & Denne Final Report - Review of Residential Reassessment Processes, City of Virginia Beach 3 Table 2-2: Budget and Staffing Benchmarks Virginia IAAO Metropolitan Jurisdiction Council (MJC) Survey, 1999 Benchmark Beach, 2005- 2006 Number Low Median High Budget as a percent of total 0.58 22 0.34 0.93 2.89 property tax rcvenues Budget per parcel ($) 18.15 29 8.84 21.20 39.32 Parcels per staff 4,231 30 1,739 2,819 6,667 Sourcc: "1999 Major Assessment Jurisdiction Survey," Cook County Assessor's Office In principle, values of the first benchmark (assessment expenditures as a percentage of property tax revenues) should be minimized so that the funds available for other government services are maximized while at the same time providing sufficient funding for effective assessment adminis- tration. Determining an optimal level of funding obviously requires judgment. At typical levels of property taxation in the U.S., it is generally believed that between 1.0 and 1.5 percent of prop- erty tax revenue is needed for effective assessment administration. As can be seen, Virginia Beach is considerably outside that range, and only two of the responding districts had lower ra- tios than Virginia Beach (one was a very large, high tax district, and the other probably served only part of a county that included a major city with a separate assessor's office). On the other hand, the Commissioner of Revenue and the GIS center process real estate transfers and mapping changes, which would be the responsibility of many assessors' offices. The factors just mentioned also pertain to the other two benchmarks. Probable increases in costs since 1999 complicate interpretation of the second benchmark (budget per parcel). In any event, eleven of the responding districts had lower (1999) expenditures per parcel, while eighteen had higher. Regarding the third benchmark (parcels per staff member), a comparatively low number indicates (everything else being equal) a light workload, while a large number indicates a heavy workload. In comparison to the median of 2,819 parcels per staff member in the 1999 MJC sur- vey, several earlier IAAO studies have suggested that 2,500 parcels per staff member is typical overall, while larger districts (like Virginia Beach) typically had about 3,500 parcels per staff member. In any event, only four districts had higher workloads than Virginia Beach (and two of those clearly represented unusual circumstances). No (long-term) deficiencies were noted in office facilities. Reportedly, pairs of appraisers share a city-owned vehicle for a week, which certainly presents a scheduling challenge and may result in suboptimal use of appraisal resources. We conclude that, while the assessor's office operates efficiently, we believe that it is under- funded and under-staffed. An argument for increased funding and staffing would be more com- pelling if it were accompanied by an increase in the tax base. Unfortunately, such a claim cannot be documented. However, experiences in other jurisdictions suggest that frequent re-inspections do discover un-assessed and erroneously classified property. More accurate appraisals, in addi- tion to reducing tax mis-payments, would allow the assessor's office to raise its target assess- Almy, Gloudemans, Jacobs & Dcnne Final Report - Review of Residential Reassessment Processes, City of Virginia Beach 7 ment ratio slightly, which would increase the tax base. More importantly, the risk of losing as- sessed value through the appeal process would be reduced. There are several staffing needs. As emphasized in section 3, we continue to recommend a sta- tistical analyst position. Such a specialist is needed to maintain appraiser productivity while not requiring each appraiser to develop multivariate mass appraisal model building skills and sophis- ticated ratio study analyses. Having such an analyst will be needed to take advantage of the ca- pabilities of the next version 7.1 0 of Pro Val, when it is released. Second we recommend that, unless the Center for Geospatial Information Services itself is sufficiently staffed to provide effective support to the assessor's office, a GIS analyst position be created within the assessor's office. Recent developments in the city's GIS system have apparently robbed the assessor's office of mapping resources because earlier routines of generating maps no longer work. Neither the GIS center nor the assessor's office has sufficient staff to remedy the problem. Maps are crucial to mass appraisal processes, and the current situation cannot be endured. Appraisers are forced to rely on suboptimal paper maps and manually annotate them. Although such a tedious approach helps appraisers get a feel for the spatial pattern in sales