Illinois Department of Revenue
Glossaries
and
Formulas
I-C LAND VALUATION
GLOSSARY OF TERMS
AD VALOREM TAX - "According to Value"; a tax levied according to the value of a
property, not according to the ability to pay.
ABSTRACTION METHOD - Sales Price – (Replacement Cost New – Depreciation)
= Site Value. Provides data to develop Land:Building (L:B) ratio. Uses sales of
improved property.
ALLOCATION METHOD - Ratio of Land Value to Building Value (L:B). Land is
always equal to 1. Based on the Principle of Balance.
ANTICIPATED USE METHOD - (Developer Method) - Used with land in transition
such as agricultural to residential, commercial or industrial. Estimate Sale Price of all
developed lots, subtract the estimated total cost of development, the difference being
an estimate of value for the land in an undeveloped state.
APPRAISAL - An opinion or estimate of value of property.
ASSESSMENT - Official act of discovering, listing, appraising, and entering a value
for property on the assessment rolls for ad valorem tax.
ASSESSED VALUE - The value placed upon property after multiplying its market
value by the level of assessment.
BUILDING RESIDUAL - Sales Price - Land Value = Building Value (Residual)
CAPITALIZATION - A mathematical process for converting the net income
produced by a property into an indication of value. (Present value of future worth)
Used in the Income Approach to value.
NET INCOME (I in the IRV formula) =
CAPITALIZATION RATE (R in IRV formula) consists of the Discount Rate,
Recapture Rate, & Effective Tax Rate.
Land Capitalization Rate = Discount Rate & Effective Tax Rate.
Building Capitalization Rate = Discount + Recapture + Effective Tax Rates
VR
I
×
I-C LAND VALUATION
EFFECTIVE TAX RATE - The tax rate expressed as a percentage of market
value. Found by multiplying the level of assessments by the current
local (aggregate) tax rate. Would be applied to the full MV
DISCOUNT RATE - Return ON Investment (Mortgage Interest Rate)
RECAPTURE RATE - Return OF Investment (involves depreciation)
COST APPROACH - Estimating the value of land as vacant and then estimating the
depreciated cost of replacing the improvement.
Land Value + (Replacement Cost New – Depreciation) = Market Value
DEPRECIATION - Loss in value of improvements from any cause. Land does not
depreciate.
Physical: wear & tear; use & abuse; action of elements
Functional: poor design; excessive frills
Economic (External): factors outside of property
DEPTH FACTOR - Used to adjust the front foot value of a lot. (Used when the
subject lot is at variance to the standard lot depth under the 4-3-2-1 premise.)
FF Value of Subject lot
= Depth factor
FF Value of Standard lot
FRONT FOOT - A strip of land one foot wide fronting a street, etc., and running the
entire depth of the lot. ( 50' x 150' FF = 50')
HIGHEST AND BEST USE - That (property’s) use determined to generate the
highest net return to a property over a period of time, provided it is legal, reasonable,
profitable, and probable.
MARKET VALUE - The most probable sale price of a property in terms of money in
a competitive and open market, assuming that the buyer and seller are acting
prudently and knowledgeably, allowing sufficient time for the sale, and assuming that
the transaction is not affected by undue pressures.
MASS APPRAISAL - The process of valuing a universe of properties as of a given
date, using standard methods and allowing for statistical testing.
I-C LAND VALUATION
NEIGHBORHOOD - The immediate environment or area having the most direct
impact on a property's value.
PRINCIPLE OF SUBSTITUTION - Assumes that a buyer will not pay more for a
property than the cost of acquiring an equally desirable substitute property.
REL (Remaining Economic Life) - %REL + %DEP = 100% of MV. May be
thought of as the period of time over which a prudent investor would reasonably
expect to recapture their investment.
RESIDUAL - Remaining Value: Market value - Building Value = Land Value or
Land Residual.
SITE - Parcel that has been made ready to be used for the purpose for which it was
intended.
UNITS OF COMPARISON - Used in the Sales Comparison Approach when
establishing an appropriate measure of value. Front Foot (FF), Square Foot (SF),
and site value are typical units of comparison. The median Unit Value of the most
consistent Unit of Comparison is used as an indicator of value when all of the lots
have exactly the same features.
UNIT VALUE - Found by dividing the Sales Price by number of units
Sales Price
$10,000 = $10 / SF
# of SF 1,000 SF
4-3-2-1 RULE -- Assumes that the front of a lot carries a proportionally higher value
than the rear portion. (Front 25% of lot equals 40% of the value of the lot) The basis
for deriving depth tables.
65-35 RULE - Suggests that the utility of a lot is seriously affected by its shape, thus
a loss in value. Applies to triangular shaped lots with a right angle; if base is on
street, the lot has 65% of the value of a rectangular lot having the same frontage and
depth. If apex is on street, lot has 35% value of the rectangular shaped lot.
I – D MATH FOR ASSESSING OFFICIALS
GLOSSARY OF TERMS
ASSESSED VALUE: The value placed upon property after multiplying its
market value by its level of assessment.
CAPITALIZATION: A mathematical process for converting the Net Operating
Income into an indication of value. (determining the present value of future
worth) Used in the Income Approach to value. Formula used:
I
(I) Net Operating Income R x V
PGI Potential Gross Income (100% capacity @ economic rent)
– V&C – Vacancy & Collections Loss
+ MI
+ Miscellaneous Income
EGI = Effective Gross Income
– EXP – Allowable Expenses
– RR
– Reserve for Replacement
NI = Net Operating Income
CAPITALIZATION RATE: R in the IRV formula. Consists of the Discount
and Effective Tax rates when calculating land income values; consists of the
Discount, Effective Tax and Recapture rates when calculating building
income values.
Recapture rate - often called the “Return Of investment”; rate needed to
recover the investment during the remaining economic life (REL) of the
building.; using straight line depreciation, calculated by dividing 100
(percent) by the REL of the building.
Effective Tax rate - determined by multiplying the level of assessment
by the aggregate tax rate supported by that property; used to calculate
property taxes by applying the effective tax rate to full market value.
Discount rate - often called the “Return On” or “mortgage interest” rate.
COEFFICIENT OF DISPERSION (COD): a statistical measure of variation of
individual assessment ratios around the median level of assessments (an
average error expressed as a percent). It is the most common method used in
measuring assessment uniformity.
I – D MATH FOR ASSESSING OFFICIALS
COST FACTOR: a factor used to adjust a manual's cost values to reflect the
local cost of materials and labor. Once established, applied throughout
jurisdiction. (Sales Price – Land Value = Building Value )
Indication of COST FACTOR =
DATA BANK: composed of square feet, cubic feet, effective perimeter, square
feet wall area, and wall ratio of a building.
EAVE HEIGHT: the height of a building from grade-level to the building's
eave.
EFFECTIVE AGE: The age of an improvement based on that improvement's
CDU rating. The typical Economic Life of a building – the Effective Age = the
Remaining Economic Life of the building. The Typical Economic Life – the
REL = the amount of accrued depreciation.
EFFECTIVE GROSS INCOME: potential gross income minus vacancy and
credit plus any miscellaneous income.
EFFECTIVE PERIMETER: the linear measurement around a building.
For a rectangle: P = 2L + 2W
EQUALIZATION FACTOR: Applied to a property's assessed value.
Calculated by dividing 33.33% by the prior (3 year average) median level of
assessment. Often called a multiplier.
EQUALIZED ASSESSED VALUE: Assessed Value (AV) multiplied by
equalization factor(s). Certified assessed values for farm land and farm
buildings are already equalized.
FRAME BAY: the rectangle or square formed by support columns.
GROSS INCOME MULTIPLIER: sales price divided by gross income – a unit
of comparison used in the sales comparison approach to value.
LOAD BEARING: walls of building support the structure.
MARKET VALUE: most probable sale price of a property in terms of money in
a competitive and open market, assuming that the buyer and seller are acting
Building Residual
MRCN
I – D MATH FOR ASSESSING OFFICIALS
prudently and knowledgeably, allowing sufficient time for the sale, and
assuming that the transaction is not affected by undue pressures.
