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Home My WebLink AboutMARCH 18 2008 WORKSHOP MINUTES I I III CITY OF VIRGINIA BEACH A COMMUNITY FOR A LIFETIME ITY COUNCIL MAYOR MEYERA E. OBERNDORF, At-Large VICE MAYOR LOUIS R. JONES, Bayside - District 4 WILLIAM R. DeSTEPH, At-Large HARRY E. DIEZEL, Kempsville - District 2 ROBERT M DYER, Cen/erville - District I BARBARA M HENLEY, Princess Anne - District 7 REBA S. McCLANAN Rose Hall - District 3 JOHN E. UHRIN, Beach - District 6 RON A. VILLANUEVA, At-Large ROSEMARY WILSON, At-Large JAMES L. WOOD, Lynnhaven -District 5 JAMES K. SPORE, City Manager LESLIE L. LILLEY. City Attorney RUTH HODGES FRASER, MMC, City Clerk CITY HALL BUILDING I 2401 COURTHOUSE DRIVE VIRGINIA BEACH, VIRGINIA 23456-8005 I PHONE: (757) 385-4303 I FAX: (757)385-5669 EMAIL:Ctycncl@vbgov.com CITY COUNCIL WORKSHOP AGENDA 18 MARCH 2008 1. CITY MANAGER'S BRIEFING - Conference Room - 3:00 P.M. A. RESIDENTIAL TAX ASSESSMENT EV ALUA TION AND REFINEMENT Robert J. Gloudemans, Partner - Almy, Gloudemans, Jacobs & Denne B. APZlICLEAR ZONE MASTER PLAN Jack Whitney, Director - Planning Department C. PLANNING ITEMS PENDING Jack Whitney, Director - Planning Department i :11 - 1 - MINUTES VIRGINIA BEACH CITY COUNCIL Virginia Beach, Virginia March 18, 2008 Mayor Meyera E. Oberndorf called to order the VIRGINIA BEACH CITY COUNCIL WORKSHOP in the City Council Conference Room, City Hall, on Tuesday, March 18,2008, at 3:00 P.M Council Members Present: William R. "Bill" DeSteph, Harry E. Diezel, Robert M Dyer, Barbara M Henley, Vice Mayor Louis R. Jones, Reba S. McClanan, Mayor Meyera E. Oberndorf, John E. Uhrin, Ron A. Villanueva, Rosemary Wilson and James L. Wood Council Members Absent: None March 18, 2008 i II - 2 - CITY COUNCIL COMMENTS Councilman Diezel referenced the correspondence of Fire Chief Steven R. Cover dated March 17, 2008, concerning the fire incident that occurred on Monday, March 10, 2008, at 4820 Columbus Street. It is his goal to conduct a formal post incident analysis within the next thirty (30) days. There were no lives lost and the injuries sustained to the operating crews were minor. This is extraordinary, considering the size and complexity of the fire. Councilman Diezel commended the operation of all parties involved. Councilman Diezel advise this date also marked the Twelfth anniversary of the deaths of the two (2) Chesapeake Firefighters Mayor Oberndorf extended her grateful appreciation. During the Development Authority meeting this morning it was announced that Economic Development located Allied Technology, employing approximately two hundred (200), to a facility to conduct business in Virginia Beach. March 18, 2008 : III - 3 - CITY MANA GER 'S BRIEFING APZ-l/CLEAR ZONE MASTER PLAN 3:00 P.M. Jack Whitney, Director - Planning Department, advised the Briefing re the APZ-l CLEAR ZONE MASTER PLAN provides general land use policy guidance regarding the future use of property located within the Accident Potential Zone 1 and Clear Zones around NAS Oceana. Last Fall, the Ocean a Land Use Conformity Committee directed staff to prepare a Master Plan for the disposition and compatibility of land use surrounding Oceana in the APZ-1/ Clear Zone areas. Since that time, there has been a tremendous amount of staff work and public involvement on the subject of preparing this Master Plan. The Oceana Land Use Conformity Committee has reviewed same and unanimously endorsed it. It is now in the process of public review in advance of being considered for adoption by reference, as part of the City's Comprehensive Plan. Mr. Whitney commended Tom Pauls, Coordinator - Comprehensive Plan, Debbie Zywna, Planning Co-ordinator, and stafffor their dedicated efforts. Tom Pauls referenced the five (5) Sub-Areas A-E as depicted on the General Location Map. APZ - 1 / Clear Zones - General Location Map Sub-Areas A-E , p; 'l, '[', .\..' ,,' .,",\' \ \ " , ~ , , ,'> ,~..,:,,~'" , f egen _OearZcnelczl _Acddtt1tPdenlillZone1(APZ-1l DAl:ddsrtPdenl.Zone2(APl.Z) ~~~~u.~I~e Oepartmenl of Planning September 12, 2007 THIS OOCtAJIENT IS "'TENoOED FOR GENERAL Pl.lNHI<I<J PURPOSES ONLY AU Wl'<RRANTlES. UCC AND OTHERWSE, EXPRESSED OR ....lIED. ...CWOlNG ....RRAHTIES AS TO ACOJRACV OF THE DATA 9'i0Wll HFRON ANO MERCHANTABIlITY ANO THE FITNESS FOR AI'ARTICUI..AIl: PURPOSE ARE EXPRESSLY OISCt.ANEO ANOAll HC1DENTAl CONSEQUENTIAL OR SPECIAL OAMo\GES ARlSlNO OUT Of OR III CONNECTIOtf Y\fTH THE USE OR PERFO-.NCE OF THE DATA SHOIo'tN ON THIS """,,PARE EXPftESSlYOlSCu.....m N4Y OETERMJNA.TION OF TOI"OoJR.I.PHYOR CONTOURS OR NtY OEPICTION OF PHYSlCAl"'PRCNEMENTS. PROPERTY llHESOR IllJl..tolDARIES IS FOR OENERAllNFORWtlTlON ONLY AND SHALL NOT BE USED FOR THE DESlGN.I.lOOf'ICA~.OR CQ.ISTAUCTIOM OF NPRCNEMENTS TO REAL PROPERTY OR fOR FlOOO PlAN OElERMr'UlllON March 18, 2008 I II - 4 - CITY MANA GER 'S BRIEFING APZ-l/CLEAR ZONE MASTER PLAN PLANNING GOALS 1. Preserve existing stable residential neighborhoods within APZ-l 2. Remove, as voluntary opportunities present themselves, all non-compatible development within the 'Clear Zone' 3. Ensure that proposed non-residential uses are consistent with the City's AICUZ provisions Overarching Principles I Preserve existing stable residential neighborhoods II Identify areas where opportunities exist for the voluntary reuse of land II Consider planned public projects when evaluating the purchase and voluntary reuse of land II Provide general design guidance for the voluntary reuse of land II Include key stakeholders when amending the Master Plan for the area Topic Specific Principles I: Residential - Avoidfragmenting the spacing of homes Sell city-acquired property as quickly as possible to prevent blight and safeguard ne ighborhoods Create a "Pattern Book" that reinforces the architectural character of older neighborhoods within this area I: Commercial Encourage compatible businesses to develop in a manner consistent with residential areas New businesses should be designed to enhance existing commercial areas Work to attract compatible businesses to the area II Traffic Improve traffic flow and access to roadways Whenever a property is converted to a different type of use, consider traffic flow improvements Use buffers to protect neighborhoods from major roadway impacts II Open Space Add open spaces, park areas, sidewalks and trail systems whenever possible Explore assembling properties for open space within neighborhoods Select landscaping materials that keep sight lines open, clear and uncluttered Use substantial landscaping with trees and shrubs to buffer new compatible businesses from stable neighborhoods Preserve views of waterways March 18, 2008 : III - 5 - CITY MANA GER 'S BRIEFING APZ-l/CLEAR ZONE MASTER PLAN PLANNING GOALS Infill and Compatible Use Options I Residential Infill The parcel is embedded within a stable residential neighborhood and not adjacent to any other use The proposed residential development will not increase density within the neighborhood The proposed design should ensure compatible mass, bulk, and height on building alterations and new construction when considering adjacent properties Conditions consistent with AICUZ principles, most importantly sound attenuation Design Guidelines 8: Lot and Building characteristics I: Landscape and Streetscape character Criteria for Transitional Areas II Proposed uses conform to the Oceana Land Use Conformity Program I Change in use is achieved through conditional rezoning or conditional use application and compliance with the design guidelines 8: Development proposals must be planned in a fashion that prevents the fragmentation of any adjoining neighborhoods 8: Property owners requesting such change voluntarily agree to rezone their property II Parcels of land proposed for change of use should be consolidated to allow the creation of a unified and coherent development March 18, 2008 I II - 6 - C IT Y MANA G E R 'S B R IE FIN G APZ-l/CLEAR ZONE MASTER PLAN March 18, 2008 I ,I - 7 - C IT Y MANA G E R 'S B R IE FIN G APZ-l/CLEAR ZONE MASTER PLAN OCEANA LAND USE CONFORMITY PROGRAM INCENTIVES II Business Tax Rebate (ORD-2931 Sec 35.2-5) II Fee Reimbursementsfor (ORD-2931 Sec 35.2-6) - building code permits - rezonings and conditional use permits - subdivision and site plan review - water and sewer connection March 18, 2008 , , II - 8 - C IT Y MANA G E R 'S B R IE FIN G APZ-l/CLEAR ZONE MASTER PLAN OCEANA LAND USE CONFORMITY PROGRAM INCENTIVES (Continued) . Partial Exemption to Real Estate Tax (ORD-2932) . Economic Development Investment Program Grants (ORD-2934B) I Certain principal uses in Accident Potential Zone I now allowed where otherwise were conditional uses in the underlying zoning district (ORD-2934) Vested Properties I. Sub-Areas A and B 1.1; Location and data as of August 13, 2007 1.1 Maps of 2 Sub-Areas Related Documents online at www.vb1!ov.com/apzl cz I. APZ-1/Clear Zone Master Plan . APZ-1 / CZ Use and Acquisition Plan II City Zoning Ordinance Table 1804 . OPNAV Instructions 1l010.36B 1.1 List of Compatible Uses within APZ-1, NAICS Codes Next Steps Process now underway to consider adopting this Master Plan as part of the Comprehensive Plan II City Council - Briefing - March 18th II City Council- Public Comment - March 25th II City Council - Consider Final Action - April 1 st THIS BRIEFING WAS BROUGHT FORWARD March 18, 2008 : II - 9 - C IT Y MANA G E R 'S B R IE FIN G RESIDENTIAL TAX ASSESSMENT EVALUATION AND REFINEMENT 18 March 2008 3:43 P.M. Jerald Banagan Assessor advised, following the recommendations of the Tax Assessment Task Force in 2005, City Council decided to have a Property Tax Consultant review assessments and procedures of the Assessors office. Management Services contracted the firm of Almy, Gloudemans, Jacobs and Deene. Mr. Gloudemans presentedfindings on commercial assessments in 2007. Mr. Gloudemans expressed appreciation for the great cooperation and assistance from Jerry Banagan, Assessor, Ron Agnor, Assistant Assessor, Residential Appraisal staff: (Kim Smith, Tom Vitz, Dick Whitaker, George Barham, Sue Cunningham), Kim Utley, Information Technology/Data Coordinator and Ron Berkebile, Management Services. What We Did Reviewed appraisal statutes, guidelines, tables, forms and other documentation Site visit and interviews (week of November 26) Conducted independent statistical review of assessment accuracy and uniformity Developed draft andfinal reports Assessment Environment (Late 2007) City had completed 2007-2008 revaluation: base date of 1 July 2006 and completion date of 31 January 2007 Working on 2008-2009 reevaluation Transitional real estate market; consideration given to later sales (after July 