prices, GIS could speed the process, and geostatistical analyses could reveal patterns that cannot be spotted currently. We believe meeting GIS needs should be made a priority item. 2.4 Management The City of Virginia Beach is fortunate in having strong leadership in the assessor's office and in having an experienced staff of appraisers. It also is fortunate in having two Pro V al experts. Nevertheless, there are some general professional development needs that need to be met if ca- pabilities of the CAMA system and the City's GIS system are to be effectively used. A general challenge is increasing the appraisers' understanding of, and support for, the im- provements in processes that the ProVal system makes possible. Happily, management recog- nizes this and has begun to inculcate in the appraisal staff a sense of ownership of the values produced by the system. Blaming the system for any problems is not acceptable; solutions to problems must be found. Not all residential supervisors are considered to have strong mass ap- praisal and leadership skills, and two are nearing retirement age. There is a feeling among some of the appraisal staff that they have excess work because they rather than the clerical staff now do data entry. They also enter the sketches on new properties. Although current skills vary, most of the appraisal staff also would benefit from additional mass appraisal skills. Over and above general mass appraisal skills, the assessor's office also would benefit from the statistical and GIS analyst positions recommended above. As noted in our commercial review, the assessor's office has a general policy and procedures manual. In addition, a new "business processes" document has been prepared in conjunction with the implementation of the Pro V al system. As part of standard operating procedures, current land value rates are displayed on large-scale maps of each neighborhood, along with recent sales. The Excel worksheets that are used to develop base rates provide consistency and documentation both of the input data and the results of market analyses. In addition, summary sheets are pre- Almy, Gloudemans, Jacobs & Denne Final Report - Review of Residential Reassessment Processes, City of Virginia Beach 8 pared that document new base rates and adjustment factors. Managers review these work prod- ucts and help ensure consistency in process and results. We also conclude that assessment procedures and results are adequately communicated to tax- payers and others. More information is provided about residential appraisal procedures than on commercial procedures, and the district neighborhood sales analyses are especially valuable. 2.5 GIS Virginia Beach is fortunate to have the vast majority of the data resources required for the effec- tive use of geographic information in assessment administration, although recent developments seem to have constituted a step or two backward in regard to their effective use for assessment purposes. The city's geographic information system (GIS) is based on a combination of the GeoMedia products from Intergraph, (originally used by the assessor's office for production efficiency pur- poses) and the somewhat more widely used ArcGIS system from ESRI (used by the city for all other purposes). In practice, the assessor's data changes are propagated into the ESRI system approximately weekly. Thus for analytical purposes either system could be used, and advantage can easily be taken of the somewhat greater availability of tools targeting the ESRI customer base. Among such tools is Parcel Analyst, a useful software tool, licensed by the city, for devel- oping statistical summaries of data extracted through spatial queries. Staff has yet to be trained on the tool. Finally, it should be noted that the assessor's data are indexed by a "GeoPIN," which facilitates the development of custom software and the effective use of general-purpose statistical software, inasmuch as the identifier itself embeds the X- Y (east-west, north-south) po- sition of each parcel. Capturing and maintaining the data necessary to support a GIS constitutes the overwhelming majority of the cost of a GIS, an investment the city has made, to its great cre- dit. In comparison to such infrastructure costs, the marginal costs of taking advantage of its ca- pabilities for analytical purposes, or extending those capabilities, are minimal, although care must be taken to avoid conflicts that impose losses of functionality. In recent years the assessor's office reports the loss of some of the functional benefits that ac- crued to it from GIS. In particular, the assessor's office made substantial and effective use of large-format, large-scale maps of selected areas on which were