Special Bd. of Aldermen — 02/27/2017 Page 3
total of about $8.5 billion. There are many more categories of property within the commercial and industrial
really than there are in the residential. There are several categories of property in the residential basically but
in the commercial/industrial, there’s a much more wider variety of property. It’s all sort of grouped. Some of
these categories may be kind of different equalization ratios than others.
| should have said at the beginning that these equalization ratios are only approximate because they’re based
upon sales which have occurred in the last so-called qualified sales which have occurred in the last year.
There are many residential sales that occur. So you’ve got a significantly larger group of data points to look at.
In the commercial and industrial area especially within the subcategories, there might be a handful or even
only one sale. For example in the area of residential apartment complexes, | think I’m correct in saying there’s
only been one significant sale in the last year. That was not qualified.
Qualification is another concept that is used in determining equalization ratios. For various reasons, the DRA
suggests that sales can be disqualified between relatives, or if a government entity is involved, and there’s like
20 different reasons for disqualification. A disqualified sale doesn’t necessarily mean that it wouldn’t be
considered in determining in a process like we’re asking KRT to do. It wouldn’t necessarily be disqualified and
determined in kind of looking at the market. Atleast in the context of the equalization ratio, it is disqualified. In
terms of the commercial and industrial equalization ratio, it is disqualified. In terms of the commercial and
industrial equalization ratio, we’re dealing with a relatively small number of sales with some having been
disqualified. The actual commercial values as compared with assessments might be something different than
this. Based upon what we’re looking at, we have a 90 on average across the commercial properties, we have
about a 93 percent equalization ratio. Meaning the average commercial property based upon the qualified
sales that have taken place is assessed at about 93 percent of its actual value.
If we use those equalization ratios and now move to the right and we upgrade the two categories of properties
to 100 percent, the $5.3 billion of property in the residential sohere increases to $6.6 billion. The good news
being there’s a $1.3 billion value out there that our homeowners possess that didn’t exist five years ago. So
people’s homes are worth a lot more. If we use this 93 percent equalization ratio and take the commercial
property to 100 percent, we only come up with $3.4 billion. On the left, you can see that the residential
property is about 62 percent of the entire value of the city. This is under current assessments and the
commercial property is 37 and change almost 38 percent of the current values — the total amount of the current
values. Were these equalization ratios simply applied to the property that exists, the residential property would
go to 66 percent of total value because it’s going up more based on these equalization ratios, based on the
scant number of sales, the preliminary view, but based upon the 93 percent equalization ratio for commercial.
Residential would climb to $6.6 billion which would then be 66 percent of the total value and commercial and
industrial although it would climb in terms of total value not as much so it would go down to 34 percent. The
relative split between residential and commercial would change.
What does this mean in terms of property taxes collected? We're just giving you a hypothetical on the next
page which is 6 of 14. $200 million is roughly what we collect. We collect a little bit more than that but it is a
good round number for analysis. Currently if we’re collecting $200 million based upon the values that we have
on the books, as | said, 62.4 percent or $125 million roughly is being collected from residential property
taxpayers. Whereas on commercial and industrial, nearly 38 or about $75 million is being collected from
commercial and industrial taxpayers. From the page before, you remember that we upgraded the properties
based on the equalization ratios. On that upgrade sort to speak, residential went to 66 and commercial went to
34 percent of the entire pie. Based on those new values because residential is now 66 percent not 62 on the
same $200 million, $132 million rather than $125 million would be collected from residential and $68 million
rather than $75 million would be collected from commercial and industrial. So what does that mean? It would
mean a shift of $7 million off commercial and not residential based upon the required adjustment in
assessments that the State is imposing.
What do we need to do? We think in reviewing a number of the commercial sales that have taken place that
we may not be capturing all of the commercial values that really exist in the marketplace. We need to make