1) Conversion to ProVal CAMA system (old system used for July 2008; new system for August 2009) Summary of Findings Virginia statutes provide a strong basis for fair and equitable assessment Assessment procedures are appropriate and effective Assessments achieve high accuracy/uniformity Department is well managed Residential staff is highly professional and productive - understaffed New CAMA system is significant enhancement Various opportunities for improvement exist March 18,2008 : II - 10- C IT Y MANA G E R 'S B R IE FIN G RESIDENTIAL TAXASSESSMENT EVALUATION AND REFINEMENT 18 March 2008 Strong Statutory Basis for Accurate Values and Assessments Assessments based on full market value (price property would bring on the open market) Assessments are updated annually No artificial value requirements or constraints Mandatory rate rollback when assessments increase Usual exemptions; relief for elderly and disabled Public disclosure of sales prices (but Virginia law does not provide for real estate transfer declaration) Assessment Procedures · Comply with professional standards · Market-calibrated cost approach · Appraisers review and plot sales on maps · Valuation analyses are thorough/well-done · Old system very cumbersome; new system has more functionality and is more efficient · Too many neighborhoods · Various additional opportunities exist Mr. Gloudemans depicted a chart entitled "Sales Ratios by Property Type" Assessment Performance · Level of assessment between 0.95 and 1.00 -- 0.98for 07108 residential values · Good uniformity among property groups · Good uniformity and consistency in values among individual properties -- average dispersion of 8% · Good uniformity between commercial and residential properties Budget and Staffing Conclusions · Budget low by traditional benchmarks -- budget per parcel -- budget as a % of property tax revenue · Staff relatively small by traditional measures and compared to other jurisdictions · Staff highly productive but overly stretched · Vulnerabilities given potential retirements and possible appeal increases March 18, 2008 , I I - 11 - C IT Y MANA G E R 'S B R IE FIN G RESIDENTIAL TAX ASSESSMENT EVALUATION AND REFINEMENT Bud1!et and Staftin1! Benchmarks IAAO Metropolitan Jurisdiction Council (MJC) Survey 1999 Benchmark Virginia Number Low Medium High Beach 2005-2006 Budget as a percent 0.58 22 0.34 0.93 2.89 of total property tax revenues Budget per parcel $ 18.15 29 $8.84 $21.20 39.32 ($) Parcels per staff 4,231 30 1,739 2,819 6,667 Recommendations · Seek sales disclosure form / consider mailer Consider centralizing sales validation process and adopt sales validation codes · Enhance analytical capabilities additional training and pilot projects -- add statistical analyst position -- add GIS support position -- provide appraisal staff direct access to data (rather than submission of requests to ComIT) · Continue to consider late sales · Consolidate neighborhoods · More comprehensively monitor time trends and determine required adjustments · Use multi-year (time-adjusted) sales · Consider testing direct sales approach Consider a number of additional technical refinements (see report) Conclusions · Residential valuations are highly accurate and uniform (exceed professional standards) · City has a highly experienced and capable staff -- but staff is thinly stretched and vulnerable to turnover/retirements or increased appeals · The new CA.MA system represents a major improvement and brings opportunities for improved efficiencies (many already in place) · Assessment department should strive to enhance its data analysis capabilities · Addition of a Statistical Analyst and GIS Specialist would be highly desirable · Valuation procedures are sound; various technical refinements can be considered March 18, 2008 I I I - 12 - C IT Y MANA G E R 'S B R IE FIN G RESIDENTIAL TAX ASSESSMENT EVALUATION AND REFINEMENT Councilman Dyer understood assessments were basically eighteen (18) months behind reality. Mr. Banagan advised, for the past two (2) years, the assessment data has been brought up through December, with the job finished in January and the assessments go into effect in July. Notices will be mailed April Fourth. Councilman DeSteph inquired re mandatory roll back on assessessment increases. Mr. Banagan advised there is a state statute, if due to a reassessment, total property values increase more than 1%, there is a roll back in the tax rate. If revenues do increase more than I%, a Public Hearing is held on the tax rate. Councilman DeSteph inquired re the percentages of inaccuracies during the review. In the Commonwealth of Virginia, if your house is assessedfor $500,000 and soldfor $400,000, when recorded for the Grantor's Tax purposes, it is recorded at the higher of the two (2) rates. Mr. Gloudemans advised this was accomplished in terms of an average error (average difference between assessment and sale price) which was 8% average for all the residential. Sometimes, someone overpays for a property or secures an extremely good purchase. Mr. Banagan advised the Clerk of Circuit Court records Grantee and Grantor's taxes and as this is not his area of expertise, he would refer to the Circuit Court for an explanation. There is a state statute which states on the Grantor's tax, the higher of the sale price or actual value is recorded. It is the Attorney General's opinion since assessments are at market value this can be used as a gauge of actual value. The Grantee tax is being recorded at the sale price. The Commissioner of the Revenue is responsible for updating the transactions on the real estate data base. Councilman DeSteph referenced commercial property being based on the income approach. The next bullet advised residential was based on the cost approach derived from a hybrid sales approach. Mr. Gloudemans advised there are different rates per square foot for different quality classes. The Assessor assigns a quality rating to a property. Those ratings are associated with certain building features. For each of those quality classes, there is a rate per square foot used to price out the building as if it were new. Then there are other adjustments made i.e. fireplaces, garages added, which gives the value of the property The depreciation percentage is then applied based on the condition and age of the property. Then, there is a separate estimate made of the land value, based on land sales. Those two components, value of building and land are added together to provide the total estimate. Mr. Banagan advised Mr. Gloudemans was performing his analysis on sales of commercial property. He did not perform rent studies in Virginia Beach. Councilman DeSteph advised Arlington utilizes the same Pro Val system as Virginia Beach. Arlington has much more information re property contained on their site than Virginia Beach. Mr. Banagan advised Arlington's appraisal system is Pro Val. Their Website is not a Pro Val product. Their Website was generated in Arlington. Mr. Banagan advised, if requested, the owners of Commercial Property must provide the Assessor's Office with income and expense information. The only enforcement is if this information is not provided, the owner cannot go to court and use this as evidence of a different value. There are other sources of also getting this information. A good percentage of commercial property owners comply. Meal, room and business license taxes of hotels are provided by the Commissioner of Revenue. March 18, 2008 I II - 13 - C IT Y MANA G E R 'S B R IE FIN G RESIDENTIAL TAX ASSESSMENT EVALUATION AND REFINEMENT Council Lady McClanan advised citizens have advised her they do not believe they are treated fairly in the Appeals Process and it is a waste of time. Mr. Gloudemans believes the volume of appeals is really a function of whether the real estate market is increasing or decreasing. Mayor Oberndorf advised many citizens are expressing fear and frustration based on what is going on in the economy. Many homes in their neighborhood are not selling, but even so they are anticipating an increase in assessment. Mr. Gloudemans advised this is not unique to Virginia Beach. The only concrete guage is the recorded prices. Councilman DeSteph inquired re the number of appeals last year approximately doubled from the previous year, which were approximately 375. Councilman DeSteph shall meet with Jerald Banagan, Real Estate Assessor, to discuss further concerns. Council Members Wilson and Wood will sponsor the following Resolution for the City Council Session of March 25, 2008: Resolution to ESTABLISH a Committee to study the late payment of Real Estate Taxes with a report to City Council within thirty (30) days of City Council's appointment. City Council was authorized in 1965 to impose a penalty of up to 10% for taxes not paid by the due date, as well as interest up to 10% annually on the amount of both the unpaid taxes and the penalty. An analysis of the penalty would assist City Council in making an informed decision about whether the penalty amount should be reduced. March 18, 2008 I II - 14- CITY MANA GER 'S BRIEFING PLANNING ITEMS PENDING 5:00 P.M. Jack Whitney, Director of Planning, gave a brief synopsis of the Planning Items pending. The majority of items for March 25, 2008, have been discussed, the two added were heard during the March Planning Commission meeting. March 25, 2008 BQI (Modification of Proffers Kempsville District Applicant requests a Modification of Proffers to change the dwelling unit design and to increase the number of dwellings by nine (9) for a total of fifty-seven (57) The purpose of the modification is to allow the developer to build a unit that will be more marketable. AICUZ is less than 65. Evaluation and Recommendation Planning Staff recommends approval Planning Commission recommends denial (6-5) No opposition Mr. Whitney advised the style, materials and architectural quality will remain the same, the only change is the new units will not have garages. Public Comment on APZ-IICZ Master Plan April 1, 2008 Nimmo Childcare (Deferred Item) Vote on APZ-IICZ Master Plan Ordinance to amend the Comprehensive Plan by incorporating the APZ-l/Clear Zone Master Plan by reference April 8, 2008 R-5R Zoning Amendment Ordinance to amend Section 502 and to add Section 502.1 of the City Zoning Ordinance re R-5R Residential Resort District Mr. Whitney advised a number of citizens registered in support and opposition and there was interest in having the matter WITHDRA WN or DEFERRED for additional work. Councilman Wood advised he has spoken with representatives of both sides and both indicated their preferences for DEFERRAL. This affects North Virginia Beach and some of Shore Drive. Councilman Wood will meet with the representative groups and advise City Council. March 18, 2008 i I - 15 - C IT Y MANA G E R 'S B R IE FIN G PLANNING ITEMS PENDING Donna House (Conditional Use Permit) Kempsville District Applicant requests a Conditional Use Permit for "permanent makeup ", which is considered to be aform of tattooing There will be only one (1) customer at a time All of the regulations applicable to tattooing will apply to this activity Evaluation and Recommendation Planning Staff recommends approval Planning Commission recommended approval (11-0) No opposition (Consent Agenda) Prosperity Beach, L.L.c. (Modification of Proffers) Beach District Applicant desires to modify the proffers of a 2006 rezoning due to the need to shift the location of buildings shown on the proffered site plan (investigation after the 2006 rezoning found a water line traversing the site where a building was shown). 