plotted, either automatically or by hand, a wide variety of statistical information such as sales prices and their ratios when com- pared to the parcels' square footage, front footage, assessment, or the like. Such resources are no longer easily generated due to changed interfaces and losses of trained personnel. As a conse- quence, previously generated maps are being updated through hand annotations. This practice both makes the process more subject to catastrophic loss and, more importantly, constrains the kinds of analyses that can be undertaken. We also note that using annotated or choropleth (shaded or patterned) maps to support human inferences about the spatial distribution of trends in real estate values makes human analytical efforts more efficient, but imposes a substantial burden on personnel to perform such analyses. Best practices in this regard automate the analytical task further so that such spatial interpolation techniques as kriging (geographic interpolation), inverse distance weighting, and geographically 9 Almy, Gloudemans, Jacobs & Denne Final Report - Review of Residential Reassessment Processes, City of Virginia Beach 3. VALUATION METHODS AND TECHNIQUES In this section we summarize and evaluate the City's current methods and procedures for valuing residential properties relative to accepted best practices as set forth in the IAAO Standard on Mass Appraisal of Real Property (2002) and the IAAO textbooks, Property Appraisal and As- sessment Administration (1990) and Mass Appraisal of Real Property (1999). Section 3.1 discusses recent market trend, system conversion, and neighborhoods. Section 3.2 reviews practices and needs in data collection and sales analysis. Section 3.3 describes and makes recommendations regarding single- family residential valuation, including townhouses and condos ofless than four stories. Section 3.4 focuses on high-rise condos. Section 3.5 discusses the Pro Val comparable sales module, and section 3.6 introduces the potential for MRA model- mg. 3.1 Background and System Conversion After years of sustained and substantial increases, the Virginia Beach residential market has fi- nally slowed and in some cases reversed direction. Aside from the most expensive luxury homes, which can attract high prices regardless of the economic cycle, newer, upper value homes with prices of, say, $450,000 and above have declined in value, some as much as 10% or more. At the other end of the market, older, lower value homes, many of which were built in the 1960s and sell in the $200,000 to $250,000 range, continued to move up in value in 2007, many in the range of 5% to 10%. Mid range homes generally held their own or increased marginally. High rise condominiums generally stayed even in value. To its credit, the City made a number ofreductions to 2007/2008 values to reflect market de- clines based on an analysis of "late" sales, namely those that occurred after the base valuation date of June 30, 2006 (sales as late as October/November were analyzed). These reductions, which totaled approximately $150 million, resulted in more realistic values and undoubtedly re- duced the number of appeals filed. We encourage the City to continue to make similar adjust- ments to reflect market declines after the traditional cutoff date in future years as well. While the number of appeals filed for 2007/2008 values was up from recent years, the number of filings (less than 700) remained very modest compared to similar sized jurisdictions elsewhere. As noted, the City recently completed a major conversion of a legacy CAMA system to the most recent version of Pro V al. Although all electronic data and sketches have been converted to the new system, data entry of other legacy data continues. This work is scheduled for completion in February 2008, leaving the City in a strong position to update values more efficiently. The work for the 200712008 assessments was done almost exclusively on the old system, while that for the 2008/2009 assessments is being done largely on the new system. A major problem common to both the old and new system is the over-abundance of neighbor- hoods, which generally correspond to subdivisions. Currently there are approximately 1,000 neighborhoods, many with too few parcels and sales for meaningful analysis, especially with re- 11 Almy, Gloudemans, Jacobs & Denne Final Report - Review of Residential Reassessment Processes, City of Virginia Beach at the individual parcel level and remain permanent until changed ore removed. If ComIT would allow it, the office could write update scripts to apply batch updates. House type factors override neighborhood factors and other adjustment factors that refine im- provement values. For example, if a neighborhood