MEAN: The arithmetic average of a set of numbers.
MEDIAN: The middle value of a ranked set of numbers.
MODE: The number that occurs most frequently in a set of numbers.
NET INCOME: Effective gross income minus allowable expenses and
reserves for replacement.
OVERALL HEIGHT: Height of building from basement floor to eave.
PARTY WALL: Common wall shared by two buildings.
POTENTIAL GROSS INCOME: Income that a property is capable of
producing if 100% occupied, based on market standards.
REMAINING ECONOMIC LIFE (REL): The period of time over which a
prudent investor would reasonably expect to recapture his or her investment.
REL (years) + DEP (years) = Typical Economic Life;
REL (%) + DEP (%) = 100% MV.
REPLACEMENT COST NEW (RCN): Represents the current cost of replacing
an improvement; MRCN represents the Manual's Replacement Cost New;
TRCN represents True RCN, which is the MRCN adjusted by local factors such
as a cost factor.
RECAPTURE RATE: The rate of return of
an investment – rate used to
recover the cost of the improvement over the economic life of that
improvement.
RESERVES FOR REPLACEMENT: Replacement or repair cost of items (i.e.
carpet, roof, etc.) pro-rated as an allowable expense to be deducted from
effective gross income.
RESIDUAL: Remaining value. Sales Price – Land Value = Building Residual
or, Sales Price – Building Value = Land Value or Land Residual.
I – D MATH FOR ASSESSING OFFICIALS
SHAPE ADJUSTMENT: Adjustment used to factor construction shape
variables on IRPAM schedule necessary to account for area/perimeter ratio
variations.
SIZE ADJUSTMENT: Adjustment used to factor construction size variables on
IRPAM schedule.
UNITS OF COMPARISON: Used in the Sales Comparison Approach when
establishing an appropriate measure of value. Front Foot (FF) and Square
Foot (SF) values are typical units of comparison.
UNITS OF VALUE: Found by dividing the Sales Price by the number of units.
The Median Value of the most consistent (least % of deviation) used as an
indicator of value.
For example: Square Foot Unit of Value is $10,000
= $10 / SF
1000 SF
WALL HEIGHT ADJUSTMENT: adjustment used to factor construction wall
height variables on IRPAM schedule.
I-D MATH FOR ASSESSING OFFICIALS
CF
SFWA
EQUALIZATION FACTOR
FORMULAS
DATA BANK
SFGA = L x W (for a rectangle)
EP = L + W + L + W (if non-standard shape, add all sides)
CF = Sum of CF of each floor (SFFA x H)
If all floors have the same SFFA, CF = SFGA x OH
SFWA = Sum of SFWA of each floor (Perimeter x H)
If all floors have the same SFFA, SFWA = EP x OH
WALL RATIO =
FLOOR SIZE ADJUSTMENT FACTOR:
BASE PRICE ADJUSTMENT FACTOR: BPA = SIZE X SHAPE X WEIGHT
RATE OF DEPRECIATION = Depreciation as a %
Depreciation in years
MARKET VALUE = GIM x PGI
COEFFICIENT OF DISPERSION (COD) =
SALES RATIO = Prior Year's Assessed Value
Current Year's Selling Price
Statutory Level (33.33%)
Prior 3-year Average Median Level
L = Levy
A = Equalized Assessed Value
R = Tax Rate
EFFECTIVE TAX RATE = Aggregate Rate X Level of Assessments
FS = SFFA
SFGA
Average Deviation
Median
X 100 (%)
=
RxA
L
I – E INTRODUCTION TO SALES RATIO STUDIES
GLOSSARY OF TERMS
AD VALOREM - according to value
APPRAISAL - opinion of value, supported by evidence
ARM'S LENGTH SALE - a sale between two parties, neither of whom is related
to or under abnormal pressure from the other
ASSESSED VALUE – the value placed upon property after multiplying its market
value by the level of assessment
ASSESSMENT - official act of discovering, listing, appraising, and entering a
value for property on the assessment rolls for ad valorem tax
ASSESSMENT LEVEL - percentage of full value at which property is being
assessed. This may refer to the statutory level (33 1/3%) or the actual level as
inferred from a sales ratio study
BOARD OF REVIEW - an appeal agency in each county, consists of 3 members;
commission counties - county commissioners; in other counties members are
appointed by the county board, or are elected
CLASSIFICATION - the practice of classifying various types of property
according to use, and assigning different assessment levels to each class.
Purpose is to tax various kinds of property at different effective tax rates though
the nominal rate is the same.
COEFFICIENT OF CONCENTRATION (COC) – the percentage of observations
falling within 10% of the median level of assessments, a high COC indicates
more uniformity
COEFFICIENT OF DISPERSION (COD) - a statistical measure of variation of
individual assessment ratios around the median level of assessments. (an
average error expressed as a %) (an indicator of assessment uniformity found by
dividing the average deviation by the median)
COEFFICIENT OF VARIATION (COV) – a statistical measure of variation of
individual assessment ratios around the mean assessment ratio.
EFFECTIVE TAX RATE – ratio of taxes billed to market value. Generally found
by multiplying the level of assessment by the local current tax rate. Expressed
as a percentage, applied to the full market value (if Level of assessments is
33.33% & if local rate is 6%; Effective Tax Rate = 2%; if Market Value $90,000,
tax = $1800)
I-E INTRODUCTION TO SALES RATIO STUDIES
EQUALIZATION - the application of a uniform % increase or decrease to
assessed values of various areas or classes of property to bring assessment
levels, on the average, to a uniform level of market value
EQUALIZATION FACTOR - factor applied to assessed valuation of each county
that raises or lowers the level of assessments to the mandated level of 33 1/3%
of market value (intra-county factors may be used by a county to bring all
property to a uniform level. Factors are sometimes referred to as multipliers)
(not applied to farm land, buildings and coal rights)
EQUALIZED ASSESSED VALUE - assessed value multiplied by any applicable
equalization factor; can form tax base from which tax rate is calculated; for farm
acreage, farm buildings, and coal rights the final assessed value is the equalized
value
EXEMPTION - removal of property from the tax base; may be a partial (a
homestead) or complete (church building used exclusively for religious use)
EXTENSION - the process in which the county clerk determines the tax rate
needed to raise the revenue (levy) certified by each taxing district. The actual
dollar amount billed to property taxpayers in district
GENERAL ASSESSMENT YEAR - the assessment year that occurs every 4
years in which all property assessments are reviewed, formerly known as
quadrennial year
LEVEL OF ASSESSMENTS - ratio of assessed value to the sale price
LEVY - The amount of money a taxing body certifies to be raised from the
property tax to meet its operating expenses
MARKET VALUE (Full Value) - the most probable sale price of a property in
terms of money in a competitive and open market, assuming that the buyer and
seller are acting prudently and knowledgeably, allowing sufficient time for the
sale, and assuming that the transaction is not affected by undue pressures.
MEAN – an arithmetic average
MEDIAN – the middle value of a group of numbers after they have been ranked
MEDIAN ABSOLUTE DEVIATION (MAD) – the median of the absolute
deviations from the median as a percentage of the median
MODE – the number that occurs most frequently in a set of numbers
I-E INTRODUCTION TO SALES RATIO STUDIES
OUTLIER - observations that have unusual values, that is, differ markedly from
the median.
OVERLAPPING TAXING DISTRICTS - taxing districts that are located in more
than one county
PRICE-RELATED DIFFERENTIAL (PRD) - measures a pattern of inequity in
assessments related to the value of property
QUARTILES - the values that divide a set of data into four equal parts (25%,
50%, 75%, 100%) when the data are arrayed in ascending order.
SALES RATIO STUDY - an analysis of the percentage relationship of assessed
value (AV) to market value; ratio equals prior year assessed value divided by the
current year sales price (SP) (Minimum of 25 useable sales/appraisals required).
