ASSESSMENT DEMONSTRATION PROGRAM P.L Chapter 15, N.J.S.A. 54:1-101

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1 ASSESSMENT DEMONSTRATION PROGRAM P.L Chapter 15, N.J.S.A. 54:1-101 Monmouth County Implementation Update League of Municipalities Conference November 19, 2014

2 LEGISLATION STATEMENT S A1591 The real property assessment demonstration program proposes a real property assessment system that will remain decentralized for the purpose of creating a more responsive and accurate assessment function that can annually adjust to the flow of the county s varied markets and submarkets. The central premise of the demonstration program is a collaborative effort between the County Tax Board and municipal Assessors. The demonstration program relies on this working relationship to address the issues of cost effectiveness and the accurate process of assessment.

3 ASSESSMENT DEMONSTRATION PROGRAM OVERVIEW There are five (5) primary components of the program that significantly modify the current assessment function. They are: 1. Appeal Calendar Municipal fiscal stabilization 2. Annual Assessment Revision Turning off the refund faucet enhanced public service 3. Revision Compliance - Uniformity 4. Assessment Standardization Uniformity, enhanced public service, Annual Reassessment Handbook 5. Education Uniformity, enhanced public service, Tax Board Portal

4 #1 - Appeal Calendar The Demonstration Program modifies the timing of the appeal season and filing requirements so that the vast majority of assessment disputes will be settled prior to the filing of the final assessment list with the County Board of Taxation. Modification of the calendar is intended to stabilize the currentyear fiscal standing of the municipality and reduce the cost of collection shortfalls. (see calendar) Within Monmouth County for 2014 the assessments were reduced 271,680,650 through County Tax Board appeals. Based largely on the settlement of Tax Court issues, the Assessors processed the further reduction of 68,426,000 as 2014 Corrections of Errors. The total change to the assessments of the 2014 Preliminary Tax List was 340,106,650. In the old assessment model the $6,841,635 in TAX DOLLARS associated with the reduced assessment would have been anticipated but uncollected revenue due to loss in appeal that would require emergency bonding with interest. Because we have changed the calendar and placed the appeal process before the budgetary process, Monmouth has greatly avoided the need for emergency bonding.

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6 ASSESSMENT DEMONSTRATION PROGRAM The Assessment Demonstration Program restructures the Assessment Calendar to position the appeal process before the budgetary process. ASSESSMENT FUNCTION CURRENT DATE NEW DATE Assessing Date October 1 PTY October 1 PTY Revaluation Completion Nov 1 PTY 1 week prior to November 1st Preliminary Assessments Certified to County Board (all towns) CTB to post all PRC to County Website Nov 1 PTY Revaluation Assessment Notice Mailed (Revaluation Towns Only) Not prior to November 10 PTY Nov 1 PTY Postcards Mailed (all non-revaluation towns) 1-Feb Nov 15 PTY Taxpayer Review Hearings completed (Revaluation Towns Only) Postcards Mailed (includes all hearing revisions) (Revaluation Towns Only) Not later than December 10 PTY 1-Feb Not later than November 30 1-Dec Added / Omitted Assessment Appeal Filed to CTB On or before December 1 On or before December 1 Added / Omitted Assessment Appeal Judgment Rendered by CTB On or before December 31st On or before December 31st Tax Appeals Filed 1-Apr 15-Jan Appeal Judgments Mailed 30-Jun 30-Apr Tax List Filed by Assessor 10-Jan 5-May Town Adopts Budget 31-Mar 15-May Tax List Finalized By Tax Board (Equalization) 10-Mar 25-May Tax Rate Certified by Tax Board 20-May 31-May Tax Bills Mailed 14-Jun 14-Jun

7 #2 - Annual Assessment Revision The Demonstration Program provides the Assessor with both the authority and the requirement for the annual review and revision of all properties within the jurisdiction. Performing Annual Reassessments are the key to avoiding multiyear refunds. Within the ADP Assessors are no longer prevented from changing assessments, both up and down, from one year to the next. For the first time, the Assessor shall address future appeal exposures through the filing of a modified and defendable assessment in future years thereby avoiding potential reductions and providing enhanced public service. The Assessor shall annually fold in the assessments back to current market value.