5,000 square feet of additional retail is also being added. Evaluation and Recommendation Planning Staff recommends approval Planning Commission recommended approval (11-0) No opposition (Consent Agenda) Residential Investment Properties Change of Zoning Bayside District Applicant requests a Change of Zoning from R-IO toA-12 Nine (9) townhouse (condominium) units will be built at d a density of 10.7 units per acre. Surrounding area is developed at 12 to 18 units per acre Design and materials of buildings are of high quality AICUZ is less than 65. Evaluation and Recommendation Planning Staff recommends approval Planning Commission recommended approval (11-0) No opposition (Consent Agenda) March 18, 2008 I I I " - 16- CITY MANA GER 'S BRIEFING PLANNING ITEMS PENDING WestNeck Partners, LLC Princess Anne District Applicant proposes to rezone the site from AG-1 and 2 to 0-2 Office for the purpose of developing an office complex of five (5) buildings They will provide a wide, landscaped buffer adjacent to West Neck Road. Site will include a trail system Buildings are designed in a Southern Rural/Tidewater style, compatible with this area The Historic Review Board has endorsed this application Project is compatible with the AICUZ at this location Evaluation and Recommendation Planning Staff recommends approval Planning Commission recommended approval (11-0) No opposition (Consent Agenda) Larisa Properties, LLC (Modification of Conditions) Rose Hall District Applicant requests a modification of a 1981 Conditional Use Permit to allow for an expansion of an existing car wash on the site The applicant is currently expanding a former gas station building on the site to be used as a self-service laundry. Evaluation and Recommendation Planning Staff recommends approval Planning Commission recommended approval (11-0) No opposition (Consent Agenda) April 22, 2008 Assisi House (Modification of Conditions) Kempsville District Applicant requests a modification of the existing church's Conditional Use Permit for the purpose of constructing a residential dwelling on the site The dwelling will house afamily of mentally disabled individuals A Use Permit is not required for a family of this type. The application is only to modify the Use Permit to allow a dwelling on the site AICUZ is Less than 65 March 18, 2008 I i I - 17 - C IT Y MANA G E R 'S B R IE FIN G PLANNING ITEMS PENDING Evaluation and Recommendation Planning Staff recommends approval Planning Commission recommended approval (11-0) There was opposition Evelyn's Wildlife Refuge (Conditional Use Permit) Centerville District Applicant requests a Conditional Use Permitfor Home-Based Wildlife Rehabilitation Applicant has been a Wildlife Rehabilitator at this location for sixteen (16) years, primarily caringfor small mammals, birds and possums Applicant meets the standards in the Comprehensive Zoning Ordinance for this type of wildlife rehabilitation Evaluation and Recommendation Planning Staff recommends approval Planning Commission recommended approval (11-0) No opposition (Consent Agenda) Welden field of Virginia, LLC (Subdivision: Fenwick Forest) Centerville District (Change of Zoning) (Overall master plan for CBN) Applicant requests a Change of Zoning from R-5D, I-I and 0-2 to PD-h-2 (r-5D) for the purpose of developing a residential community laid out in neo-traditional style. There will be sixty-nine (69) single-family homes and eighty-one (81) townhomes (density = 3.2 per acre). Project will be part of a larger mixed-use development called "The Villages of Blenheim" AICUZ is Less than 65 Evaluation and Recommendation Planning Staff recommends approval Planning Commission recommended approval (10-1) No opposition March 18, 2008 I I - 18 - C IT Y MANA G E R 'S B R IE FIN G PLANNING ITEMS PENDING Argold Dam Neck, LLC Princess Anne District Applicant requests a Change of Zoning form AG-2 and R-15 to R-7.5 for the purpose of developing one hundred thirteen (113) single-family dwellings Homes will have 2,000 to 2,400 square feet offloor area Proposed density is 3.5 units per acre. Surrounding area ranges from 2.2 to 3.5 units per acre AICUZ is Less than 65 Evaluation and Recommendation Planning Staff recommends approval Planning Commission recommended approval (11-0) There was opposition Mill Dam Associates, LLC (Subdivision Variance) Bayside District Applicant requests a Subdivision Variance to lot width Applicant desires to subdivide an exiting 1. 34-acr parcel intofour (4) lots, ranging in sizefrom 10,928 square feet to 22,828 square feet The existing parcel has only 40 feet of frontage on a public street (50 foot per lot is required.) AICUZ is Less than 65 Evaluation and Recommendation Planning Staff recommends approval Planning Commission recommended approval (11-0) There was opposition Kathleen Renfro (Conditional Use Permit) Princess Anne District Applicant requests a Conditional Use Permit for horse riding lessons The site is currently developed with a house, horse barn and a horse-riding ring. Applicant has eight (8) horses Lessons will be conducted during the day for beginning-level riders There are will be no employees There will be no shows on the site March 18, 2008 I I II II - 19 - C IT Y MANA G E R 'S B R IE FIN G PLANNING ITEMS PENDING Evaluation and Recommendation Planning Staff recommends approval Planning Commission recommended approval (11-0) No opposition (Consent Agenda) March 18, 2008 I I II ji - 20- CITY MANA GER 'S ITEMS STRUCTURE FOR FY 2009 BUDGET WORKSHOPS The City Manager distributed correspondence re the Structure of FY 2009 Budget Workshops and requested this be discussed during the City Council Session of March 25, 2008. Said correspondence is hereby made a part of the record. BY CONSENSUS, City Council ADJOURNED THE CITY COUNCIL WORKSHOP at 5:50 P.M. March 18, 2008 I I II City e>f -V-irgirria Beach OFFICE OF THE CITY MANAGER (757) 385-4242 FAX (757) 427-5626 TTY 711 VBgov.com MUNICIPAL CENTER BUILDING 1 2401 COURTHOUSE DRIVE VIRGINIA BEACH, VA 23546-9001 March 27, 2008 The Honorable Meyera E. Oberndorf, Mayor Members of City Council Subject: Assessment Process Review Dear Mayor and Council Members: On March 18, 2008, Mr. Robert Gloudemans, from Almy, Gloudemans, Jacobs, & Denne, presented the findings of the residential reassessment process review. Enclosed is a bound version of the final report. We apologize for the late delivery. Sincerely, . ~re City Manager JKS/rdb Enclosures (1) c: Jerry Banagan, City Real Estate Assessor Catheryn Whitesell, Director of Management Services ''l I' FINAL REPORT , ASSESSMENT PROCESS REVIEW RESIDENTIAL REASSESSMENT PROCESSES ,F Prepared for THE CITY OF VmGINIA BEACH DEPARTMENT OF MANAGEMENT SERVICES By ALMY, GLOUDEMANS, JACOBS & DENNE Property Taxation and Assessment Consultants 7630 North 10th Avenue Phoenix, Arizona 85021 w January 28, 2008 Alroy, Gloudemans, Jacobs & Denne . ., . Final Report - Review of Residential Reassessment Processes, CIty of Vzrgznla Beach I' .. Contents Acknowledgments..... .......................... .......... ......... ........ ............................ ...... ........ ........ .............. iii Executive Summary ........................... ....................... ....... ........ ....................... ...... ................ ......... iv 1. Introduction .................. ................... .......... ...... ....................... ........... ................... ................... 1 1.1 Assignment ....... ........................... ........ ............ ................ ........... .................................... 1 1.2 Setting........................................................................................................................ ..... 1 2. Resources, Staffing, and Management.... ..................................... ........... .......... ......... ............. 4 2.1 Current Resources............ ............................................ .......... ..................... ............ ........ 4 2.2 Current Workloads......... ........................... .................................. .................. ....... ........... 4 2.3 Evaluation of Needs .............. ........ ...... .............. ............ ..................... ............. ................ 5 2.4 Management............. ............... ..... ................................. ............... .............................. ..... 8 2.5 GIS............... ...... ........... ................ ........... .................................... ......................... .......... 9 3. Valuation Methods and Techniques...................................................................................... 11 3.1 Background and System Conversion ............................................................................ 11 3.2 Data Collection and Sales Analysis .............................................................................. 12 3.3 Single-Family Residential Valuation ............................................................................ 13 3.3.1 Old System..................................................................... ................. ........ .... .......... 13 3.3.2 New System.......... ................................ ...................... ........................ ............. ..... 14 3.3.3 Land Valuation...... .... ............ ....... ...... ......... ........ ............... ................... ................ 14 3.3.4 Improvement Valuation ........................................................................................ 14 3 .4 Hi-Rise Condominiums.......... ................. ......... ..................................... ....................... 