STATE PROPERTY TAX APPEAL BOARD (PTAB) - the highest state quasi-
judicial body which hears appeals from taxpayers and taxing bodies on property
tax assessment decisions by the county Board of Review
TAX BASE -composed of the Equalized Assessed Value (EAV) of all locally
assessed property, less all qualified exemptions, plus the value of any state
assessed property
TAX RATE - the amount of tax due stated as a percentage of the tax base,
derived by dividing the levy by the EAV. (some districts have a maximum
statutory rate; the sum of the fund rates equals the total district rate)
TAX YEAR - refers to the year of assessment
TAXING BODY - a governmental organization that levies a property tax
TAXING DISTRICT - a territorial area under the taxing body's jurisdiction
33 1/3% - Means 33 1/3% of the actual value of real property as determined by
the Department of Revenue’s Assessment/Sales Ratio studies for the 3 most
recent years preceding the assessment year, adjusted to take into account the
implementation of any changes in assessment levels since the data for such
studies were calculated
URBAN WEIGHTED METHOD - non-farm values; used in determining a county's
median level of assessment by dividing the county's total assessed value (AV) by
the county's total Estimate of Full Value (EFV); this is the preferred method of
calculating a county multiplier.
I-E INTRODUCTION TO SALES RATIO STUDIES
FORMULAS FOR SALES RATIO STUDIES
SALES RATIO = Prior Year AV X 100%
Current Year SP
COEFFICIENT OF DISPERSION (COD) = Average Deviation
X 100(%)
Median
MEDIAN ABSOLUTE DEVIATION (MAD) = Median Deviation x 100(%)
Median of Sales Ratios
COEFFICIENT OF CONCENTRATION (COC) =
Number of Sales Ratios within 10% of the median
Total Number of Sales Ratios
PRICE-RELATED DIFFERENTIAL (PRD):
Sales-Based Average Ratio = Sum of AV's
x 100%
Sum of SP's
Mean Assessment Ratio = Sum of the Sales Ratios
Number of Ratios
Price-Related Differential = Mean Assessment Ratio
Sales-Based Average Ratio
EQUALIZATION FACTOR = Desired Level (33.33%)
Prior 3-Year Average Median Level
x 100
(
%
)
I-F INTRODUCTION TO FARM ASSESSMENTS
FARM ASSESSMENTS GLOSSARY
ACTUAL AGE – the number of years that have elapsed from the year of
construction to the present date
AD VALOREM – according to value
AGRICULTURAL ECONOMIC VALUE – determined by dividing the net return to
the land by the 5-year moving average of the Federal Land Bank farmland
mortgage interest rate.
ASSESSED VALUE (AV) – the value placed upon property after multiplying its
market value by the level of assessment.
CONTRIBUTORY VALUE (CV) – the amount that contributes to the productivity
of a farm as value in use. Wasteland is assessed according to its contributory
value; farm buildings are assessed according to their contributory value to the
productivity to the farm based on their current use. For farm buildings,
contributory value is found by multiplying Replacement Cost New by the
Remaining Economic Life. CV = RCN X REL
COST APPROACH – estimating the value of the land as if it were vacant and
then estimating the depreciated cost of replacing the improvement(s)
CROPLAND – includes all lands from which crops are harvested or hay cut; all
lands in orchards, citrus groves, vineyards, and nursery and greenhouse crops;
land in rotational pasture and grazing land that could have been used for crops
without additional improvements; land used for cover crops, legumes, and soil
improvement grasses, but not harvested and not pastured; land on which crops
failed; land in cultivated summer fallow; and idle cropland.
DEPRECIATION – loss of value from any cause (physical depreciation,
functional obsolescence, economic obsolescence)
EAVES – lower edge of a roof, overhanging the side walls of a building.
ECONOMIC LIFE – estimated period over which it is anticipated that a property
may profitably be used. The period over which property will yield a return on and
of the investment, over and above the economic rent due to land. This period
can never exceed the physical life of the property and generally is shorter than
physical life or endurance
I-F INTRODUCTION TO FARM ASSESSMENTS
EFFECTIVE AGE – age of an improvement based on the improvement's CDU
rating; effective age does not always equal actual age
EQUALIZED ASSESSED VALUE (EAV) –– assessed value multiplied by any
applicable equalization factor(s). The aggregate tax rate is applied to the EAV.
For farm buildings, EAV = CV x 33 ⅓ %.
FARM – when used in connection with valuing land and buildings for an
agricultural use, any property used solely for the growing and harvesting of
crops; for the feeding, breeding and management of livestock; for dairying or for
any other agricultural or horticultural use or combination thereof; including, but
not limited to, hay, grain, fruit, truck or vegetable crops, floriculture, mushroom
growing, plant or tree nurseries, orchards, forestry, sod farming and
greenhouses; the keeping, raising and feeding of livestock or poultry, including
dairying, poultry, swine, sheep, beef cattle, ponies or horses, fur farming, bees,
fish and wildlife farming.
CONVENTIONAL FARM – the tending of all major and minor Illinois field
crops, pasturing, foresting, livestock, and other activities associated with
basic agriculture
INTENSIVE FARM – farm practices for which the per acre income and
expenditures are significantly higher than in conventional farm use.
Intensive farm use often requires significantly more labor than conventional
farm use.
GAMBREL ROOF – roof whose slope on each side is interrupted by an obtuse
angle that forms two pitches on each side, the lower slope being steeper than the
upper (red barn roof)
IDLE LAND – land that is not put into a qualified farm use as the result of a
management decision, including neglect.
INCOME APPROACH – value of income-producing property derived from the
income which it is capable of producing
MARKET VALUE – most probable sale price of a property in terms of money in a
competitive and open market, assuming that the buyer and seller are acting
prudently and knowledgeably, allowing sufficient time for the sale, and assuming
that the transaction is not affected by undue pressures
I-F INTRODUCTION TO FARM ASSESSMENTS
OTHER FARMLAND – includes woodland pasture; woodland including grass
waterways, windbreaks, woodlots, timber tracts, cutover and deforested land,
and farm building lots other than homesites.
PERMANENT PASTURE – any pastureland except woodland pasture, and
certain exclusions such as rotational pasture and grazing land that could have
been used for crops without additional improvements.
PROPERTY INDEX NUMBER (PIN) –– 14 numbers which reflect the
geographical location, legal description, and special use of a parcel of land
PROPERTY RECORD CARD (PRC) –– used to record individual property
appraisals used for assessment
QUALITY GRADE – used to adjust schedules in the manual for differences in
the quality of construction materials and workmanship
REMAINING ECONOMIC LIFE (REL) –– period over which a prudent investor
would reasonably expect to recapture his investment.
For farm buildings,
REL =
REMAINING PHYSICAL LIFE (RPL) – the tangible life span that an
improvement should have remaining given its current effective age and
considering its physical deterioration along with ordinary maintenance.
REPLACEMENT COST NEW (RCN)– represents current cost of replacing an
improvement; Manual RCN is the replacement cost new as calculated from the
Illinois Real Property Appraisal Manual (IRPAM); True RCN is the replacement
cost new after adjusting for the local market, including factors such as the cost,
design, neighborhood, and appraiser factors.
SALES COMPARISON APPROACH – the value of properties can be reliably
estimated by observing and analyzing the selling prices of comparable properties
SOIL ASSOCIATION MAPS – a grouping of individual soils that are generally
found together.
SOIL PRODUCTIVITY – the capacity of soil to grow crops or plants under
specified environmental conditions influenced by soil properties, climatic
conditions and management inputs. The soil productivity indexing system
RPL
TLE
I-F INTRODUCTION TO FARM ASSESSMENTS
assigns a number (PI) which compares a soil’s potential to produce crops to the
potential of the Muscatune soil.
TRACT – may consist of several parcels (not necessarily adjoining) which make
up a farm.
