Attachment A.pdf

Audit of 2017 City of St. Ignace Assessment Database

May 31, 2017

INTRODUCTION

This audit report consists of the audited items along with a statement of the status and statutory compliance. The auditor’s responsibility is to express opinions on the audited areas by analyzing the information drawn from the 2017 BS&A Database. I conducted this audit based on generally accepted methodology and techniques for mass appraisal as well as several STC publications including but not limited to; STC Guide to Basic Assessing, Assessor’s Manuals, STC Bulletins, BS&A Manual and the General Property Tax Act.

FINDINGS OF FACT

1. APPLICATION OF INFLATION RATE MULTIPLIER (IRM)

The IRM was correctly imported into BS&A and used in the Capped Value Formula to determine Capped value. However, on the assessment change notices in the Residential class that were mailed to the taxpayers, the Capped Value was not properly applied. The tentative Taxable Value was not determined by the tentative SEV or Capped Value. Therefore, the Taxable Value of 1,089 parcels will be different (more) than what was reported on the Assessment Change notice. The total difference of taxable value for the 1,089 parcels is 563,720.

2. ASSESSED VALUE OVERRIDES

In the 2017 assessment database, the residential real class is 97% on override, the commercial real class is 1.8% on override and the industrial real class is 0% in override. The total real parcels on override is 79%. Further analysis indicated that 24.6% of the residential parcels that are on override, have no data to calculate the value using land tables or the manual. If the overrides were removed on these parcels the TCV, AV, and TV would be zero.

3. APPLICATION OF FACTORS

A 2016 for 2017 residential sales study was performed, a ratio was determined by the Co Equalization Department, reported on the L4018 and published according to statute. The assessor appropriately indicated that there was a tentative factor on the assessment change notices and in the BOR public notice. However, the taxable values on the assessment change notices did NOT reflect the application of the tentative Equalization factor.

4. FOLLOWING SALES

Not all of the residential parcels were treated uniformly. Analysis of the uncappings and adjustments in the 2016 and 2017 assessment rolls indicate that the assessor assessed properties which recently sold significantly different from properties that have not recently. With the residential class being overridden, this has caused inequity in the class for two years.

5. CLASS/ECF/LAND VALUE CROSS CONTAMINATION

There was no evidence of cross contamination in the 2017 database.

6. COUNTY MULTIPLIER COMPLIANCE

The 2017 County Multipliers were correctly entered into the 2017 BS&A database. However, any parcel on override did not have the county multiplier applied to the calculation of the true cash value.

7. LAND VALUES

The land values calculated in the database are unreliable. In the residential class, 307 residential parcels have no data to calculate a land value with. In both the Commercial and Residential classes, the water and septic/sewer are valued inconsistently with the Assessor’s Manual. This is significant in the commercial class and would be in the residential class if it was not in the override situation.

8. LAND ADJUSTMENTS

There are adjustments made to land values. The majority is on residential parcels. it is impossible to determine if they are justified without analyzing the tax maps, land tables and land value analysis.

Because of the override situation in the residential class, it doesn’t affect the 2017 roll as certified.

However, moving forward when considering whether the database can be used for a future roll if the overrides were removed, it would be significant.

9. BUILDING ADJUSTMENTS

There are questionable adjustments made to the buildings in both the residential and commercial classes with very few comments or reasons for them. Because of the override situation in the residential class, it doesn’t affect the 2017 roll as certified. However, moving forward when considering whether the database can be used for a future roll if the overrides were removed, it would be a significant.

10. L4021 (NEW, LOSS, ADJUSTMENTS, ADDITIONS & LOSSES)

The analysis of the L4021 indicated egregious errors in the application of new, loss, adjustments, additions and losses. The erroneous application of these values can affect individual capped and taxable values, the equalization of assessments, and ultimately the millage rate reduction fraction.

Misapplication of additions and losses can cause irreparable harm to the current and future millage rates that the taxing jurisdictions can levy because this is a compounding issue.

SUMMARY and CONCLUSION The mass appraisal process uses the cost approach to value. The assessor is supposed to take current sales data and apply it to the cost manual as an ECF on parcels in like neighborhoods to reflect the market. The 2017 assessment database as a whole was not created using accepted or standard mass appraisal methodology. 97% of the residential class is on override and parcels that have sold were treated differently than those that hadn’t. This destroyed the uniformity for the residential class. The erroneous application of new, loss, adjustments, additions and losses affects individual capped and taxable values, the equalization of assessments and ultimately the millage rate reduction fraction calculation.

RECOMMENDATION

As a whole, the 2017 assessment roll does not meet the statutory requirements for values to be set at 50% of true cash value. With the amount of missing data not found in the database (i.e. land data and building characteristics), it is impossible to determine the accuracy of the database with what physically exists on the parcel. The existing database has been compromised beyond the point of repair. The only way to completely verify this is by a physical inspection of every property within the city and compare the actual improvements to the data in the database. In my opinion, the only way restore accuracy, equity and uniformity to the assessment roll is to have a complete reappraisal which should include qualitative and quantitative elements for all improvements, documented land values, land analysis and application, and appropriate ECF analysis and application for all classes of property.