15 3.5 Comparable Sales Module ............................................................................................ 16 3.6 Multiple Regression Analysis ....................................................................................... 16 4. Sales Ratio Study Performance Analysis.............................................................................. 18 5. Conclusions and Recommendations ................................ ..................................................... 29 5.1 Conclusions.............................. ..... ........................ ............. ........................ ......... .......... 29 5.2 Recommendations... ............ ...................... ....... ............................. ....................... ......... 29 Almy, Gloudemans, Jacobs & Denne Final Report - Review of Residential Reassessment Processes, City of Virginia Beach 11 I I II ACKNOWLEDGMENTS Almy, Gloudemans, Jacobs & Denne (AGJD) benefited greatly from the cooperation of the City of Virginia Beach in its review of the residential reassessment processes employed by the office of the Real Estate Assessor (hereafter, "the assessor"). Weare especially grateful for the com- plete cooperation of the assessor, J.D. ("Jerry") Banagan and the assistant assessor, Ronald ("Ron") Agnor. We thank Kim Utley for her help in supplying the data and documents we re- quested. Our review would not have been possible without the frank and professional assistance from the residential real estate appraisal staff, including the following appraiser supervisors and senior assessors: Kim Smith, Tom Vitz, Dick Whitaker, George Barham, and Sue Cunningham. Additionally, we would like to thank Debbie Apple of the assessor's office and Susan O'Neill of the GIS center. We also wish to acknowledge the assistance of Ron Berkebile of the Department of Management Service. AGJD's study team was headed by Robert Gloudemans, and its members included Richard Almy and Robert Denne. Almy, Gloudemans, Jacobs & Denne Final Report - Review of Residential Reassessment Processes, City of Virginia Beach 111 j EXECUTIVE SUMMARY The City of Virginia Beach contracted with the firm of Almy, Gloudemans, Jacobs & Denne (AGJD) for an independent, objective review of both commercial and residential reassessment procedures. This report presents the findings of our residential review. It is based on interviews and observations made during 28-30 November 2007. In preparation for our visit, we reviewed property assessment statutes, forms, manuals, and other relevant documentation. We also ana- lyzed data proved by the City in a "ratio study", the standard method used to evaluate the accura- cy and equity of residential property values. (The report of our review of commercial reassess- ment processes was submitted on 12 March 2007. That report also examined the setting for real estate assessment in Virginia and some aspects of the management of the assessor's office in more detail than this report does.) The law requires the assessor to value real estate annually at 100 percent of its fair market value, a challenging task in active real estate markets, but one that ensures a high degree of real estate tax equity. We find that the Real Estate Assessment Office does a credible, effective job of va- luing residential properties at fair market value levels. The office is fortunate to have strong lea- dership and an experienced, well-qualified residential staff that effectively employs acceptable valuation methods. Residential values closely track the market and exhibit good uniformity among properties. Our ratio study analyses revealed good uniformity in assessment levels be- tween commercial and residential property, so that each component of the real estate tax base is paying its fair share of the total. At the same time, it is important to note that residential reassessment processes are in transition from those that were possible under the previous mainframe computer-assisted mass appraisal (CAMA) system to those that are possible under the newly installed Pro Val CAMA system. There are a number of opportunities for additional improvements or refmements, some of which the office already recognizes. We summarize some of the more significant opportunities below. · Workload and Staffing. Relative to the number of properties that must be valued and the number of annual events that affect the workload (such as new construction), the apprais- al staff is comparatively small. The staff currently is keeping abreast of its annual work, which is all the more remarkable in view of the comparatively labor-intensive nature of field inspections and the current processes required for confirming and analyzing sales and for updating value estimates. The current staff size does not allow the staff to re- inspect all properties periodically, as professional standards recommend, which would help ensure that all are accurately described. The staffs current success partly is a result of a comparatively small number of appeals, a fortunate circumstance that could be jeo- pardized by the downturn in the property market. We think it prudent, therefore, for the city to consider augmenting both the number and skills of the assessor's staff. We also recommend that a current information technology policy of not allowing the assessor's office direct access to the real estate database to extract selected data for analysis be re- considered, as such a policy inevitably impinges on the efficiency and effectiveness of Almy, Gloudemans, Jacobs & Denne Final Report - Review of Residential Reassessment Processes, City of Virginia Beach iv 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 1/10th of a typical rate. At the same time, the costs of assessment administration, as a percentage of total 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 performance. 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 (1) 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 of residential 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 of ratio 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 of Residential Reassessment Processes, City of 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 of Residential Reassessment Processes, City of 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 ofRACS. 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 fmdings 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 ProVal 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. 1 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, vol. 81, no. 5, October 2005. ing 1 July, which is the assessment date for the next fiscal year. The assessment roll (land book) currently in effect for fiscal year 2007-2008 has a base assessment date of 1 July 2007. The val- ues in this land book were based on market evidence for the period, 1 July 2005 through 30 June 2006, with some consideration given to later sales where possible. The city code also provides for quarterly supplementary assessments for physical changes? The assessor currently is work- ing on 2008-2009 assessments, which are to be completed by 31 January 2008. The assessor receives information about real estate transfers from the clerk of the circuit court via the commissioner of revenue. 3 Sales prices are inferred from the amount of recordation tax paid; there is no requirement that the parties to a transfer complete a declaration giving the parti- culars of the sales. As a backup, the office also has access to sales records in the local multiple listing service (MLS). Information on building permits is received from the Permits and Inspec- tions Department. As mentioned in our commercial report, Virginia cities and counties should lobby for a sales disclosure law, mandating the disclosure of selected sales information at time of sale. In the absence of such a declaration the City should consider adopting a sales confirmation mailer to confirm the price paid and help ascertain the circumstances of the sale and whether any significant non-realty components were included. The new Revenue, Assessment and Collection System (RACS) integrates the records and processes of the Real Estate Assessor, the Commissioner of Revenue, and the Treasurer4. The GRM system of Manatron is a major part of this system. As discussed in section 3, the assessor heavily utilizes the current version of the ProVal CAMA system (also by Manatron) in its opera- tions. The City's Communications and Information Technology Department ("ComIT") is the custodian ofRACS, and RACS users rely on ComIT for crucial support. The Center for Geospa- tial Information Services, a part of ComIT, provides geographic information system (GIS) sup- port. To protect the integrity ofthe database and control use of system resources, ComIT requires that its personnel perform any job that involves more than read-only access to the RACS database, such as producing non-standard reports or obtaining file extracts. Offsetting the advantages of ComIT's policy are the costs they impose on users. Having to prepare job requests ("heat tick- ets") and wait for them to be carried out can delay work and frustrate clients like members of the city council. Even more frustrating is receiving something other than what was requested or ex- pected, thereby necessitating additional costs and delays. If experience in other jurisdictions is any guide, the current policy could eventually result in workarounds that involve the creation of parallel databases that would have the effect of degrading the value of the RACS database. It should be possible to erect system safeguards and protocols that would make a client like the as- sessor responsible for the integrity of the data it collects and that would allow it unfettered access to those data for analysis and reporting. As noted in our commercial review, taxpayers may challenge their assessment first to the asses- sor, second to the board of equalization, and third to the circuit court. Appeals to the assessor are 2 These assessments would be effective on the first of October, January, and April. 3 The commissioner also processes ownership and map changes, initiates sales records, and extends taxes. 