TYPICAL LIFE EXPECTANCY (TLE) – the amount of time in which a building
can typically expect to function economically. Typical Life Expectancy for farm
buildings is found on the Typical Life Expectancy schedule.
WASTELAND – that portion of a qualified farm tract which is not put into in
cropland, permanent pasture, or other farmland as the result of soil limitations
and not as the result of a management decision
I-I INTRODUCTION TO PROPERTY TAX
GLOSSARY
Abatement a reduction in a tax. For example, a unit of government may reduce
its levy by filing an appropriate resolution with the County Clerk prior
to extension.
Ad Valorem according to value
Aggregate
Rate
the sum of all taxing district rates applicable to a tax code
Appraisal an opinion of value, supported by evidence
Assessed
Value
the value placed on property for tax purposes and used as a basis for
distribution of the tax burden. Most of the time this amount is subject
to the State-issued equalization factor and the deduction of the
homestead exemption on residential parcels.
Assessment official act of discovering, listing, appraising property, and entering a
value for it on the assessment rolls for ad valorem tax purposes.
Assessment the degree to which different properties are assessed at equal
Uniformity percentages of Market Value (This is the foundation of Assessment
practices).
Board an appeal agency in each county, consisting of three members; in
of Review commission counties, the county commissioners or their appointees;
in other counties, usually appointed by the County Board. The Board
of Review is a review and equalizing agency.
Capitalization a mathematical process for converting the net income produced by a property
into an indication of value. Used in the Income Approach to value.
Certificate of
Error
a certificate issued by the assessing official and approved by the
court to correct an error in the tax bill
I-I INTRODUCTION TO PROPERTY TAX
Chief County
Assessment
Officer
the individual appointed by a County Board, or elected in a county, to
review township assessors in completing original assessments and to
review their work. The Chief County Assessment Officer has the
power to revise and equalize assessments and is the Clerk of the
Board of Review. In commission counties, the Chief County
Assessment Officer makes the original assessment.
Coefficient
of
Dispersion
(COD)
a statistical measure of variation of individual assessment ratios
around the median level of assessments. (An average error
expressed as a percent of the median; an indicator of assessment
uniformity found by dividing the average deviation by the median.)
County
Assessor
an individual elected to oversee the assessment process in a county.
In practice, a county assessor is responsible for making initial
assessments, rather than township assessors
Delinquent
Taxes
past due and unpaid taxes
Effective Tax
Rate
the ratio of taxes billed to the market value, generally expressed as a
percentage
Equalization the application of a uniform percentage increase or decrease to
assessed values of various areas or classes of property to bring
assessment levels, on the average, to a uniform level of the market
value
Equalization
Factor
the factor that must be applied to local assessments to bring about
the percentage increase or decrease that will result in an equalized
assessed value equal to one-third of the market value of taxable
property in a jurisdiction (other than farm acreage and farm buildings
and coal rights).
Equalized
Assessed
Value (EAV)
the assessed value multiplied by the State equalization factor. This
gives property value from which the tax rate is calculated after
deducting all qualified homestead exemptions. For farm acreage,
farm buildings, and coal rights, the final assessed value is the
equalized assessed value. Individual tax bills are calculated by
multiplying the individual district’s tax rates by the equalized assessed
value after all qualifying exemptions have been removed.
I-I INTRODUCTION TO PROPERTY TAX
Exemption the removal of property from the tax base. An exemption may be
partial, as a homestead exemption, or complete as, for example, for
a church building used exclusively for religious purposes.
Extension the process in which the County Clerk determines the tax rate needed
to raise the revenue (levy) certified by each taxing district in the
county. Also, the actual dollar amount billed to property taxpayers in
a district.
Forfeited
Taxes
taxes which received judgment for sale of delinquent taxes but were
not purchased at the tax sale and remain unpaid
Judgment court ordered authorization to sell delinquent taxes
Level of Ratio of assessed value to the sale price
Assessments
Levy the amount of money a taxing body certifies to the County Clerk
to be raised by property taxes
Market Value the most probable sales price of a property in terms of money in a
competitive and open market, assuming that the buyer and seller
are acting prudently and knowledgeably, allowing sufficient time for
the sale, and assuming that the transaction is not affected by undue
pressures.
Median middle value of a ranked set of numbers
Mill Rate one tenth of a cent (.001%)
Over-the-
counter
Sales
forfeited taxes purchased after the Annual Tax Sale upon application
to the County Clerk
Overlapping
Taxing
taxing districts that are located in more than one county
Districts
I-I INTRODUCTION TO PROPERTY TAX
Partial
Redemption
a procedure used under the Forfeiture Section
Property
Index
Number
a brief legal description of a particular parcel by numerical reference
to parcels on assessment maps. It is a fourteen-digit number. The
first two digits refer to the geographical township; the second two, to
the section in which the parcel is located; the next three, to the block
number; the next three digits identify the parcel within the block; the
last four digits identify the use of the parcel.
Redemption the payment by owner or interested party, of sold taxes, interest,
costs, and penalties, following a tax sale
Sale in Error real property which has been sold but later declared by the court to
be an improper order for sale
Sales Ratio
Study
an analysis of the percentage relationship of assessed value to
market value. Ratio equals prior year assessed value divided by the
current year sales price. Minimum of 25 useable sales/appraisals
required
Scavenger
Sale
the sale at which taxes, that have been delinquent or forfeited for two
or more years, are sold
State
Property Tax
Appeal Board
the State quasi-judicial body which hears appeals from taxpayers and
taxing bodies on property tax assessment decisions of County Boards
of Review
Subsequent
Taxes
current year taxes paid by the tax purchaser who holds a previous
year's Certificate of Purchase. The subsequent taxes are added to
the judgment record for the original sale year.
Taxing Body a governmental organization that levies a property tax
Taxing
District
a territorial area under the taxing body's jurisdiction
Tax Base composed of the Equalized Assessed Value (EAV) of locally
assessed property, less all qualified exemptions, plus the value of any
State-assessed property
I-I INTRODUCTION TO PROPERTY TAX
Tax Rate the amount of tax due stated in terms of a percentage of the tax base.
Example: $6.81 per $100 of equalized assessed valuation (equal to
6.81%).
Tax Sale the process by which delinquent taxes are annually sold
Tax Year refers to year of assessment. The tax year for 2007 refers to
assessments based on January 1, 2007 values; taxes billed in the
calendar year 2008.
Warrant a commission or document giving authority to do something. A
collector’s warrant gives the authority to collect the tax.
33 ⅓ % means 33 ⅓ % of the actual value of real property as determined by
the Department of Revenue’s Assessment/Sales Ratio studies for the
three most recent years preceding the assessment year, adjusted to
take into account the implementation of any changes in assessment
levels since the data for such studies were calculated.
I-I INTRODUCTION TO PROPERTY TAX
PROPERTY TAX FORMULAS
ASSESSMENT
INCOME APPROACH
: I
R x V
Effective Tax Rate = Aggregate Rate X Level of
Assessments
Effective Tax Rate = Taxes Billed
(Definition)
Market Value
COST APPROACH:
Market Value = Land Value + (RCN –
DEP)
EQUALIZATION:
Equalization Factor = Desired Level (33.33%)
Prior 3-Year Average Median Level
SALES RATIO STUDIES:
SALES RATIO for each sale = Assessed Value
x 100%
Sale Price
COEFFICIENT OF DISPERSION (COD) = Average Deviation
X
100%
Median
LEVY:
L = Levy
A = Equalized Assessed Value
R = Tax Rate
L
A x R
I-M INTRODUCTION TO MAPPING FOR ASSESSORS
Glossary
Aerial Photograph - Any photograph taken from the air.
Aerial Mosaic - An assembly of aerial photographs to form a continuous
photographic representation of a portion of the earth's surface.
Back sight - surveying sight taken backward; a sight or reading taken by a
surveyor back toward a position from which a previous sight has been
made
Base Line, Sectionalized Land - Base line is a parallel of latitude, or
approximately a parallel of latitude, running through an arbitrary point
chosen as the starting point for all sectionalized land within a given area.
