What are equalization rates and how do they affect my taxes?

May 9, 2017

equalization rates Why is Wilton’s tentative equalization rate 95 percent? Why are Moreau’s and Northumberland’s equalization rates at 100 percent?

As noted in our district budget newsletter, Wilton residents who live in the South Glens Falls Central School District will tentatively pay $0.87 per $1,000 of assessed value in taxes, while homeowners in Moreau and Northumberland will tentatively pay $0.06 per $1,000 of assessed value in taxes.

Why are these numbers different?

The process of equalization is used to determine tax rates. Essentially, “full market value” serves as a common denominator, or equalizer, in the process of setting tax rates. (See the infographic.)

In general, if a town’s equalization rate is less than 100, it means that overall, the property in the town is assessed at less than market value. (Meaning, if Wilton homeowners were to sell their home today, they would likely be able to sell it for an amount that is greater than their home’s assessed value.)

The equalization rate for Moreau and Northumberland is tentatively at 100 percent, which means a property’s assessment should be roughly its market value. (This means a homeowner in one of these towns would likely be able to sell their home for an amount that is equal to the home’s assessed value.)

How do equalization rates work?

An equalization rate is New York State’s measure of a municipality’s level of assessment and how close a property’s assessment is to its actual value. They are designed to ensure that owners of properties with similar full market values pay an equivalent amount of taxes.

To calculate an equalization rate for a given town, which is done by the state (not the school district) and finalized in August before the start of the school year, the state takes the total assessed value of the municipality and divide it by the total market value of the municipality. The end result is the equalization rate.

For example, if a town’s equalization rate is 100, the town is assessing property at 100 percent of the market value. This means a reassessment was likely conducted in recent years. Your property’s assessment should be roughly its market value (the price for which you could sell your property).

If a town’s equalization rate is less than 100, this means that overall, the property in the town is assessed at less than market value. The lower the equalization rate, the longer it has probably been since the last reassessment.

If a town’s equalization rate is greater than 100, overall property in the town is assessed higher than its market value. This means that property values may have decreased since the last reassessment, but assessments were not adjusted downward.

The equalization rate will change from year to year based on the real estate market and each property’s assessment. Both equalization rates and assessments are finalized in August prior to the start of the school year.

Why are equalization rates are necessary in New York State?

Each municipality determines its own level of assessment (this is in contrast to most states that require one level of assessment statewide). Hundreds of taxing jurisdictions – including most school districts and counties – do not share the same taxing boundaries as the cities and towns that are responsible for assessing properties.

In order to distribute school district or county taxes among multiple municipalities, the level of assessment of each municipality must be equalized to full market value. Equalization rates are based on local data collected by the state.

Once the full market value of each municipality is determined, the state determines how much in taxes should be collected from each municipality. The school district does not control equalization rates. It only controls the tax levy, or the amount that taxpayers within its boundaries will contribute to the district’s budget. The tax levy and the tax rate are not the same. The tax rate, is the amount of tax paid for each $1,000 of assessed property value.

If all municipalities assessed property at 100 percent of market value, equalization rates would not be necessary. However, most of the state’s more than 700 school districts distribute their taxes among segments of several municipalities, many of which have different levels of assessment. The number of municipal segments in a school district ranges from one to as many as 15. South Glens Falls is composed of three towns (Moreau, Northumberland and Wilton).

Equalization rates measure the level of assessment for the entire municipality. They are not intended to correct unfair individual assessments in a city or town. The assessor has the primary role in ensuring the fairness of individual assessments. The more frequently properties are reassessed based on current market values, the more likely it will be that assessments are fair. Property owners also have a role to ensure their individual assessments are fair.

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