4 While approximately 30 other cities and counties in Virginia use Pro Val, Virginia Beach is the first to obtain GRM (Roanoke also plans to do so). Almy, Gloudemans, Jacobs & Denne 2 Final Report - Review of Residential Reassessment Processes, City of Virginia Beach informal. Regarding appeals to the board of equalization, the Virginia code (' 58.1-3379(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 2. RESOURCES, STAFFING, AND MANAGEMENT 2.1 Current Resources The resources allocated to assessment administration are an indication of political support for accurate and equitable assessments. Of course, the nature of the assessment workload affects resource requirements. How the assessor utilizes available resources is essential to operational efficiency and effectiveness, and property tax systems must be well managed if public accep- tance is to be secured. Funding for the Office of the Real Estate Assessor in the 2007-2008 fiscal year is $2,838,696. The total complement is thirty-five. We note with approval the upgrading of a clerical position to a "business application specialist." The incumbent in the position is crucial to the office's successful use of its IT resources. This person serves as a communications bridge between the assessor's office and ComITo While the assessor is requesting additional positions, city budget goals would dictate a staff reduction of three full-time equivalent (FTE) positions. As discussed below, we believe a strong case can be made for increasing the assessment staff; reducing it like- ly would be extremely detrimental. The residential appraisal staff totals seventeen, with one appraiser serving as an office-wide CAMA system specialist. There are three residential supervisors and thirteen appraisers respon- sible for field inspections and for developing and maintaining Microsoft Excel-based neighbor- hood base rate models. The supervisors nominally are responsible for sets of council districts with approximately equal parcel counts. Even though each supervisor has a team of appraisers associated with him or her, the appraisers are not truly subordinate to the supervisor. They work more as roving teams, as they are assigned neighborhoods throughout the city in order to give them more-or-Iess equal work assignments in terms of number of parcels and valuation chal- lenges. Assignments are revised annually. The assessor's office has access to the IT resources provided by ComIT, although as previously mentioned we believe that current polices render those resources less useful than they could be. The office benefits from the data it receives from the Commissioner of Revenue and from the Permits and Inspections Department. A citywide 311 call center, which became operational in September 2007, has reduced call volume and the time spent responding to simple inquiries. The office has the use of ten city-owned automobiles and nine mobile telephones. 2.2 Current Workloads Statistics on parcel counts and statistics on transactions and events such as sales, new construc- tion and renovations, exemption applications and appeals provide an indication of workloads. Market trends obviously affect workloads. Currently, the total number of taxable parcels ofland in Virginia Beach is approaching 150,000. There are more than 141,000 residential parcels (commercial parcels constitute almost 5 percent of the total or about 8,200). The rate of growth has been fairly stable since 1991 at about 1,600 parcels (1 percent) per year. In 2006, about Almy, Gloudemans, Jacobs & Denne Final Report - Review of Residential Reassessment Processes, City of Virginia Beach 4 I' ,i II 1,500 residential units were added (single-family residences, condominiums, townhouses, and duplexes). There were 3,000 residential building additions. In addition to inventorying and va- luing new construction, the residential appraisal staffhad 16,000 sales to review. The sales cul- minate in updated valuation models, and there are about 1,100 residential neighborhoods (which we, consider excessive as discussed in section 3). Nearly two-thirds of all appeals to the assessor are residential appeals, so an annual appeal workload of 400 or more can be anticipated. There is an important time dimension to appraisal work. The deadlines associated with finishing annual assessments by 31 January and quarterly supplemental assessments require physical field inspections of new construction in the run up to the deadlines. The ProVal system allows the assessor to work on multiple annual land books simultaneously, which allows for a more effi- cient use of staff resources. 2.3 Evaluation of Needs Assessors' offices typically do not engage in cost accounting, particularly with respect to how staff members utilize their time, and many do not compile relevant workload statistics. Although the City of Virginia Beach does not compile data on time utilization, the assessor's office does compile useful workload statistics. Table 2-1 provides a pro forma estimate of staffing needs (full-time equivalent positions or FTEs). The assumed workload statistics (column 2) are based on available workload statistics. The productivity rates (column 3) are notional and are based on rates achieved or believed to be achievable in other jurisdictions. The days of work estimates (column 4) simply are the work- load estimate divided by the productivity rate. The indicated FTE need (column 5) is based on an assumed work year of 220 days. Better figures on workloads and productivity rates that re- flect actual achievements in Virginia could be used to refine the estimate. Nevertheless, the es- timates reveal concerns about the adequacy of staffing in a number of areas. The line captioned "Executive & technical support" shows a need of five positions where only three exist now. The additional positions are a statistical analyst and a GIS analyst. In addition, the activities identi- fied as "field data verification" are not now carried out because available staff must spend their time on higher priority activities associated with adding new property to the rolls and carrying out annual reassessments. However, professional standards recommend that properties be in- spected periodically. On the other hand, the number of residential valuation models that need to be recalibrated every year could be substantially less than the 1,100 (one per neighborhood) completed in the past, particularly ifour recommended statistical analyst position were created and staffed. It also should be noted that the estimated staffing requirement of forty in table 2-1 is consistent with the benchmark data presented in table 2-2 (which is the same as table 3-1 in our commercial review). The analysis above ignores administration ofland-use assessments, and it does not take into account probable increases in homestead exemption workloads. Almy, Gloudemans, Jacobs & Denne Final Report - Review of Residential Reassessment Processes, City of Virginia Beach 5 II Ii II Table 2-1: Evaluation of Staffing Needs Position/activity Assumed Productivity Days of Indicated staffing Actual Workload rate/day work needed (FTEs) staffing (1) (2) (3) (4) (5) (6) Executive / management 7.0 5 Real Estate Assessor 1.0 Assistant Real Estate Assessor 1.0 Executive & technical support 5.0 Real Estate Clerical Operations 6.1 8 Deeds processed 22,000 50 440 2.0 Map changes processed 600 30 20 0.1 Permits logged 4,700 50 94 0.4 Homestead exemptions 5,000 50 100 0.5 Other exemptions 3,000 20 150 0.7 Customer service 1,500 50 30 1.0 Appeals logged 400 20 20 0.1 Other support (file updates) 0 100 0 0.0 Notices reviewed/mailed 145,500 500 291 1.3 Non-residential property appraisal 5.2 5 Screen sales 1,000 20.0 50 0.2 Inspect sales 1,000 15.0 67 0.3 I&E questionnaires 3,600 15.0 240 1.1 . Modeling buildinglQA 30 0.5 60 0.3 New work (permits) 200 2.0 100 0.5 Change reviews 7,900 25.0 316 1.4 Field data verification 1,400 12.5 112 0.5 Appeals 100 0.5 200 0.9 Residential property appraisal 17.7 17 Screen sales 10,500 30.0 350 1.6 Inspect sales 10,500 15.0 700 3.2 Modeling buildinglQA 50 0.5 100 0.5 New work (permits) 4,500 8.0 563 2.6 Change reviews 133,200 100.0 1,332 6.1 Field data verification 28,400 35.0 811 3.7 Appeals 300 10.0 30 0.1 Sub-total 35.9 35.0 Overhead Number Hours of staff per year 3.7 0.0 Professional development 23 20.0 457 2.1 Other 36 10.0 359 1.6 Total 39.6 35.0 Almy, Gloudemans, Jacobs & Denne 6 Final Report - Review of Residential Reassessment Processes, City of Virginia Beach I'" II 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 revenues Budget per parcel ($) 18.15 29 8.84 21.20 39.32 Parcels per staff 4,231 30 1,739 2,819 6,667 Source: "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 ofthe 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 of2,819 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 & Denne 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 7.10 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 Val 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 oftools 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 I " II weighted regression can be brought to bear in estimating land values, total values, or both. However, such analyses require still more knowledge and skills. In any case, we recommend that the training and personnel issues underlying the diminished ability of the assessor's office to undertake spatial analyses be addressed at the earliest opportu- nity, along with software compatibility issues, if any. We also recommend that the possibility of implementing modem geostatistical techniques in the appraisal process be given serious consid- eration. Providing for the GIS analytical position mentioned earlier would greatly help to ad- dress these needs. Almy, Gloudemans, Jacobs & Denne Final Report - Review of Residential Reassessment Processes, City of Virginia Beach 10 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 ProVal comparable sales module, and section 3.6 introduces the potential for MRA mode1- 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 of reductions 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 OctoberlNovember 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 2007/2008 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 cent declines in the number of sales being recorded. This is a particular problem in the Pro V al systems because ProVal's valuation tables are neighborhood-driven. With few sales to work with, assessors cannot reliably determine market adjustment factors and the like (see section 3.2 below). We strongly recommend that the City restructure its neighborhoods to ensure that there are adequate sales available for market analysis. As a rule of thumb, we believe that neighbor- hoods should be sufficiently large to generate at least 15 and desirably 30 sales per year. 3.2 Data Collection and Sales Analysis As noted earlier, conversion of data to the new ProVa1 system should be entirely complete by February 2008. Although the conversion took longer than expected and there were some prob- lems (common for such projects), it appears to have been successful and places the Assessor's office in a much better position to take advantage