Soundings : Taxes and transparency
Preparing for a program at the Edgartown Library, I spoke recently with Larry Mercier, a veteran of the Edgartown board of assessors since 1974. When I asked Larry what he felt the public understands least well about the work of the assessors, he paused only a beat before replying, "I think the primary one is, how we assess."
The business of assessing property in Edgartown, as in all the Island towns, is a cycle that ends each year with the mailing of tax bills and immediately begins again, with the gathering of data that will support the next year's round. Ours is an "ad valorem" system, which means our taxes are based on values, and in the work of discovering the values on which this system depends, the records of real estate sales are the town's main forensic tools.
No function of town government has been so transformed by the digital age as the business of assessing property values. What four decades ago was done with typewriters, adding machines and ledger books is now undertaken with GIS mapping, digital photography, spreadsheets, online databases - and a daunting level of state oversight and review.
The tools have improved, which is fortunate, for the Vineyard's pyrotechnic real estate market makes the work of assessment uniquely challenging. Consider that three decades ago, vacant land in Edgartown regularly traded at about $6,000 per acre. Now a ballpark price is $600,000 for half an acre - a 200-fold increase. Talk about your moving targets!
No Island town can issue its tax bills without first passing scrutiny by the state. It's always been so, but in generations past the state's supervision usually amounted to a day's visit and a pleasant drive around town to view a few sample properties. Now the process of review spans months, and the Department of Revenue's imperative to the towns is clear: show us, don't just tell us, that you've appraised every piece of property within 10 percent of its full and fair market value.
Certainly there are moments in the work of assessors when subjective judgment comes into play - how do you compare the dollar value of one water view to another? But most of the work, by far, involves the brute application of methods and formulas laid down by the state.
I was interested to learn, from Mr. Mercier, that when a town submits its application to the state for a tax rate, it must also submit the full property tax listings and assessments for every member of the board of assessors. And when the town assessor submits her annual summary to the state, she does so under oath and penalty of perjury.
Of all the taxes we pay, our annual property tax is the most openly arrived at. Ironically, it's also the only tax bill whose fairness we can easily challenge. You can't know what your neighbor pays in sales taxes, or state or federal taxes, and with the IRS codes so arcane that no expert can understand them, what does fairness even mean? But in half an hour online you can study, in detail, the assessments of every property on your street. This whole business of property assessment - especially in Edgartown, where a wonderful set of maps and links has recently been posted on the town website - is radically transparent to us as citizens.
When the real estate market is shifting, as it is now, the work of town assessors becomes harder. When the number of transactions drops as it did this year, that work becomes harder still - because fewer sales mean fewer data points to shine a light on values of similar properties.
As it happens, more than half of all sales in Edgartown last year were "coded out" by the assessors - judged not useful as data points and set aside because they didn't qualify as arm's-length transactions. Fair market value, a cornerstone of the assessment process, is the price agreed upon by a willing buyer and seller, under no duress and with no special circumstances. Note, however, that our assessors cannot reject a transaction as tainted simply because a buyer is so wealthy - as many Island buyers are - that money has lost most of the meaning it has for ordinary working folks.
What we've seen over the past two generations is a radical disconnect between the high end of the Island real estate market and the local economy that determines what sort of prices people who live here can pay. The loftier regions of this market are characterized by buyers for whom money has become primarily a way of keeping score, and by sales transacted at levels that strike many of us as simply crazy. The fact remains that many of these sales do represent fair market value in the purest sense of the term.
In Edgartown, the assessors recently completed another year's round of work, and some 6,000 tax bills were sent out, on time, to fund another year of municipal services. At the deadline this week, fewer than two percent of those bills had been challenged by taxpayers. This speaks well for the work of the assessors whose job is so complex, but whose duty, in the end, is easily enough defined. It is, first, to amass the data, and then to ask, what is this data telling us about the value of property in our town?