is assigned a neighborhood factor of 1.10 and some parcels in the neighborhood are assigned house type factors of 14, which we will assume implies a house type factor of 1.15, parcels in the neighborhood without a house type factor would receive a factor of 1.10, while parcels with the house type factor of 14 would receive a factor of 1.15. This has the implication that one cannot update a neighborhood by changing its neighborhood factor by the desired percentage, since the update will only affect parcels without house type factors. Instead, one would have to individually modify the house type factors to af- fect the desired change. We find this process cumbersome. Fortunately, Virginia Beach has not yet assigned many house type factors. Pro Val also provides the ability to apply relative desirability factors to individual parcels. Although these should only be applied on an exception basis, we would think that neighborhood factors6 in conjunction with relative desirability factors should be largely capable of fine-tuning improvement values generat- ed by valuation tables for location influences. As a minimum, we recommend that the City care- fully consider how it plans to reconcile and update neighborhood, house type, and relative desi- rability factors in future years. Annual updates also contain depreciation tables, which are tied to condition ratings in the Pro V al system (about 80% of Virginia Beach residences are assigned "normal" condition ratings). We were glad to note that the City bases its condition ratings on effective age relative to actual age, so that, for example, a new home is coded as being in average (not good) condition and an older home in typical condition receives only typical depreciation for its age. Depreciation table updates override existing tables, so that users that customize their tables must reestablish them each year. While it will thus involve some extra effort, we recommend that the City conduct its own studies to derive deprecation factors from the local market. Experience has shown that the "one size fits all" approach to deprecation seldom works as rates of depreciation can vary drastically among and within jurisdictions depending on local market forces. Economic and functional obsolescence is assigned on an individual parcel basis and is adequate- ly supported in the Pro Val system. 3.4 Hi-Rise Condominiums Like other residential properties, hi-rise condos (defined as condo projects with more than four stories) are formally appraised on the cost approach, although the values are rooted in sales anal- ysis. Each project is generally assigned to a separate neighborhood and a separate Pro Val model is created for each. A condo association master record contains building data. Condo unit records contain details of each unit (floor level, size, view, balconies, associated parking, etc.). 6 House type factors apply to improvements (only). Separate neighborhood factors can be applied to land and build- ing values. Almy, Gloudemans, Jacobs & Denne Final Report - Review of Residential Reassessment Processes, City of Virginia Beach IS the Pro V al residential cost engine with SPSS, a third party statistical package. "Nonlinear" (also known as "hybrid") MRA is used to derive market-indicated base rates, depreciation rates, and neighborhood adjustments from recent sales. The results help inform the corresponding parame- ters that are entered into the Pro V al improvement valuation tables. As indicated in section 2.3, we strongly recommend that the City add a statistical analyst posi- tion. The position would be responsible for conducting quantitative market analyses in support of annual revaluations and for developing an MRA capability in the Assessor's office. Part of these responsibilities will be uncovering and leveraging the analytical capabilities in current and future releases of Pro Val, as well as complementing them where appropriate with a third party statistical package. A final recommendation we make with respect to valuation methods and techniques is that the office begin explicitly tracking time trends and entering them into Pro V al tables provided for this purpose. In addition to helping keep abreast of the market, time adjusted sales prices can be im- portant in appraisal analyses and permit appraisers to consider a longer period of sales, which can be especially important when the volume of sales declines. Time adjusted sales prices can also be used in comparable sales analyses and sales ratio studies (as we do in section 4 below). Almy, Gloudemans, Jacobs & Denne Final Report - Review a/Residential Reassessment Processes, City of Virginia Beach 17 For readers unfamiliar with these statistics, the median ratio is the middle ratio