8 #2 - Annual Assessment Revision Continued No more Freeze Act each year stands on its own. No more fractional assessments each year taxpayers deal with market value. No more Chapter 123 if the assessment is proven to be $1 off, then it gets adjusted. (we no longer have to protect the municipality by providing a 1/3 margin of error.) No more large assessment changes after revaluation each year assessments are adjusted based on recent market evidence expectation of 1%-3% up or down each year by neighborhood and class.

9 Annual Qualified Reassessments and 5-Year Internal Inspections To improve the accuracy of the annual assessments the current model of "10-year revaluations will be replaced by Annual Qualified Reassessments supported by 5-year internal inspection contracts. Revaluation service is comprised of inspection, valuation and appealdefense. Under the new "annual qualified reassessment" model the assessor will be responsible for valuation and appeal defense. Each municipality will enter into a 5-year contract (3 years with 2, 1-year options) for the "internal inspections of 20% of all line items". This service will presumably be offered by the current revaluation firms. Every 5 years 100% of the properties will be internally inspected which is twice that of the current revaluation model. The assessors annual qualified reassessment, supported by the outside internal inspection model, is intended to be a permanent and sustainable replacement for all future revaluations.

10 5-Year, 20% Internal Inspection Savings Estimate A B C D E F Total Monmouth County Parcel Count 20% Internal Inspections Per Year Countywide Annual Maintenance Cost 10-Year Cost of 2, 5-Year Inspection Cycles 10-Year Cost of Revaluation Estimated Countywide 10- Year Savings on Maintenance (A x 20%) (B x $21) (C x 10 years) (A x $70) (D - E) ($21 per inspection) ($70 per line is statewide average) 249,212 49,842 1,046,682 10,466,820 17,444,840 ($6,978,020) On average, Revaluations cost $70 per line and the proposed system costs $42 per line. By performing the valuation and the appeal defense components of the revaluation model, the municipal Assessor saves the Taxpayers $6,978,020 over 10 years.

11 #3 - Revision Compliance The Demonstration Program provides the power to compel the implementation of revaluation, reassessment, compliance plan, and maintenance programs. By providing the ability to expedite the implementation of the revaluation process there will be greater precision in the timely assignment of individual tax liabilities putting an end to the protracted over/under payment of taxes. The authority to compel facilitates the implementation plan for annual reassessments. In accordance with the State-approved implementation schedule, all Monmouth County towns will be performing annual reassessment supported by 5-year internal inspection programs in the year 2018.

12 #3 - Revision Compliance Continued The Tax Board must shepherd the transition of the municipal Tax Lists from varying ratios of assessed-to-market values, to all towns submitting annual reassessments to 100% of market value. Towns transition through 3 distinct states of Tax List submission as they go through the 5-year implementation process; they are: 1. Revise to Ratio: Review 100% of parcels, revise assessments - both up and down in accordance with current market evidence, to the Directors Ratio (this is for all towns in year 1 and continued by any town that has a revaluation pending for future years) 2. Revaluation Implementation: Submission of final revaluation by outside firm. 3. Revise to Market Value: Review 100% of parcels, revise assessments - both up and down in accordance with current market evidence, to 100% market value.

13 MONMOUTH COUNTY IMPLEMENTATION SUMMARY TRANSITION TO ANNUAL REASSESSMENTS REVALUATION IMPLEMENTATION Assessment Function Action Towns Parcels Towns Parcels Towns Parcels Towns Parcels Towns Parcels Revaluation 3 9, , , ,089 0 Annual Reassessment to Ratio Annual Reassessment to MV , , , , , , ,517 Annual Totals , , , , ,517

14 MONMOUTH COUNTY IMPLEMENTATION SUMMARY TRANSITION TO ANNUAL REASSESSMENTS 20% INTERNAL INSPECTION IMPLEMENTATION Assessment Function Action Towns Parcels Towns Parcels Towns Parcels Towns Parcels Towns Parcels Total Parcels Within Towns , , , , ,517 20% Annual Internal Inspection* 31,737 37,753 46,686 49,903 49,903 *"Total Parcels" x.2 = number of parcels to be inspected annually 100% of parcels internally inspected every 5 years.