of the new system's efficiencies going for- ward. Pro V al is sketch-driven in that areas are calculated from measurements and building component codes, and area measurements drive valuation rates. Except for high-rise condos, appraisers complete sketches of all new residential construction as part of field inspections. Appraisers de- scribe the Pro V al sketching tool as more difficult than in the old system but equally efficient af- ter one gets over the learning curve. A major difference is that in the old system each floor of a multiple story building was sketched, whereas in the new system one only sketches the ground floor and assigns codes to vertical sections. In tract subdivisions, sketches of standard models can be selected and modified as necessary. The strong real estate market and record numbers of sales, new construction, and remodeling ac- tivity through at least 2006 (coupled with the relative staffing shortages noted in 2.3 above) have made it difficult for the office to keep up with all the activity. The office has been able to make inspections of building permits, sales, and appeals where required5. Contrary to best practice, however, it has been unable to conduct periodic reinspections of all properties on a rotating basis (e.g., every 4-6 years). However, the office does have Pictometry (multiple oblique aerial pho- tos that permit one to view building details with reasonable accuracy), which has been used in data review of selected areas. The office also plans to obtain Pictometry's automatic change de- tection technology, which will highlight physical additions (or destruction) to property. As in many other jurisdictions, renovations pose a special problem. Although they are not used in value calculations, ProVal does provide for the capture of type, year, and amount (value) of renovations. Appraisers are instructed to adjust effective age and not grade or condition unless special circumstances call for doing so. We find this policy reasonable and conducive to consis- tency. 5 Building permits are still maintained on the mainframe. Permits are downloaded to an Access file and printed. A clerk culls them to eliminate those that do not call for field work, sorts them between commercial and residential and by district, and places them in neighborhood folders with a copy of the site plan for field inspection. ProVal provides some workflow management support. A record is kept of the permit record number, the GeoPIN, the permit type and date, the person assigned to work the permit, and other relevant events. Almy, Gloudemans, Jacobs & Denne Final Report - Review of Residential Reassessment Processes, City of Virginia Beach 12 As described in our commercial report, the Commissioner of Revenue works sales first. The Commissioner assigns a transaction code and determines the consideration amount from the transfer tax stamps if it is not stated on the deed. Previously the Assessor's office held sales in the mainframe until appraisers worked a neighborhood, at which time they determined the validi- ty of sales in the neighborhood for appraisal purposes. Now appraisers are provided with a list of all sales not yet worked in their neighborhoods every two weeks and instructed to validate those sales before the next list is generated. Keeping sales validations current in this manner should make it possible to generate earlier statistics on market trends and contemporary assessment le- vels. Since the current version of Pro Val does not have a standalone sales file, sales data are added to property records. This can be problematic in that property data could change after the sale (e.g., the case of a room addition), which creates a mismatch between the sale price and property data. For practical purposes, however, this danger is minimal since appraisers are likely to be aware of the situation and could disqualify the sale. The next version of Pro Val will purportedly have a standalone sales file that captures property characteristics at time of sale and thus address this issue, which will also make it more feasible to use multiple years of sales in appraisal analyses. Formerly appraisers simply assigned a code of "V" (valid) or "I" (invalid) to a sale with no do- cumentation of backup for their determinations. Fortunately, the Pro Val system supports the as- signment of sale validation codes indicating the reason a sale is considered invalid. We strongly recommend that the office take full advantage of this feature. We were also glad to learn that plans call for making MLS printouts (including pictures) for appraisers to use in sales validation. While it is good for appraisers to validate sales, we are somewhat concerned with the wide dis- semination of this function with each appraiser working the sales from the neighborhoods for which they are responsible. To maintain consistency and evenness in the process, we would pre- fer to see a small group of appraisers responsible for at least initially validating sales and assign- ing appropriate validation codes. 3.3 Single-Family Residential Valuation 3.3.1 Old System The old system of residential valuation was extremely labor-intensive. Appraisers would plot sales on maps and work with spreadsheets of sales sorted by neighborhood, year built range, grade, condition, and stories. Vacant land sales were also listed for each neighborhood. Land and building rates would be manipulated to produce overall sales ratios near 95 percent. Valua- tion rates for thousands of combinations of these parameters were updated each year, often based on interpolation and judgment due to inadequate sales. Appraisers posted the new valuation rates to separate tables and entered new site values individually for each parcel. While the system produced accurate values in terms of sales ratio statistics, it was time-consuming and inefficient. Its success depended critically on good judgment, and the lack of sales for an individual stratum could lead to sizeable changes in values from one year to the next, although percent changes in values were also monitored. Almy, Gloudemans, Jacobs & Denne Final Report - Review of Residential Reassessment Processes, City of Virginia Beach 13 3.3.2 New System Assessments for 2007-2008 will be based on a hybrid of the old system and the new system (ProVaI7.9). As will be seen, it automates the bulk of the annual update process. The system has an attractive master screen displaying ownership, valuation, and assessment information, the building sketch, and the most recent photo. From there the user can display any memos on the property and navigate to other screens and functions. Of course, only authorized users can modi- fy valuation tables and parameters. Users can generate a number of pre formatted Crystal reports for which they can specify desired parameters (e.g., sale date range for a sales ratio report), but cannot modify report formats ("heat tickets" must be submitted to IT for this purpose). 3.3.3 Land Valuation The Pro Val land valuation system is neighborhood-driven. For each neighborhood, appraisers specify "land types" (e.g., residential lot, farmland, swamp, or forest) and land valuation me- thods (e.g., site value, front foot, or size range). Most residential land was appraised on a site value basis in the old system and converted to land type "lot" in the new system. Parcels with multiple land types (e.g., a home site plus farm land) can be assigned multiple land lines. Golf courses were converted to two land lines: one for the standard land type ofthe neighborhood and a second for the golf course increment. "Additional" percentage adjustments in the old sys- tem (termed "assessment-land percent") were assigned influence code "4" (shape/size adjust- ment) in the new system with the same percentage adjustments applied and any accompanying explanatory notes converted to "memos" in ProVal. While we have no major quarrels with these land valuation procedures, we recommend that managers and senior staff strive to keep the system straightforward and highly automated, so that land values can be easily updated. Land type should not be used to code site features (e.g., traf- fic or view), which in turn should be assigned site influence codes with corresponding adjust- ments that can be modified for entire neighborhoods as needed. Wherever possible, only single land lines should be used (the case of golf course land comes to mind). 3.3.4 Improvement Valuation Pro Val provides users with updated Marshall & Swift costs. The updates come as an Access file, which the City copies and saves as a new file. The updates contain base rates and rates for dwel- ling exterior features, patios, porches, and garages, but not miscellaneous interior, exterior, and yard improvements, for which the City must maintain its own rates (and are not overridden by the updates). Rates for items with similar costs can be assigned to "groups" so that the user need only maintain a single rate. The ProVal system allows users to adjust base improvement values in several ways. One way is through the "house type" factor tables. Each such table has pre-assigned numbers (beginning with 11, 12, 14, ...) and corresponding user-assigned factors (e.g., 0.90 or 1.15). Each table has a number and is assigned to one or more neighborhoods. For now, the City has been assigning them the number of the neighborhood to which they apply. Although the factors are table-driven and can thus be easily changed, house type codes (11, 12, etc.) must be assigned and maintained Almy, Gloudemans, Jacobs & Denne Final Report - Review of Residential Reassessment Processes, City of Virginia Beach 14 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 V al 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 V al 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 15 Valuation begins by analyzing sales in a project to determine the typical unit value, which is then multiplied by the number of units to estimate total project value. An estimate of land value made during "artery" studies (which were described in our commercial review) is divided by number of units to obtain estimated land value per unit, which is subtracted from total value per unit to obtain building residuals. hnprovement models are then calibrated to yield required building values. 