when there is an odd number of sales (or the average of the two middle-most ratios when there is an even num- ber). The 95 percent confidence interval displays the range of ratios within which one can be 95 percent confident that the true population median lies. The confidence intervals about the me- dian assessment ratio provide information on whether any observed differences between the me- dian and its target level (0.95 to 1.00 in Virginia Beach) are likely to have stemmed from sam- pling variability alone in the absence of a failure to achieve, in the aggregate, the target level of assessment. The price-related differential (PRD), which should be between 0.98 and 1.03, indi- cates whether there is any suggestion of price-related biases in the assessment errors. If the PRD is below 0.98, high-value properties tend to be assessed at a higher ratio of market value than low-value properties. When the PRD is greater than 1.03, the opposite pattern, which is more common in practice, prevails. Such assessments are said to be regressive. The coefficient of dispersion (COD), which should be under 15 for residential properties, measures the relative tightness of the clustering of assessments about their target market value; in a sense it is the av- erage percentage error of the assessments relative to market value. There is a slight suggestion that residential vacant land (first line in Table 1) may be under as- sessed, possibly more so for more valuable parcels than for less valuable ones, but the evidence is not strong enough to reach that conclusion reliably. As can be seen in the table, the upper bound for the confidence interval for vacant land easily falls within five percentage points of the overall median ratio on the bottom line (0.98). Thus the standards of the IAAO guidelines are easily met. The same is true for all other ( apparent) failures of median ratios to fall within 5% of the overall median ratio as called for by best-practices guidelines; the inherent variability of small samples precludes any deficiency conclusions since the observed findings could well have arisen by chance alone. In addition to city-wide, overall analyses, we looked for any patterns that might suggest prob- lems with particular subsets of the residential assessments. Analyses by neighborhoods, al- though commonly done in other contexts, were infeasible here due to the extraordinary number of neighborhoods in the city and the consequent paucity of sales in most of them, leaving too few for statistical reliability. This issue was addressed several ways. First, we plotted all the ratios geographically, as illustrated in figure 4-1, and looked for patterns, but found nothing of signific- ance. We also prepared plots of ratios by district as illustrated in figure 4-2. Finally, we plotted neighborhoods within district (not reproduced here) to see if there were patterns different from those likely to have arisen by chance alone. We found nothing of significance. Almy, Gloudemans, Jacobs & Denne Final Report - Review of Residential Reassessment Processes, City of Virginia Beach 19 Figure 4-3: Plots of Sales Ratios by the Year in which Houses Were Built I AO a. ~ t- 3i1OO "" 8 Q.. 1,2<5 ~ ... cr en <( jun';':HPfr9feS"i011". I I o I o I I I I I ! i , ~~- 17~ II o R e<";l Lne:J:l .. 0 OOfi 7:'; r; R:':'>t.lUrleafKijOO4 t7~JJ 'BOO 185"0 1950 :-(1)(1 ::D:')O " YrBullt "h CO co lfJ50 l%U 1!37Q 1lJOO 19!.4) ::001 :;010 YrBuilt Figure 4-4: Plot of Sales Ratios by Size of House 1.80 1.60 @ 1.40 0 120 Q. III c( I- ei 1.00 c( Un~ar R~9r~ssion w o o o o o ff o o (fJ o .~ -~ . " ~CO 0 ;0' 0 <b . 0 ."'J~-:"" o o o 60 o o o R Sq Line... = 0.003 o 2000 4000 6000 6000 1??oo FinSize Almy, Gloudemans, Jacobs & Denne Final Report - Review of Residential Reassessment Processes, City of Virginia Beach 23 Returning to the use of box plots, we examined patterns in sales ratios according to zoning code (figure 4-7) and according to number of stories and construction grade (figure 4-8). Appropriate- ly, the pattern ofratios by zoning code revealed no causes for concern, as also is the case with number of stories. Similarly, the grade (or quality) of the improvement revealed no biases, al- though typical properties were easier to appraise as indicated by their lower dispersion (more compressed box heights). Figure 4-7: Plot of Sales Ratios by Zoning Code : t I . t . e . ! @ " 9 " co ~ e g r " ~ II (, ~ s - H " g e Q ti 8 ~ 'lr '~ r ~\OO , . '" .. 9 " " ~ 9. c i:l " " " " 0 8 " . g . 8 " o * ~~ ~""'UT U f'U -T- _,__-----r'uu_.-..--- ,------,-----,----,----r-----r------.-----r --l--T-----,--~-.