15 #3 - Revision Compliance As part of the Year-2 submission of the Preliminary Tax List the Tax Board and a team of Assessors developed a standardized way of reviewing each list for The criteria, which will be refined each year in line with advancements in technology and education, was a high-level review of the following characteristics: Review of Land Assessment Changes: an indicator that the Assessor recalibrated the VCS based on subject sales keeping uniformity within the VCS. Review of Class 4 Assessment Changes: A failure to move all segments of the ratable base in accordance with evidence will undermine inter-class uniformity and cause an unintended shift in the tax levy assignment Review of the treatment of recent sales as compared to other changes: address spot assessing. (See Ratio Scatter Diagram) Review of quantity of total changes: Expectations are different in a town revising from 100% to 100% as compared to a town moving from 80% to 100% or a town revising to the Director s ratio. Review of expected ratio change compared to actual change: Expectations are different in a town revising from 100% to 100% as compared to a town moving from 80% to 100% or a town revising to the Director s ratio.

16 #3 - Revision Compliance Continued

17 #4 - Assessment Standardization The Demonstration Program provides for enhanced system administration by requiring that all municipalities within the County utilize the same property assessment software (MODIV/CAMA system). By adopting a single computerized costing environment we are now positioned to have a common controlling textbook and discussion that does not require alternative subtext to accommodate other systems. System standardization has permitted the development of Monmouth County s ADP Handbook for Annual Reassessments which shall be revised and expanded annually to incorporate the incremental advancement of appraisal techniques and technology. System standardization has permitted the fixed integration of new software tools such as the Tax Board Portal with the County s Microsystems software.

18 ADP Handbook for Annual Reassessments Introduction The intention of this text is to serve as a basic guide in support of your municipal reassessment as required under the Real Property Assessment Demonstration Program. While the assessor s knowledge of the local markets is at the center of the reassessment, proper utilization of Microsystems and available technology will play fundamental roles in your success and accuracy. It is essential for this guide to be considered as a whole, rather than in parts. Following only certain steps will result in an incomplete and non-uniform submission of the tax list.

19 ADP Handbook for Annual Reassessments - Continued VCS Review The delineation of neighborhoods and assigning of VCS s is arguably the most important aspect of the ADP. The VCS takes on a new roll in our system. It may no longer conform to zoning delineations or be an easy way to value an outlier within a neighborhood. Simply put, a VCS is now the identifier of a specific market. Each specific market will need a unique VCS. The same formula may be used in a different market however; it will require a separate VCS. In the event the two markets appreciate or depreciate at different rates, alterations could easily be identified and revised in subsequent years if coded properly. Improvement values will marginally change annually as we update our depreciation and costing tables. The land value will take into consideration the major and/or minor fluctuation to the overall market value. A comprehensive yearly review and revision of your current VCS structure is essential to the success of your annual reassessment. IMPORTANT: You must review your VCS structure after a revaluation as the Company performing the revaluation is not setting up your VCS structure for annual revision.

20 ADP Handbook for Annual Reassessments - Continued CAMA Data Management The management of your CAMA is essential, as the accuracy of value depends on the reliability of the data. Furthermore, the CAMA to saleprice ratio will be used as the catalyst for making global changes. It is crucial that these ratios are uniform and that flat adds, appeal judgments and data errors are corrected. If only a portion of the data is repaired, the entire analysis may be flawed. IMPORTANT: A review of the flat added field prior to clearing the data is necessary. Many municipalities have relied on this field a great degree in the past. Due to the multiple functions this field has held (addeds, appeal judgments, value gaps, etc.), it is important the field is properly reviewed and revised. In response to our needs, Microsystems has produced a robust Global Update Reassessment Menu. This menu allows the Assessor to create spreadsheets that identify flat adds, market, land and deprecation adjustments. It also provides the user with the ability to make global changes as needed. A review of the H-Codes utilized for Hurricane Sandy is also needed. The H-Code assigned to a property is a Hard Edit and will be removed if the improvement value is changed.