3.5 Comparable Sales Module Like most CAMA systems, Pro Val has a comparable sales module, although Virginia Beach has yet to use it. The user assigns points to selection characteristics, which include land size and var- ious improvement characteristics (users can add several additional features to the default list). The algorithm searches the subject neighborhood for the best comparables based on the assigned points and returns the five best comps (several additional neighborhoods can be specified if de- sired). Optionally, the algorithm will search unsold as well as sold properties. Search parame- ters can be saved and the profiles reused. The ProVal comparable sales module is typical of several others in the industry. It will find the best comparables given the selected parameters and points, but is suboptimal in terms of para me- ter selection and cumbersome in terms of weighting the parameters, as points are in various units corresponding to the units in which the parameters are coded (square feet, years, number of bed- rooms, garage stalls, etc.) rather than true percentages. Further, once selected, comparables are not adjusted for sale date or differences from the subject property. This is not to say that the comparable sales module is not useful, but rather to put it in perspective and note that the City may find opportunities to enhance its capabilities in this area. 3.6 Multiple Regression Analysis Many larger jurisdictions like Virginia Beach use an automated version of the direct sales com- parison approach based on multiple regression analysis (MRA) for residential property. Unfor- tunately, ProVal currently does not support such an approach. We note, however, that Manatron, the owner of Pro Val, recently acquired Sigma Systems, based in Buffalo, New York, which does support MRA and which also has a much more sophisticated comparable sales program that ad- dresses all the shortcomings of the Pro Val approach noted above. A number of Sigma's current clients (including Salt Lake City and Cape Town, South Africa) are current users ofMRA. While we see no compelling reason for Virginia Beach to implement MRA in the near term, we recommend that the City monitor developments with the Sigma acquisition and the anticipated addition ofMRA and an enhanced comparable sales module in version 7.10 of the ProVal suite. When the opportunity is ripe, we recommend that the City implement the method on a pilot ba- SIS. We also note that it may be possible to use MRA to help calibrate existing valuation tables. Pro V aI's largest client, Snohomish County, Washington (county immediately north of Seattle and King County), currently uses MRA for this purpose. The County has successfully replicated 16 Almy, Gloudemans, Jacobs & Denne Final Report - Review of Residential Reassessment Processes, City of Virginia Beach the ProVal 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 ProVal 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 of Residential Reassessment Processes, City of Virginia Beach 17 4. SALES RATIO STUDY PERFORMANCE ANALYSIS Ratio studies are the chief means by which assessment performance is measured. The primary guideline on how to perform such studies is the Standard on Ratio Studies (IAAO, 2007 or its predecessor, 1999). Although Virginia Beach makes good use of ratio study statistics during re- valuation work, the City and the state generally have traditionally prepared only summary studies and not afforded much attention to the guidance the IAAO standard offers. The most often quoted statistics relating to the performance of the Virginia Beach Assessor's office are the re- markably low numbers of assessment appeals. The incidence of appeals in Virginia Beach has in fact remained admirably low in recent years, although with the recent changes in the economy the incidence of appeals can be expected to grow. Appeal statistics, however, can fail to illumi- nate the assessment situation under a variety of circumstances, so ratio statistics are essential to consider. We were pleased to see that the new Pro V al system greatly expands the capability of the asses- sor's office to conduct ratio analyses through its so-called Value Calibration Analysis option. Since the in-place assessments had been developed using the prior system, however, we con- ducted our own analyses of the quality of those assessments. The standard statistics from such analyses of the categories of residential properties used in Virginia Beach, presented in Table 4- 1, indicated no overall problems. Table 4-1: Standard Ratio Study Statistics for Residential Property Assessments for 2007 Compared to Time Adjusted Sales from 2005-2007 95% Confidence Interval for Price Related Coefficient of Group Median Median Differential Dispersion Upper Lower Bound Bound Count Urban SF, Vacant Residential Land 0.92 0.87 0.95 1.05 0.18 145 Urban SF, Residence 0.98 0.98 0.98 1.02 0.09 11,083 Urban SF, Outbuildings Only 0.92 0.79 1.05 1.02 0.14 15 Urban SF, Townhouse 0.96 0.96 0.97 1.01 0.08 3,986 Urban SF, Low Rise Condominium 0.98 0.98 0.99 1.01 0.07 4,078 Urban SF, High Rise Condominium 1.02 0.99 1.03 1.00 0.08 396 Urban SF, Duplex 0.92 0.85 0.98 1.04 0.14 76 Urban SF, House and Garage Apmt 1.13 0.75 1.27 1.05 0.15 5 Urban SF, House and Apartment 1.05 0.86 1.21 1.04 0.13 11 Urban SF, Historic House 0.56 1.00 1 Suburban SF, Vacant Resid Land 0.93 0.74 1.06 1.03 0.27 35 Suburban SF, Residence 0.99 0.96 1.02 1.04 0.12 147 Suburban SF, Outbuildings Only 0.98 0.77 1.20 1.08 0.22 2 Overall 0.98 0.98 0.98 1.01 0.08 19,980 Almy, Gloudemans, Jacobs & Denne Final Report - Review of Residential Reassessment Processes, City of Virginia Beach 18 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 4-1: Sales Ratios Plotted Geographically 1 (blue) indicates lower ratios, 3 (green) middle ratios, and 5 (red) highest ratios *.f- " "Iff: ..~ _ .~"~ior~ f_~ ,~,..,,~ if..l".~~ i:~~ 51 of" i;. .~ _ ~ ~. _ _~_ tl>...1,1""~ .,' \ 'If. ", x'~'.('...... . ,,,o\.,'~. '. '"#:f c_ - ~"~1:J<' \' - " > ~ Il.-J ,,'"t .>1, .:' ( ..' ~ ,,-'Of-". "/~" ~\_, A.t "'. ~4... .LL ...-i" ~,.;' 1'" ~\ .,' '" 'l>" - ~.' "_:~.' st_ ,,~ -l~ "h-1 ". -~ tf.~. ~ ,,'1' ~".H" \.. It .. t ~\.r '. t~. _ ;', 't- i~. ~~~ :l't. ., I :f ~. Ji' ''iI~'' ,";'. . ...' \,. .~., , '\i <.ui ," - _" - " _ i- ,.' _ .LlJi . ~- .. 'c' . ,'t.' . . ~T, '......:. ",~ '.'. . '''.''';'.'11 'II, . ,I '. .~, ;'t'''. llo;., ,,". ..r."~~~~1I"1:~~"~-'.\~. _.~"'~ . l' ~ t.. ".'1.:_ i..'~" .i~ OJ .2..;...... ...,.~. .... . I,...,... "ft' ;1... !" "_ .,. '1'~1 ... ".. .4. I ~ ~~ III C ~ o Z .s 4 '3 ~2 .1 ~ ;. ~I ,r. '~t ~ 1??oo Almy, Gloudemans, Jacobs & Denne Final Report - Review of Residential Reassessment Processes, City of Virginia Beach 4 " 111 ,,~..... . I,', ' ~r . "~.".:" '-<< ::$', .' ,,: ~~ . ..1l11 < .. . " '. . ,'. . . . . 2000 4000 600ll 800Il fasting 20 Figure 4-2: Box Plot of Sales Ratios by District 1.80 * * * .. .. ,. .. 1.60 I '" ... ... .. f ; t i I ... . I I t I I ,. I 1,40 ,. 0 g ~ 1.2 0 Q. ~ 6 a: t54 48 14 n ~ 1.00 49 'W' 0 9 0 0 0 0 0 a ... ,60 8 0 ... t 0 ... ... ,. 0 .. .. .. .. ; ... ... .. ... .40 .. *' 10 20 30 40 50 51 60 70 75 DistNum In Figure 4-2, and in all box plots, ratios of assessments to time-adjusted sales prices are plotted on the vertical axis and the other variable, in this case the district number, is plotted horizontally. The shaded boxes enclose the central fifty percent of the data, the inter-quartile range (IQR), with the tops and bottoms indicating the upper and lower quartiles and the horizontal black lines within the boxes indicating the medians. The numbers near the median indicate the number of sales in the stratum or subgroup. The vertical lines indicate the range of data that would not be considered to be either outliers, defined as observations at least 1.5 times the IQR beyond the nearer quartile, or extremes, defined as observations at least 3.0 times the IQR from the nearer quartile. Outliers are plotted as open circles and extremes as asterisks. As the box plots readily indicate, all the districts have very nearly the same median and comparatively little dispersion about those medians. It might also be noted that the degree of dispersion is approximately uni- form across the districts. As noted above, the assessments analyzed here are for fiscal year 2007-2008, which has a base assessment date of 1 July 2006, and are based on market evidence generally collected between 1 July 2005 and 30 June 2006. For the analyses reported here, sales from an augmented time win- dow were used: 1 July 2005 to 30 June 2007, with sales adjusted for time to eliminate any dis- 21 Almy, Gloudemans, Jacobs & Denne Final Report - Review of Residential Reassessment Processes, City of Virginia Beach torting effects that may have arisen from using the extended time frame. As with our previous report for commercial property, for sales validation purposes we relied on two layers of sales re- view conducted by the City: the screening performed by the office of the Commissioner of Rev- enue and the further validation performed hy appraisers during the revaluation process. In addition to examining sales ratios by location, we also conducted a series of analyses in which we compared ratios against key property characteristics: year built, building size, lot size, zon- ing, number of stories, construction grade, physical condition, property type, and value range. The balance of this section contains graphical results from those analyses. In each case, one would hope to see no significant difference in assessment levels across the range of these charac- teristics. For example, small, mid-size, and large homes should all be assessed near the overall city-wide median (0.98). Systematic differences would indicate a problem in valuation sche- dules (e.g., a failure to account for differences in building costs or popularity among small and large homes). Figure 4-3 contains "scatter plots" of sales ratios according to the year in which a residence was built. The left-hand plot displays the full range of ages since the 18th century and the right-hand plot examines houses built since 1950. Each dot in the plots locates the ratio of a single sale. As can be seen from the left-hand plot, very few houses in Virginia Beach were built before 1950. The lines in the graph are the best fit (regression) line and its 95% confidence limits. As can be seen most clearly in the right-hand graph, assessment ratios remain closely centered near the city-wide median ratio of 0.98 regardless of year built, indicated good uniformity between newer and older homes (this further implies that the City's depreciation tables are working well). Figure 4-4 examines ratios by improvement size and indicates good uniformity between smaller and larger homes. Figures 4-5 and 4-6 contain similar scatter plots of sales ratios against lot size. The left-hand plot of figure 4-5 displays the full range of lot areas; the right-hand plot is of a lesser range. Figure 4-6 displays ratios for the most common lot sizes. Again, the patterns indi- cate good uniformity. Almy, Gloudemans, Jacobs & Denne Final Report - Review of Residential Reassessment Processes, City of Virginia Beach 22 ,. 