Bearing - Direction of a line measured as the acute angle from a reference
meridian; usually expressed in the form "S 30o E" or "N 58o W".
Boundary - A line that marks the outermost extent of an area, or a
subdivision between areas.
Cadastral map - A map that shows the size, shape and extent of each land
parcel in a prescribed geographical area, for purposes of describing and
recording ownership.
Cartography - The science and art of making maps.
Chain - A land surveyor's measure -- 66 feet, or 100 links.
Commencing - Informative term of beginning and/or origin.
Degree - One/360th of the circumference of a circle.
Description - The exact location of a piece of property stated in terms of
lot, block, and tract, or by metes and bounds.
Government Survey (U.S. Rectangular Land Survey) - In 1785 the U.S.
Congress authorized the first land survey of the United States. It specified
that this survey should divide the land into portions approximately 6 miles
I-M INTRODUCTION TO MAPPING FOR ASSESSORS
square. These portions are referred to as townships. The townships are
surveyed from an east-west base line and from north-south principal
meridians. Townships are laid off from the base lines and meridians. To
identify the townships, each is given an identification in which it was
referred to by its relation to the base line and meridian. Horizontal tiers of
townships are laid off north and south from the base line and numbered
consecutively. Vertical columns of townships called ranges are laid off to
the east and west of the principal meridians and numbered accordingly.
The townships can be identified by listing the township tier number and the
range number, such as Township 2 North, Range 2 West. Each township
is usually divided into 36 sections, each approximately one mile square and
containing approximately 640 acres. This may vary considerably at rivers
or where base lines or meridians converge, etc., but generally holds true.
Grantee - one to whom a grant is made (buyer).
Grantor - the person by whom a grant is made (seller).
Index Maps - (1) A map of smaller scale on which are depicted the location
(with accompanying designations) of specific data, such as larger-scale
topographic quadrangles or geodetic control. (2) A map showing the
location and numbers of flight strips and photographs, made by assembling
individual photographs into their proper relative positions and copying the
assembly photographically at a reduced scale.
Latitude - angular arc distance north or south of the Equator along a
meridian of longitude.
Line - Boundary, course or extension between points; may consist of
straight or curvilinear segments.
Link - linear measurement equivalent to 1/100th of a chain equal to 0.66
feet or 7.92 inches.
Longitude - Angular arc distance east or west of the Prime Meridian along
a parallel of latitude.
Map - A representation (usually on a flat medium) of all or a portion of the
earth, showing the relative size and position of features to some given
scale or projection. A map may emphasize, generalize, or omit the
I-M INTRODUCTION TO MAPPING FOR ASSESSORS
representation of certain features to satisfy specific requirements. Maps
are frequently categorized and referred to according to the type of
information which they are designed primarily to convey, to distinguish
them from maps or others types.
Map projection - involves the transformation of a 3-dimensional form into a
2-dimensional plane; they record the curved surface of the Earth on a flat
display. They may be cylindrical, conical or azimuthal (planar). This is the
field of cartography
Meridian Line - A meridian line is any line running due north and south.
Since meridian lines converge at the North Pole, no two meridians are
parallel. Practically within the limits of a property survey, all lines shown as
north or south are considered parallel.
Metes and Bounds - precise description of the boundary lines of parcel of
land. Not described by reference to a lot or block shown on a map, but
described by starting at a known point and describing the bearings and
distances of the lines forming the boundaries of the property.
Monuments - Monuments are tangible landmarks indicating boundaries.
(1) Physical Monument
- A physical monument is an existing feature such
as a stone or stake but not the line of an adjoiner. (2) Natural Monuments
-
A natural monument is a naturally occurring object such as a lake, river,
tree, boulder, or hill. (3) Artificial Monument
- An artificial monument is a
man-made object such as a stake, fence, set stone, etc. (4) Record
Monument - An adjoiner property called for in a deed such as a street or
particular parcel of land. (5) Legal Monument
- Any monument controlling in
a legal description. It is often limited in meaning so as to be synonymous
with record monument.
More or Less - The words "more or less" in their ordinary use are to be
taken as words of caution, denoting some uncertainty in the mind of one
using them and a desire not to misrepresent. When used in connection
with quantity and distance, "more or less" are words of safety and
precaution, intended merely to cover some slight or unimportant
inaccuracy.
Natural Boundary - Any existing boundary that can be readily identified
and located, e.g., the boundary line of an adjacent parcel of land, a river
I-M INTRODUCTION TO MAPPING FOR ASSESSORS
boundary, ditch, wall, bluff, etc. Courses and distances, as a general rule,
give way to a call for a natural boundary, because a natural boundary, if
fixed, is unchangeable, and more likely to be the true call than courses and
distances
Parcel - In land ownership mapping for assessment purposes, a parcel is
usually held to be a tract of land under one identical ownership. It may be
a combination of two or more tracts acquired by separate deeds.
Planimetric map - A map representing only the 2-dimensional, horizontal
position of features measured on plane surfaces.
Plat Map - Usually a survey drawing of an individual parcel of land showing
special characteristics and the locations of any buildings thereon.
Point - "Point" in a boundary is the extremity of a line; spatial location
without defined dimensions.
Point of Beginning - The reference point from which the description point
begins.
Pole - 5.5 yards; 16.5 feet; one rod.
Political Township - township units set up by government agencies. They
can be changed at any time and do not necessarily correspond with
congressional township boundaries.
Prime Meridian (Principal Meridian) - Zero Longitude at Greenwich,
England. It is the line from which all other lines of longitude are measured.
This includes the line that runs 180° away from Greenwich also known as
the International Date Line.
Property Index Number - a series of groupings of numbers that describe
the geographic location and use of a specific tax parcel.
Public Lands Surveys, or Public Land Survey System (PLSS) - In
general, the survey of Federal or State lands or the lands of any other
public body. The term, however, is commonly used to designate the
cadastral survey of the public lands of the U.S.; originally the Government
land Office (G.L.O.) surveys; the present surveys executed by the Bureau
I-M INTRODUCTION TO MAPPING FOR ASSESSORS
of Land Management (B.L.M.). Synonymous with rectangular surveys of
the U.S. lands; or the rectangular survey system.
Quarter Section - A 160 acre block of land, 1/4 of a section.
Range - A vertical column of townships in the rectangular survey system.
Rod (or pole) - Is a surveyor's lineal measure of 16 1/2 feet, or 1/4 of a
chain.
Scale - Relative ratio of map to ground distances.
Section - A one square mile block of land containing 640 acres, or one
thirty-sixth of a township.
Section Number - these are numbers assigned to the one square miles
units within a survey township. A standard survey township will contain 36
sections.
Standard Parallels - Standard parallels, or correction lines, are parallels of
latitude at intervals of 24 miles north or south of the base line.
State Plane Coordinate Systems - The plane-rectangular coordinate
system established by the U.S. Coast and Geodetic Survey, one for each
State in the Union, for use in defining positions of geodetic stations in terms
of plane-rectangular (X and Y) Coordinates. Each state is covered by one
or more zones, over each of which is placed a grid upon a conformal map
projection.
Subdivision - A tract of land divided, by means of a map, into lots, or lots
and blocks, for the purpose of resale, generally for residential or agricultural
purposes.
Survey - The act or operation of making measurements for determining the
relative position of points, on, above, or beneath the earth's surface; also,
the results of such operations. Photogrammetric survey
- A method of
surveying that uses either ground photographs or aerial photographs.
Aerial survey
- A survey using aerial photographs. Ground survey - A
survey made by ground methods. A ground survey may or may not include
the use of photographs.
I-M INTRODUCTION TO MAPPING FOR ASSESSORS
Tax Map - a picture of one or more parcels of land showing the boundaries
of subdivisions of land, with the length thereof, and the areas of individual
tracts for the purpose of describing and recording ownership. It is a
graphical representation on a flat surface of some portion of the earth's
surface. It shows the relative size and position of the land with respect to
the other properties, roads, highways and major topographic features
relating to the value and use of the land.