-----r-- 1 :: ) 4 'C- '" 7 (j 11) 11 f u~ 1"3 j4 '5 1<'; ,., IB 19 :r:> 11 1:: ;,>, .:'4 ZonCod. Figure 4-8: Plots of Sales Ratios by Number of Stories (Left) & Construction Grade (Right) "1 _ __ _~_~~__u__~ _~ _ --- ---- ------------------------ .. . -1 ,~ I I J .0 Et~ I r t 1 ~ Q j rt ~"l j r r ~ j ] ~ 0 I I J I I ^," ,. f".'W..- .~ .,"~ 0.,.,.,1 ,,..;-,.:h- -_0.1 , , , _G-,.. 1$.: '" "obGrade ..tcrt.~ Almy, Gloudemans, Jacobs & Denne Final Report - Review a/Residential Reassessment Processes, City of Virginia Beach 25 Figure 4-10: Plot of Sales Ratios by Property Category 180 100 o o o o f s . . 0 8 @ 0 0 Q ~ ,1 ! 1 1 ..J 8 * 1.40 '20 Q. IJl < I- lr,oo ~ n 80 'ill " ~ I\l d r [ i 0 ~ ~ <' " ~ ;p !! f I ~ ~ !l. ; " It ~ 11 '" r " * '! r ! j ~ R ;, ~ ~ ;, Clan Finally, we explored potential disparities in the treatment oflower vs. higher valued properties by plotting assessment ratios against market values. Since there is a known statistical problem that arises when comparing ratios to one of the terms of the ratio (either assessed values or sales prices), it is inadvisable to plot either assessments or sales prices on the horizontal axis. The best solution to this problem devised to date is to estimate market value as an average of the two for each property, which is the practice adopted here. As can be seen from the plots, any suggestion that higher value properties may be under-assessed derives from a very limited number of sales. Taking successively smaller ranges of property values as the domain for analysis, as was done in the plots in figure 4-11, quickly eliminates any suspicion of price-related biases. Almy, Gloudemans, Jacobs & Denne Final Report - Review of Residential Reassessment Processes, City of Virginia Beach 27 " ] O. House type factors. House type factors offer a way of applying factors to subsets of properties within neighborhoods in the Pro Val system. However, relative desirability factors already provide this capability on an individual parcel basis and house type fac- tors override neighborhood factors. While the City did not use house type factors in the 2008/2009 revaluation, we recommend that it carefully consider their role going forward, so that, if applied, house type factors will be supported by adequate sales and work in harmony with other valuation factors. 11. Depreciation analysis. Rather than rely on universal depreciation tables provided by Pro Val, we recommend that City staff derive depreciation factors entered into Pro Val tables from local sales analyses. This can be done by graphing percent good factors (im- provement residuals divided by RCN) against effective age, or from MRA models when available. 12. Multiple regression analysis. While we see no compelling need for the City to implement MRA at the present time, we recommend that it keep abreast of the technique and moni- tor probable enhancements of this nature to ProVal as a result of the Sigma acquisition. In particular, we see MRA as the most logical valuation method for townhouses and con- dominiums with potential application to detached residential properties as well. 13. Statistical analyst. Related to the recommendation above, we strongly recommend that the City retain a statistical analyst to conduct MRA analyses and leverage analytical tools in the new Pro Val system and future releases thereto, which we expect to incorporate greatly expanded market modeling, comparable sales analysis, and ratio study capabili- ties. ] 4. Mass appraisal training. As the assessor's office recognizes, fully benefiting from the capabilities of the Pro V al system requires that all appraisers have certain new mass ap- praisal skills, and desirably they would have a basic understanding ofMRA so that its analytical powers and their experience could be effectively harnessed. 15. Time trend analysis. We recommend that the City begin conducting time trend analyses by major property types and market areas using standard techniques described in the IAAO literature. Such analyses will provide early feedback on market trends. Also, time-adjustments permit appraisers to expand the sales analysis period (and thus augment sample sizes) and can be highly useful in sales ratio studies and comparables sales ana- lyses. 16. Statistical software package. As a low priority item at the present time, we recommend that the City obtain a third party statistical package (e.g., SPSS) to conduct statistical ana- lyses, including charts and graphs depicting market trends and sales ratio patterns. This recommendation would complement the statistical analyst position recommended above and become more relevant at that point. Future enhancements to the Pro V al system may also address this need, although we suspect only partially so. Almy, Gloudemans, Jacobs & Denne Final Report - Review of Residential Reassessment Processes, City of Virginia Beach 31