Deterioration of the Property Tax in the State of Wyoming

By Theodore R. Smith
ESTA Technical Director
Alpine, Wyoming

The property tax system fails to comply with acceptable norms of fairness and equity among local citizens of the State of Wyoming. More importantly the property tax has been shown to be regressive and is increasingly impacting those citizens who are least able to afford to carry this increasing financial burden. In a period of “bubble” development in the housing market there is no fair and equitable technique that can be used to estimate “Fair Market Value.” Real property appraisal is an art not a science and efforts to implement a Computer Assisted Mass Appraisal (CAMA) system, through the application of sophisticated statistical techniques, has further undermined and destabilized property tax assessment administration within the State of Wyoming.

1. The nation’s financial problems have impacted Wyoming assessments. Many of the sales in Lincoln County during 2006—2007 were supported by low/no down payments and non-conventional interest rate instruments. These financial terms are not conventional, as has been documented elsewhere, and represent inflated prices that should not be used to infer “Fair Market Value” of homes owned by established home owners.

2. The current revaluation program is regressive and biased against lower income residents. Average family income for Lincoln County is $57,200, which would qualify the average family for a home costing $188,600. The average home price in Lincoln County exceeds $259,000 while most homes in the new subdivisions in North Star Valley sell for $350,000--$550,000 with some selling for more than $5 million. Clearly local residents cannot afford these homes. Out-of-state buyers with many times the local incomes are inflating assessments of longtime residents with lower incomes. These citizens can ill-afford higher property taxes.

3. Speculators and real estate developers in a bubble market purchased land at dramatically inflated prices. Prices far exceeded values that could be absorbed by local residents making it unlikely that working families in Lincoln County would be qualified to purchase these new homes. These speculative land values were used to support the Board of Equalization’s contention that the Lincoln County Assessment/Sale Ratios were out of compliance; they were also used to justify increasing the assessed values for existing homeowners in Lincoln County.

4. Assessments for homes are increased but the system is biased against reducing assessments. The assessed values in Lincoln County have been increased based on the housing bubble and speculation. The market has now turned and, characteristically, there are limited transactions available for the assessor to rely on to reduce assessments. The system cannot manage downward adjustments.

5. Lack of transparency. Tax payers are denied full access to the Assessor’s sales’ data base. Only after an appeal is filed is the Assessor obligated to provide information which limited to the 5 comparable sales selected for their appraisal. Home owners are denied access to information that might be favorable to them when filing their appeal and/or may suggest a lower valuation.

6. Sales data are artificially inflated by inclusion of real estate commissions. According to the Board of Equalization Regulations, the Assessor’s sales data file is adjusted to insure that all prices include transaction costs, and these values are then used to infer “Fair Market Value” of unsold properties. This inflates values by as much as 6 percent, even though the affected owners have no intention of selling their.

7. Median-based Coefficient of Dispersion is biased against property owners. Most statistics are based on Gaussian probability distributions with the Mean as a measure of central tendency and the Standard Deviation as a measure of dispersion. This is seen in the Board of Equalization’s use of a 95% confidence interval. A Mean-based measure of Dispersion would give more weight to higher-valued Assessment/Sales Ratios and, therefore, lessen the possibility of a county’s assessment/sale ratio being out of compliance with the state Board’s standards.

8. The Board of Equalization’s performance criteria is questionable. The Board of Equalization’s Strategic Plan stated: “the Board cannot suggest objective performance criteria that can be reliably applied to all counties. Further, the situation has rendered the Board’s previous performance criteria useless.” Based on the Board’s own admission, their existing performance criteria should not be used to require revaluation by local assessors for the 2007 calendar year.

9. The Computer Assisted Mass Appraisal (CAMA) system yields statistically unreliable results. SPSS-generated Multiple Regression equations are not correctly designed, estimated and applied by the Assessor when calculating market adjusted values in Lincoln County. This is an extremely technical issue that we are prepared to discuss. It is not the Assessor’s fault inasmuch as the system is badly flawed and requires technical expertise that apparently has not been transferred to the level of the county assessor. It is very unlikely once the technique is property applied that it will be applicable for very many properties in Lincoln County. In the meantime many assessments have been generated incorrectly.
   
   1Draft: Lincoln County Affordable Housing Study, page 18, Section 1, 2008.
   2State Board of Equalization Strategic Plan, August 31, 2007, p. 6.

Theodore R. Smith, Ph.D., a longtime resident of Wyoming, Dr. Smith has served on the staff of the International Tax Program at the Harvard Law School and has advised the IAAO and the Appraisal Institute on computerize valuation issues.  He has published extensively in the property tax and appraisal fields and has consulted with governments throughout the United States and abroad.
Rocky  Mountain Oil and Gas Association v. Bd. Of Equalization, 749 P. 2d 221 (Wyo.1987)
WYO STAT. § 39-2-102 (1994).