Topographic map - A map which represents the horizontal and vertical
positions of the land features; distinguished from a planimetric map by the
addition of relief in measurable form.
Township (congressional township) - Township is a nearly square area
of land containing 36 sections.
Traverse - A method of surveying in which a sequence of lengths and
directions of lines between points are measured.
II-A INTERMEDIATE RESIDENTIAL ASSESSMENT PRACTICES
GLOSSARY
AD VALOREM – according to value
ACTUAL AGE – the number of years that have elapsed from the year of
construction to the present date
ASSESSED VALUE – the value placed upon property after multiplying its market
value by the level of assessment (33 ⅓ %)
ATTIC – space between the top of the ceiling joists and the roof. For assessment
purposes, an “attic” is “an attic accessible by a stationary permanent staircase.”
CANTILEVER – beam or slab supported at one end only, or which projects
beyond its support.
CDU RATING – modifies the normal age depreciation of an improvement
according to the appraiser's determination of the improvement’s condition,
desirability, and utility
COST APPROACH – estimating the value of the land as if it were vacant and then
estimating the depreciated cost of replacing the improvement(s)
COST FACTOR – used to adjust the schedules in the manual for differences in
local construction labor and material rates
Indication of Cost Factor =
DEPRECIATION – loss of value from any cause (physical depreciation, functional
obsolescence, economic obsolescence)
DEPTH FACTOR – factor used to adjust front foot price of a lot because the front
portion of lot is deemed more valuable than the rear portion
EAVES – lower edge of a roof, overhanging the side walls of a building.
ECONOMIC LIFE – estimated period over which it is anticipated that a property
may profitably be used. The period over which property will yield a return on and
of the investment, over and above the economic rent due to land. This period can
never exceed the physical life of the property and generally is shorter than physical
life or endurance
Building Residual
MRCN
II-A INTERMEDIATE RESIDENTIAL ASSESSMENT PRACTICES
EFFECTIVE AGE – age of an improvement based on the improvement's CDU
rating; effective age does not always equal actual age
EQUALIZED ASSESSED VALUE (EAV) –– assessed value multiplied by any
applicable equalization factor(s)
FRAMING – wood, steel, or concrete load-bearing skeleton of a structure.
FRONT FOOT PRICE – supposes that each foot of lot frontage is worth the same
dollar amount; used to indicate lot value
GRADE – indicates plane of ground surface; also denotes established street and
sidewalk planes
IMPROVEMENT – any structure attached to, lying upon or within the land that may
not be removed without physical stress
INCOME APPROACH – value of income-producing property derived from the
income which it is capable of producing
I
IRV FORMULA – formula for income approach to value R x V
JOIST – one of a series of parallel beams to support floor and ceiling loads,
supported in turn by larger beams, girders, or bearing walls.
LEGAL DESCRIPTION – a description in words judged legally sufficient to locate
and identify a parcel of land
LEVEL OF ASSESSMENTS – ratio of assessed value to sale price
MARKET VALUE – most probable sale price of a property in terms of money in a
competitive and open market, assuming that the buyer and seller are acting
prudently and knowledgeably, allowing sufficient time for the sale, and assuming
that the transaction is not affected by undue pressures
MEDIAN – middle value of a ranked group of numbers
ON-CENTER (o.c.) – center-to-center distance from one structural member to
another; term used for spacing studs, steel columns, posts, joists, rafters, etc.
OVERHANG – upper level projection of a building; extends beyond the lower
structure.
II-A INTERMEDIATE RESIDENTIAL ASSESSMENT PRACTICES
PROPERTY INDEX NUMBER (PIN) –– 14 numbers which reflect the geographical
location, legal description, and special use of a parcel of land
PROPERTY RECORD CARD (PRC) –– used to record individual property
appraisals used for assessment
QUALITY GRADE – used to adjust schedules in the manual for differences in the
quality of construction materials and workmanship
REMAINING ECONOMIC LIFE (REL) –– period over which a prudent investor
would reasonably expect to recapture his investment
REL =
REPLACEMENT COST NEW (RCN)– represents current cost of replacing an
improvement; Manual RCN is the replacement cost new as calculated from the
Illinois Real Property Appraisal Manual (IRPAM); True RCN is the replacement
cost new after adjusting for the local market, including factors such as the cost,
design, neighborhood, and appraiser factors.
ROOF STYLES:
GABLE ROOF – a roof forming an inverted V.
GAMBREL ROOF – roof whose slope on each side is interrupted by an obtuse
angle that forms two pitches on each side, the lower slope being steeper than
the upper (red barn roof)
HIPPED ROOF – a pitched roof having sloping ends rather than gable ends
MANSARD ROOF – roof type with two slopes (pitches) on each of four sides;
lower slopes are steeper than upper.
SAWTOOTH ROOF – a roof with a profile similar to the teeth in a saw
composed of a series of single-pitch roofs, whose shorter or vertical side has
windows for light and air.
SALES COMPARISON APPROACH – the value of properties can be reliably
estimated by observing and analyzing the selling prices of comparable properties
SHEATHING – first covering of boards, plywood, or wallboard placed over exterior
wall studding or roof rafters
Building Residual
TRCN
II-A INTERMEDIATE RESIDENTIAL ASSESSMENT PRACTICES
STUD – inner parallel vertical wood or steel framing of walls and partitions.
TRUSS – structural component composed of a combination of members, such as
beams, bars and ties, usually arranged in triangular units to form a rigid framework
for supporting loads over a span.
II-B INTERMEDIATE COMMERCIAL ASSESSMENT PRACTICES
GLOSSARY
AD VALOREM – according to value
ALLOWABLE EXPENSES – legitimate expenses that can be deducted from
effective gross income in order to arrive at net income; for assessment
purposes, depreciation, mortgage interest, and property taxes are not
allowable expenses
BEARING WALL – wall that supports the floors, roof, or any vertical load in
a building in addition to its own weight
CAPITALIZATION – process of converting net income of a property into an
indication of its value
COMPONENT-IN-PLACE – used to cost out buildings by analyzing and
pricing each component part of the building
COMPARABLES – recently sold properties that are similar in many aspects
to a property being appraised
CONSTRUCTION WEIGHT ADJUSTMENT – adjustment used to factor
construction weight variables on IRPAM schedule – necessary because the
larger a building’s frame size, the more expensive is its construction cost
CUBIC FEET – length x height x width
DATA BANK – composed of square feet, effective perimeter, cubic feet,
square feet wall area, and wall ratio of a building
EAVES
– lower edge of a roof, overhanging the side walls of a building.
EAVE HEIGHT – the height of a building from grade-level to the building's
eave
ECONOMIC LIFE – estimated period over which it is anticipated that a property
may profitably be used. The period over which property will yield a return on and
of the investment, over and above the economic rent due to land. This period can
never exceed the physical life of the property and generally is shorter than physical
life or endurance
II-B INTERMEDIATE COMMERCIAL ASSESSMENT PRACTICES
EFFECTIVE GROSS INCOME – potential gross income minus vacancy and
credit
EFFECTIVE PERIMETER –the linear measurement around a building
P = 2L + 2W
FRAME BAY – the rectangle or square formed by support columns
FRAMING – wood, steel, or concrete load-bearing skeleton of a structure.
GRADE – indicates plane of ground surface; also denotes established street
and sidewalk planes
GROSS INCOME MULTIPLIER – a unit of comparison in the market
approach to value comparison; sales price divided by gross income
LOAD–BEARING (L/B) WALL – weight of wall and portion of floor/roof load
are supported by the wall, remainder is supported by the interior framing
MARKET VALUE – most probable sale price of a property in terms of
money in a competitive and open market, assuming that the buyer and seller
are acting prudently and knowledgeably, allowing sufficient time for the sale,
and assuming that the transaction is not affected by undue pressures
NET INCOME – effective gross income minus allowable expenses and
reserves for replacement
ON-CENTER (oc) – center-to-center distance from one structural member to
another; term used for spacing studs, steel columns, posts, joists, rafters,
etc.
