Special Bd. of Aldermen — 02/27/2017 Page 4
sure that we do that so that we can mitigate the effect of the shift that you see on page 6 of 14. | think KRT
can correct me if I’m wrong but there are kind of three different ways you can evaluate a property. There’s the
sales analysis — what does something like that sell for. There might not have been a whole lot of sales and
they might not have been recent. Again in the commercial area these sales are less frequent. Number two,
the cost approach. How much did it cost to build this building and what’s the depreciation and that kind of
thing, or third, build an income model that uses market data and some information we can gather from
taxpayers themselves to determine what is the revenue generated by a commercial property and then based
upon that revenue and the appropriate capitalization rate so-called decide how much it is worth based on the
income approach. We think that if we analyze commercial properties in that way, we can come up with more
commercial value than we would be able to simply by using this 93 percent equalization ratio and just bringing
properties up according to that number. | could cite specific properties but there are properties that seem to be
generating a lot of income that don’t have very high assessments but there haven’t been a lot of sales in those
categories so it’s hard to peg their value with a five year old sale, or a two year old sale, or something like that.
We've seen some apartment complexes sell considerable higher than their assessments or at least one big
one which was disqualified for various reasons but still tells us a lot about the market.
In any event, we think that by engaging KRT to take a very detailed approach to look at all properties including
commercial properties to develop income models with respect to each category of commercial property that we
can maximize or increase to make sure that we capture all of the commercial values that actual exist out there.
Therefore mitigate the effect of the shift that could occur from the values that we see in analyzing this data.
Before | turn it over to them, I’d be glad to take any questions if you have any from me. | don’t know if | could
answer them but | would say that what could happen here, this shift of $7 million, this could mean that
someone’s taxes could go up 10 percent. That’s not what we want to see. We haven't even factored in the
budget here. We certainly don’t want to see that. We're happy that people’s houses has gone up in value.
We're happy that a family has $50,000 or $70,000 of equity that they didn’t have before but we certainly don’t
want to promote...we want to make sure that we’re correct and fair. We don’t want to unfairly increase
residential property taxes at the expense of while benefiting commercial properties if we don’t have to. So that
gives you this wonderful picture.
Alderman Dowd
For clarification, there are some instances — probably not many — but where residential or commercial property
values have gone down since the last time we took a look at it.
Mayor Donchess
We're talking averages now. | would bet there’s not a single residential property that has gone down but
commercial definitely. One thing | did not mention, something else, the homes that have a more moderate
value like those around $200,000 have gone up more in value than those higher up on the value scale. We're
talking average figures. The equalization ratio of homes in the $200,000 to $250,000 range is lower than 80
therefore their values are going to up more. Houses at the top haven't increased in value as much. The
impact will be more on the more moderately priced homes which is another thing we'd like to avoid. Any
questions now?
Alderwoman Kelly
So on the last page it said the medium assessment ratio might be between .9 and 1.1 — the standards first
statistical re-evaluation. | guess my question is are we required to do 100 percent or is it within that .9 to 1.1?
Mayor Donchess
KRT — now you’ve gone into the KRT area of the presentation. I’ve sort of taken you to the level of my
expertise. They’re far more knowledgeable than me.