21 Standardization and Technology Details Work Product and Delivery Transparency Posting of public documents under the OPRS website. Municipal Tax Map Maintenance shared services agreement Tax Board Portal development and expansion of graphical and statistical analysis software and Class 4 Valuation tools. Integration with Monmouth County GIS and Google Maps Engine. Incremental development of Microsystems functions and integration with external technology tools. Expansion of the Online Appeals Portal

22 #5 - Education Underlying the Demonstration Program is a series of advancements in appraisal practices and procedures which necessitate additional educational requirements that, in fact, double the State s present requirements for Assessors and likewise apply to County Tax Board Commissioners and the Administrator within the Demonstration County. To position the local assessor with the tools to perform the annual reassessments the Tax Board must enhance the assessors' current capabilities through education in valuation principals, mass appraisal and technology.

23 TAX BOARD PORTAL VCS and Sales Mapping

24 TAX BOARD PORTAL VCS Mapping

25 TAX BOARD PORTAL Sales Mapping

26 Demonstration Program Summary Working collaboratively within Monmouth County and by creating and nurturing partnerships with Burlington County, the Division of Taxation and with other forward- thinking assessment and technology professionals; we have accessed the knowledge and insight of a broad professional skill set. Over time, this mutually beneficial conjunction will produce an effect greater than the sum of any individual effort. By incrementally employing technology and applying advanced assessment administration techniques, we will elevate the performance and role of the Assessment Function within the State of New Jersey. Our collective target is to reduce the cost of the Assessment Function by addressing all systemic cost-drivers while enhancing service to the public.

27 N.J.S.A. Const. Art. 8, 1, 1 Township practice of increasing assessed value only of homes sold in township and leaving value of other homes undisturbed constituted a spot assessment in violation of New Jersey Constitution's uniformity clause. Township of West Milford v. Van Decker, 120 N.J. 354, 576 A.2d 881 (1990). The phrase true value means the price which the assessor believes can be obtained for the property, in money, at a fair sale. National Bank of N.J. v. Middlesex County Bd. of Taxation, 26 N.J. Misc. 249, 59 A.2d 270 (1948) Dominant principle of the constitutional mandate that property is to be assessed for taxation under general laws and uniform rule and that all realty assessed and taxed locally or by State for allotment in payment to taxing districts shall be assessed according to the same standard of value and taxed at the general tax rate of the taxing district in which the property is situated for use of such district is equality of treatment and burden. Delaware, L. & W. R. Co. v. Neeld, 23 N.J. 561, 130 A.2d 6 (1957). Where it is impossible to secure both standards of true value and uniformity and equality of valuation required by law in regard to assessment of property for taxation purposes, uniformity and equality required by law is to be preferred as the just and ultimate purpose of the law. Delaware, L. & W. R. Co. v. Neeld, 23 N.J. 561, 130 A.2d 6 (1957). Essential purpose of revaluation of all properties within a district is to achieve tax equalization among members of taxing district and among municipalities in same county. Cold Indian Springs Corp. v. Ocean Tp., 154 N.J.Super. 75, 380 A.2d 1178 (L.1977), affirmed 161 N.J.Super. 586, 392 A.2d 175, certification granted 78 N.J. 410, 396 A.2d 596, affirmed 81 N.J. 502, 410 A.2d 652. In equalization of assessments, where it is not possible to attain a uniformity and equality together with absolute true value, equality and uniformity are to be preferred at the expense of true value. Berkeley Heights Tp. v. Division of Tax Appeals, Dept. of Treasury, 68 N.J.Super. 364, 172 A.2d 453 (A.D.1961), certification denied 36 N.J. 138, 174 A.2d 923. Taxation 2621 In equalization of assessments, absolute quality is an impossibility, and even if some inequality should result, it is not sufficient to make the action taken by the county board arbitrary or unreasonable, and principle by which the court is guided is the constitutional mandate that property shall be uniformly assessed. Berkeley Heights Tp. v. Division of Tax Appeals, Dept. of Treasury, 68 N.J.Super. 364, 172 A.2d 453 (A.D.1961), A selling price is a guiding indicium of fair value for purpose of tax assessment and ordinarily is merely evidential, though it may become controlling, subject to limitation that determination of fair value properly involves the weighing and appraising of all component factors and circumstances. Hackensack Water Co. v. Division of Tax Appeals, 2 N.J. 157, 65 A.2d 828 (1949).

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