OVERALL HEIGHT – height of building from basement floor to eave
PARTY WALL – common wall shared by two buildings; party wall
adjustment 60% (actual length of wall x 60%)
POTENTIAL GROSS INCOME – income that a property is capable of
producing if 100% occupied based on market standards
II-B INTERMEDIATE COMMERCIAL ASSESSMENT PRACTICES
RECAPTURE RATE– rate used to recover the cost of the improvement over
the economic life of that improvement; the rate of return of
an investment
REMAINING ECONOMIC LIFE (REL) –– period over which a prudent
investor would reasonably expect to recapture his investment
REL =
REPLACEMENT COST NEW (RCN)– represents current cost of replacing
an improvement; Manual RCN is the replacement cost new as calculated
from the Illinois Real Property Appraisal Manual (IRPAM); True RCN is the
replacement cost new after adjusting for the local market, including factors
such as the cost, design, neighborhood, and appraiser factors.
RESERVES FOR REPLACEMENT – replacement or repair cost of items
(i.e. refrigerator, carpet, roof, etc.) pro-rated as an allowable expense to be
deducted from effective gross income
SHAPE ADJUSTMENT – adjustment used to factor construction shape
variables on IRPAM schedule; necessary to account for area/perimeter ratio
variations
SIZE ADJUSTMENT – adjustment used to factor construction size variables
on IRPAM schedule
WALL HEIGHT ADJUSTMENT – adjustment used to factor construction
wall height variables on IRPAM schedule
Building Residual
TRCN
II-B INTERMEDIATE COMMERCIAL ASSESSMENT PRACTICES
CF
SFWA
DATA BANK
SFGA = L x W
EP = L + W + L + W
CF = Sum of CF of each floor (SFFA x H)
SFWA = Sum of SFWA of each floor (Perimeter x H)
Wall Ratio =
II-D INTERMEDIATE MATH FOR ASSESSORS
GLOSSARY OF TERMS
ABSTRACTION METHOD: Uses sales of improved property to provide data
to develop Land to Building (L:B) ratio. Sales Price - (RCN-Depreciation) =
Site value L is always equal to 1. B will equal the Building Value divided by
the Land Value.
ALLOCATION METHOD: Based on the Principle of Balance. A ratio of land
value to building value (L:B) where the L always equals 1; the value of B will
equal the BV divided by the LV.
ANTICIPATED USE METHOD: Used with land in transition such as
agricultural to residential, commercial or industrial; called the Developer's
Method. Estimate the Sale Price of all developed lots and subtract the
estimated total cost of development. The difference represents the estimate
of the value for the land in an undeveloped state.
ASSESSED VALUE: The value placed upon property after multiplying its
market value by its level of assessment.
CAPITALIZATION: A mathematical process for converting the Net
Operating Income into an indication of value. (determining the present value
of future worth) Used in the Income Approach to Value. Formula used:
I
(I) Net Operating Income R x V
PGI Potential Gross Income (100% capacity @ market or econ rent)
– V&C
Vacancy & Collections Loss
EGI Effective Gross Income
– Exp Allowable Expenses
– RR
Reserve for Replacement
NI Net Operating Income
CAPITALIZATION RATE: R in the IRV formula. Consists of the Discount
and Effective Tax rates when calculating land income values; consists of the
Discount, Effective Tax and Recapture rates when calculating building
income values.
Discount rate - often called the return On the investment or mortgage
II-D INTERMEDIATE MATH FOR ASSESSORS
interest rate. May be calculated by using the Band of Investment Method
that provides a weighted rate.
Effective Tax rate – Ratio of taxes billed to market value. Determined
by multiplying the level of assessment by the aggregate tax rate
supported by that property; used to calculate property taxes by applying
the effective tax rate to full market value.
Recapture rate - often called the return Of investment; rate needed to
recover the investment during the remaining economic life (REL) of the
building; using straight line depreciation, calculated by dividing 100
(amount of the investment) by the REL of the building
COEFFICIENT OF DISPERSION (COD): The most common method used
in measuring assessment uniformity.
CONTRIBUTORY VALUE: Used in the valuing of farm buildings.
Calculated by multiplying a farm building's RCN by its REL.
COST FACTOR: a factor used to adjust a manual's cost values to reflect
the local cost of materials and labor. Once it is established, it is applied
throughout the jurisdiction. (SP - LV = BV BV
= cost factor indicator)
MRCN
DEPTH FACTOR: Used to adjust the Front Foot value of a lot when the
subject lot is at variance to the standard lot depth. Calculated by:
FF value of Subject Lot
or determined by the use of Depth Tables
FF Value of the Standard Lot
EFFECTIVE AGE: The age of an improvement based on that
improvement's CDU rating. The typical Economic Life of a building – the
Effective Age = the Remaining Economic Life of the building. The Typical
Economic Life – the REL = the amount of accrued depreciation.
EQUALIZATION FACTOR: Applied to a property's assessed value.
Calculated by dividing 33.33% by the prior (3-year average) median level of
assessment.
Often called a multiplier.
EQUALIZED ASSESSED VALUE: Assessed Value (AV) multiplied by
II-D INTERMEDIATE MATH FOR ASSESSORS
equalization factor(s). Assessed values for farm land and farm buildings are
also their EAV's.
Certified EAV's: Annual values that are certified by DOR to be applied to farm
land PI's 60-130.
FARM LAND ASSESSMENT: Based on productivity and use.
Cropland - assessed at Full Certified EAV of corresponding adjusted PI.
Permanent Pasture - assessed at 1/3 of its EAV as cropland.
Other Farmland - assessed at 1/6 of its EAV as cropland.
Contributory Wasteland - assessed at 1/6 of the lowest certified EAV.
Non-Contributory Wasteland - carries a 0 assessment.
Farmland assessments not subject to state multipliers.
FARM BUILDING ASSESSMENT: Based on a modified cost approach.
(RCN x REL = CV; CV x 33 1/3% = AV)
RCN - Calculated on a building of like utility (current use)
REL - Calculated by dividing the Remaining Physical Life (RPL) by the
Typical Life Expectancy (existing structure)
CV - Contributory Value
Farm building assessments not subject to state multipliers.
FRONT FOOT: A strip of land one foot wide fronting a street, etc., and
running the entire depth of the lot. (Lot dimensions : 50' x 150' There are
50 FF.)
FRONT FOOT VALUE: Supposes that each foot of lot frontage is worth the
same dollar amount. Sales Price ÷ # FF = $/FF value. A unit of value that
may be used when using the Market/Sales Comparison Approach.
PRICE-RELATED DIFFERENTIAL: Another method of measuring
assessment uniformity; used to measure an indication of a tendency of
assessment bias relating to the value of property.
MEDIAN: The middle value of a ranked set of numbers.
METES AND BOUNDS: Precise description of the boundary lines of a
parcel of land. Not described by reference to a lot or block shown on a map,
but described by starting at a known point and describing the bearings and
II-D INTERMEDIATE MATH FOR ASSESSORS
distances of the lines forming the boundaries of the property.
PRODUCTIVITY INDEX NUMBERS (SOIL PI): A scale based on average
level management used to determine the relative capacity of soils to produce
crops.
Farmland is assessed based on a soil's PI, or adjusted PI, and its use.
RCN: Replacement Cost New. MRCN represents the Manual's
Replacement Cost New; TRCN represents True RCN, which is the MRCN
adjusted by a cost factor.
REL: Remaining Economic Life. May be thought of as the period of time
over which a prudent investor would reasonably expect to recapture their
investment.
%REL + %DEP = 100% MV;
REL (years) + DEP (years) = Typical Economic Life.
RESIDUAL: Remaining value. Sales Price – Land Value = Building
Residual or Building Value (SP - BV = LV or Land Residual).