1~ ... S ~L Figure 4-3: Plots of Sales Ratios by the Year in which Houses Were Built un.ar Regression w... 1.00 1.75 1.50 1L1.2S !2 i 00 1950 1960 1970 1960 1990 2000 2010 vrSullt Figure 4-4: Plot of Sales Ratios by Size of House Unear Regression w,.. o o R Sq Lileor . 0.003 8000 1??oo 1.<0 o e o Almy, Gloudemans, Jacobs & Denne Final Report - Review of Residential Reassessment Processes, City of Virginia Beach @ o C) R Sq Linear . 0.005 o 1150 1800 1850 1900 1950 2DOO 2050 YrBullt 1.80 1.60 1,40 1.20 Q. ~ Ii 1.00 < .80 .60 0 ,4 0 o o o 2000 6000 4000 FinSize o o <b Untar Regres!ilon w,.. R Sq UlOar' 0.004 23 1.80 1. 1 ... ~ .... ~,.00 .<0 1,20 a.. U) 0< t- o: 1 .00 U) 0< Figure 4-5: Two Plots of Sales Ratios by Lot Size Unl!iaf Regression w... .<0 0 Unear Regressl... o o o 0 o o Sq u.ear . 1 .sne-8 o SOOOO 10??oo 150000 200000 250000 300000 Ar...GRM Figure 4-6: Plot of Sales Ratios by Most Common Lot Sizes 1.80 Linear Regressi... 1.60 R Sq Linear = 3.399E-4 1.40 ce o o o .80 o <0000 ~o 0 c900 ~ 0 0 o .60 o~o .d(l 0 0' 0 0 o 0 o .40 o 20000 40000 6??oo 80000 100000 AreaGRM Almy, Gloudemans, Jacobs & Denne Final Report - Review of Residential Reassessment Processes, City of Virginia Beach 24 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 of ratios 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 ... ~ ~, <> . <> <> e <> <> <> i . , ! . i . . . . . . ; 8 <> fl El g 8 ~.,. i 0 0 <> 3 H .,~., ~ 't t I <> . <> " . I <> >> ,jJ e ft <> ~ <> <> tI II <> 8 <> <> 8 <> g . <> <> o <> . 1 2 3 4 to 11 12 13 14 15 ,. 1 18 1& ~ ~ ~ n ~ ZonCede Figure 4-8: Plots of Sales Ratios by Number of Stories (Left) & Construction Grade (Right) >0, ".. ...."'" ......g+ -...... ....... 25 Almy, Gloudemans, Jacobs & Denne Final Report - Review of Residential Reassessment Processes, City of Virginia Beach As suggested in figure 4-9 below, one area of some minor concern is that appraisers may have over-reacted to departures from average physical condition, assessing those in poorer condition too low and those in good condition too high. The presence of a real problem in this regard is far from established, however, due to both the small number of properties involved and the possibili- ty of alternative causes for the phenomena, such as sales of property made in contemplation of a change in use. Figure 4-9: Plot of Sales Ratios by Physical Condition Category 1.80 1, I o 1.40 1.20 .80 a. II) ~ a: ~ 1.00 Figure 4-10 is a box plot of sales ratios by the same property categories as is table 4-1. Again, no problems are apparent aside from those categories with too few sales to draw reliable conclu- SIons. Almy, Gloudemans, Jacobs & Denne Final Report - Review of Residential Reassessment Processes, City of Virginia Beach 26 1,80 Figure 4-10: Plot of Sales Ratios by Property Category o o o o " o .. t i 8 8 o o o j 3 . 5 .J a '" " '" " .. .lll l/l !! I i f ."I ."I ."I , l I t I I (') I 1 i f 11 ! ~ 1 1 II. l Class Finally, we explored potential disparities in the treatment of lower 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 Figure 4-11: Plots of Sales Ratios against Market Value 1.110 Unear Regresston w... " Unur Regression w... 1 A. ~ 11I:1 :! " o o 1. ~o o o 1 A. ! ~I, o o RSqU-.O.l101 o 0 RSqU--4274E.. o lOOlXXJO _ 300000O 400000O 500000O 600000O EstMklVal SllllOOO 1000ooo .5OOllOO 2OOOIlOO Es1Mk\VaJ In summary, the performance of the assessor's office on residential assessments for 2007 appears to have conformed well to best practices as codified in the IAAO Standard on Ratio Studies. Procedurally, we are pleased to note that the software available to the assessor to monitor ap- praisal performance has recently been substantially improved with the introduction of the Pro V al system. That system, however, is not natively capable of producing the graphical displays in- cluded above. The IAAO standard notes that graphical presentations constitute important tools for both analytical and communications purposes. Accordingly we suggest, as a matter of less than urgent priority, that consideration be given to acquiring software to enhance the ability of the office to undertake such statistical and graphical analyses. In view of the ability of Pro V al to export the necessary data readily, such an upgrade should be a low-cost, high-value proposition. Almy, Gloudemans, Jacobs & Denne Final Report - Review of Residential Reassessment Processes, City of Virginia Beach 28 5. CONCLUSIONS AND RECOMMENDATIONS 5.1 Conclusions Enumerated below are the main conclusions of our review of the residential reassessment processes in use in the City of Virginia Beach. 1. Residential assessments in Virginia Beach are based on acceptable methods, and they meet professional standards for level of assessment and uniformity of assessments. 2. Credit for the above is due to the strong leadership provided by the assessor and by skills and experience of the appraisal staff. 3. Based on the comparatively low number of appeals, there appears to be good public ac- ceptance of assessments in Virginia Beach. Factors that contribute to this fortunate situa- tion doubtless include the professionalism of the assessor's office, the good communica- tion of information about property price trends and assessments, the recent strength of the real estate market, and comparatively low effective tax rates. 4. As the assessor's office fully recognizes, there are no grounds for complacency. A wider downturn in property prices will put pressure on the office to meet its legal and policy mandates. A large increase in the number of appeals will be difficult to manage and could jeopardize the tax base. There will be pressure to increase property tax rates. With its current level of staffing, the office is unable to take sufficient steps to ensure that all assessable property is accurately described, and property that is not accurately described cannot be accurately appraised. An increase in appeals and in the number of applications for residential property tax relief will place further strains on the staff. 5. We believe that the office is understaffed. However, the new computer-assisted mass ap- praisal system (pro Val) offers opportunities for greater effectiveness, although realizing the system's potential will require increasing the mass appraisal skills possessed by the assessor's office. 6. Our recommendations identify areas where we believe appraisal effectiveness and effi- ciency could be improved. 5.2 Recommendations Enumerated below are our main recommendations for strengthening the residential reassessment processes used by the assessor's office. It should be noted that the assessor's office recognizes and has begun to implement improvements in a number of areas. 1. Sales disclosure declaration. The City of Virginia Beach (in conjunction with other Vir- ginia counties and cities) should lobby for a legal requirement that, in connection with Almy, Gloudemans, Jacobs & Denne Final Report - Review of Residential Reassessment Processes, City of Virginia Beach 29 paying the recordation tax, real estate sellers and buyers be required to complete and file a real estate transfer declaration. The purpose of the declaration would be to provide as- sessors and the Department of Taxation with information needed to determine whether a sale is usable for appraisal or for ratio study purposes. It would require disclosure of the particulars of each sale. 2. Sales confirmation form. In the meantime, the real estate assessor should develop a ques- tionnaire to be used as necessary in sales confirmation and screening efforts. 3. Database access. The current requirement of ComIT that the assessor's office must pre- pare job requests to extract, analyze, and prepare customized reports needlessly frustrates and delays legitimate and essential operations and should be reconsidered. It should be possible to erect system safeguards and protocols that would make the assessor's office responsible for the integrity of the data it collects while allowing it unfettered access to that data for analysis and reporting. 4. Staffing. We recommend that the two specialist positions recommended below (see rec- ommendations 5 and 13) be created and that the appraisal staff be augmented by at least two positions so that data can be maintained accurately. 5. GIS enhancements and analyst. Attention should be given to developing meaningful GIS capabilities in the Assessor's office, including the retention of a GIS analyst capable of conducting GIS mapping and spatial analyses for the support of the appraisal staff and management. We also contemplate that this individual would be potentially capable of undertaking or supporting geostatistical valuation analyses. 6. Late sales. In soft markets the Assessor's office should continue to consider late sales in setting valuation rates and factors. This works to the benefit of all concerned and should reduce the number of appeals that could otherwise be expected. 7. Sales validation. Sales validation codes (rather than a simple code of valid or invalid) documenting the reason for rejection should be assigned to sales during the validation process. To promote consistency, we recommend that the Assessor consider designating a small group to validate sales as they are received from the Commissioner of Revenue. This would also facilitate earlier studies of market trends and assessment levels. 8. Neighborhoods. To bolster sample sizes and enhance valuation stability, we recommend that the City consolidate existing residential neighborhoods into larger areas. As a gener- al rule, neighborhoods should be sufficiently large to generate at least 15 and preferably 30 sales per year. 9. Land valuation. Managers should ensure that the system be kept straightforward with all key adjustments tabularized, so that they can be easily monitored and updated. Multiple land lines should be avoided if possible. Almy, Gloudemans, Jacobs & Denne Final Report - Review of Residential Reassessment Processes, City of Virginia Beach 30 10. 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 V a1 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 Pro Val 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 V al system and future releases thereto, which we expect to incorporate greatly expanded market modeling, comparable sales analysis, and ratio study capabili- ties. 14. 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 ~xperience 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