RPL: Remaining Physical Life. Used in calculating the REL factor when
assessing farm buildings. Found by subtracting the Actual Age or Effective
Age from the Typical Life Expectancy of the existing structure.
SALES RATIO STUDY -- used to indicate the percentage relationship of
assessed value to actual market value for real property in certain categories
and in geographical areas.
SLOPE & EROSION FACTORS: Used to adjust a soil's PI number if slope,
erosion or both exist. PI # x factor = Adjusted PI. Adjusted PI x Certified
EAV = Assessed Value.
TRENDING FACTOR: Used to adjust sale prices when combining existing
sales of other years with the current year sales ratios. Found by dividing the
least current year county's median level of assessment by the most current
year county's median level of assessment.
UNITS OF COMPARISON: Used in the Sales Comparison Approach when
establishing an appropriate measure of value. Front Foot (FF) and Square
Foot (SF) values are typical units of comparison.
II-D INTERMEDIATE MATH FOR ASSESSORS
UNITS OF VALUE: Found by dividing the Sales Price by the number of
units.
$10,000
= $10/SF The Median Value of the most consistent (least %
1000 SF of deviation) Unit of Comparison is used as an
indicator of value.
4-3-2-1- RULE: Assumes that the front of a lot carries a proportionally
higher value than the rear portion. The basis for deriving depth tables to be
used when the Front Foot is the unit value.
65-35 RULE: Suggests that the utility of a lot is seriously affected by its
shape, thus a loss in value. Applies to right-angle triangular shaped lots; if
base is on the frontage, the lot has 65% of the value of a rectangular lot
having the same frontage and depth, if the apex is located on the frontage,
the lot has 35% of the value of a rectangular lot having the same frontage
and depth.
II-E INTRODUCTION TO EQUALIZATION
GLOSSARY OF TERMS
AD VALOREM - According to value
APPRAISAL - An opinion of value, supported by evidence
ARM'S LENGTH SALE - A sale between two parties, neither of whom is
related to or under abnormal pressure from the other
ASSESSED VALUE - The value placed on property for tax purposes and
used as a basis for division of the tax burden. This amount is subject to the
state issued equalization factor
ASSESSMENT - Official act of discovering, listing, appraising, and entering a
value for property on the assessment rolls for ad valorem tax
ASSESSMENT LEVEL - The percentage of full value at which property is
being assessed. This may refer to the statutory level (33 1/3%) or the actual
level as inferred from a sales ratio study
BOARD OF REVIEW - An appeal agency in each county. Consists of 3
members; in commission counties - county commissioners or appointed by
the county commissioners; in other counties members are appointed by the
county board, or are elected
CLASSIFICATION - The practice of classifying various types of property
according to use, and assigning different assessment levels to each class.
Purpose is to tax various kinds of property at different effective tax rates
though the nominal rate is the same.
COEFFICIENT OF DISPERSION (COD) - A statistical measure of variation
of individual assessment ratios around the median level of assessments.
(An average error expressed as a percent; an indicator of assessment
uniformity found by dividing the average deviation by the median)
CLASS WEIGHT - Found by dividing the number of each class parcels by
the total number of class parcels
CLASS REASSESSMENT FACTOR - The degree of change due to
II-E INTRODUCTION TO EQUALIZATION
reassessment, found by dividing the current comparable class assessed
value by the prior comparable class assessed value
CLASS CONTRIBUTION - The adjusted change factor, found by multiplying
the class weight by the class reassessment factor
EFFECTIVE TAX RATE – Ratio of taxes billed to Market Value. Found by
multiplying the level of assessment by the local current tax rate. Expressed
as a percentage, applied to the full market value (if Level of assessments is
33.33% & local rate is 6%, Effective Tax Rate = 2%).
EQUALIZATION - The application of a uniform percent increase or decrease
to assessed values of various areas or classes of property to bring
assessment levels, on the average, to a uniform level of market value; the
process of providing uniform average level of assessments between
townships and/or counties
EQUALIZATION FACTOR - The factor applied to assessed valuation of
each county that raises or lowers the level of assessments to the mandated
level of 33 ⅓ % of market value. Intra-county factors may be used by a
county to bring all property to a uniform level. Factors are sometimes
referred to as multipliers. (Not applied to farm land, buildings and coal
rights)
EQUALIZED ASSESSED VALUE - Assessed value multiplied by an
equalization factor. Can form Tax Base from which Tax Rate is calculated.
For farm acreage, farm buildings, and coal rights, the final assessed value
is the equalized value
EXEMPTION - Removal of property from the tax base. May be a partial (e.g.
a homestead) or complete (e.g. a church building used exclusive for religious
use)
EXTENSION - The process in which the county clerk determines the tax rate
needed to raise the revenue (Levy) certified by each taxing district; the
actual dollar amount billed to property taxpayers in the district
GENERAL ASSESSMENT YEAR - The assessment year that occurs every
4 years when all property assessments are reviewed
II-E INTRODUCTION TO EQUALIZATION
PRICE-RELATED DIFFERENTIAL (PRD) - Used to measure a pattern of
inequity in assessments related to the value of property
LEVEL OF ASSESSMENTS - Ratio of assessed value to the sale price
LEVY - The amount of money a taxing body certifies to be raised from the
property tax to meet its operating expenses
MARKET VALUE (Full Value) - The most probable sale price estimated in
terms of money in a competitive and open market, assuming that the buyer
and seller are acting prudently and knowledgeably, allowing sufficient time
for the sale, and assuming that the transaction is not affected by undue
pressures.
MEDIAN - Middle value of a ranked set of numbers
OVERLAPPING TAXING DISTRICTS - Taxing districts that are located in
more than one county
RANDOM SAMPLING - An alternate method of determining a township
reassessment factor
SALES RATIO STUDY - An analysis of the percentage relationship of
assessed value to market value. Ratio equals prior year AV divided by the
current year SP. Minimum of 25 useable sales/appraisals required
STATE PROPERTY TAX APPEAL BOARD (PTAB) - The highest state
quasi-judicial body which hears appeals from taxpayers and taxing bodies on
property tax assessment decisions by the county Board of Review
TAXING BODY - A governmental organization that levies a property tax
TAXING DISTRICT - A territorial area under the taxing body's jurisdiction
TAX CODE - A number used by the county clerk that refers to a specific
combination of taxing bodies
TAX BASE - Composed of the Equalized Assessed Value (EAV) of locally
assessed property, less all qualified exemptions, plus the value of any State
assessed property
II-E INTRODUCTION TO EQUALIZATION
TAX RATE - The amount of tax due stated in a percentage of the tax base.
Derived by dividing the levy by the EAV. Some districts have a maximum
statutory rate. The sum of the fund rates equals the total district rate
TAX YEAR - Refers to year of assessment. The tax year for 2007 refers to
assessments based on January 1, 2007 values; taxes billed in the calendar
year 2008.
33 1/3% - Means 33 ⅓ % of the actual value of real property as determined
by the Department Of Revenue's Assessment/Sales Ratio studies for the
three years preceding the assessment year, adjusted to take into account
the implementation of any changes in assessment levels since the data for
such studies were calculated
TOWNSHIP WEIGHTED REASSESSMENT FACTOR - The sum of the
class contributions. This is the percent adjustment that will be applied to the
previous 3 years' assessed values. (Note: 1. If a township equalization factor
has been applied and the difference between the two is less than 1%, the
township equalization factor will be used instead of the township
reassessment factor; 2. If the township reassessment factor is less than
1%, a factor of 1.000 will be used)
WEIGHTED PARCEL REASSESSMENT- Used in calculating a
reassessment adjustment factor. Each class (Residential-Commercial-
Industrial) has an influence on the final township reassessment factor in
relation to the number of parcels in that class
URBAN WEIGHTED METHOD - Non-farm values; Used in determining a
county's median level of assessment by dividing the county's total assessed
value (AV) by the county's total Estimate of Full Value (EFV). This is the
preferred method of calculating a county multiplier.
