DLS City & Town Newsletter

Determining and Analyzing the Proposed 2018 Equalized Valuation

James J. Paquette – Bureau of Local Assessment

What is Equalized Valuation?

Equalized Valuation (EQV) is the fair cash value of all property in a city or town subject to local taxation as of January first as determined by the Commissioner of Revenue (Commissioner) under G.L. c. 58, §§ 9 -10C. EQV is determined by the Commissioner every two years.

Why is the EQV of a city or town important?

For FY2020 and FY2021, the January 1, 2018 EQVs will become part of the allocation of aid distributed to cities and towns through the Chapter 70 school aid program, public library equalizing municipal grant amount and determination of the reimbursement rate for school construction projects. Certain Cherry Sheet assessment programs will also use EQV to determine the assessment to a city or town including county tax, Boston Metropolitan district, mosquito control projects and air pollution control projects. In addition, EQVs will be used to determine the decile ranking for the equity and surplus rounds of the state match for the community preservation distribution in FY2019. Finally, EQV is used in calculating a community’s debt limit under G.L. c. 44, § 10.

What components are used to develop the EQV?

The equity of an assessment administration program depends upon accurate estimates of the full and fair cash value of property within a city or town. Assessment performance can be quantified through a statistical analysis referred to as an assessment sales ratio (ASR) study. The data components needed to calculate EQV are submitted to the Commissioner of Revenue each year by communities as part of the annual tax rate setting process. This includes interim year adjustment reporting and reporting under the five-year certification process required by G.L. c. 40, § 56. This data is used to determine the aggregate ratio of the residential property class. Every community receives an EQV ratio for residential property class reflecting its assessment level as a percentage of market value.

For communities that have a large enough commercial base (not including land valued under Chapters 61, 61A and 61B) and industrial base – generally over 15% of the community’s total value – a separate aggregate ratio is developed for those combined classes, provided that there is a sufficient sample size of sales information. If not, the residential ratio is used for those two classes of property.

Personal property and certain other specialty properties, such as power plants and land valued under Chapter 61, 61A, and 61B are considered to be at 100 percent of market value. To view these ratios, please click here.

What is the process for establishing EQV?

There are four steps involved in establishing EQV, each having statutory deadlines.

1. Proposed EQV - Every two years, on or before June 1st, the Commissioner is required to determine and establish proposed EQVs for each city and town as of January 1st in that year.

2. Revised EQV - After release of the proposed EQV and by June 10th, the Commissioner is required to hold a public hearing on the EQVs. Based upon information received at the hearing or otherwise, the Commissioner may revise the proposed EQV of any city or town. If an EQV is revised, the Commissioner sends notice to the affected city or town by July 20th.

3. Appeal Process - On or before August 10th, a city or town may appeal its EQV to the Appellate Tax Board (ATB). The ATB must decide the appeal by Jan 20th of the following year. A failure of the ATB to act upon an appeal within that time is deemed a denial of the appeal. The decision of the ATB is final.

4. Final EQVs - On or before January 31th, the Commissioner determines and issues the final EQVs. This entails revising the EQVs modified by the ATB on appeal and making a statutory adjustment for property subject to the excise imposed under G.L. c. 121A, § 10.

Most Recent Proposed EQVs

The commissioner’s most recent proposed EQVs were released on May 31, 2018 for June 1, 2018 and are accessible by a community under the LA-19 Equalized Valuation Report through the DLS Gateway system at https://dlsgateway.dor.state.ma.us/gateway/Login.

Total Proposed EQV for FY2018 vs. Total Proposed EQV for FY2016

The proposed EQV for 2016 totaled $1,104,461,349,900. The proposed EQV for 2018 totaled $1,246,495,943,000, an increase of 12.86%. It should be noted that the EQV increase from 2016 to 2018 mirrors the increase in the state’s total assessed value for the same period (12.1%). The increase in EQV total value from 2016 to 2018 demonstrates the continual process of recovery from the financial crisis of 2007-2008. 25 municipalities decreased in equalized values while all others saw an increase.

EQV Changes from 2016 to 2018 by County

In Berkshire County, 10 communities had lower EQVs in 2018 than in 2016, 21 communities had an increase in their EQV of less than 10%, and one community had an increase of greater than 10%. This contrasts Middlesex County where no communities saw a decline, 21 communities had an increase of less than 10%, 29 communities had between 10% and 20% increase, and 4 communities had an increase over 20%.

While the extremes at either end of the spectrum represent only a small number of communities, the majority of communities with declining EQV are located in the western part of the state. All communities experiencing more than a 20% increase are located the eastern part of the state. These results closely mimic the higher population, property values, and levels of growth found in the eastern part of the state.

The map below displays statewide percent changes from the 2016 EQV to the 2018 EQV.

The map below demonstrates the concentration of value, as demonstrated by the current Preliminary EQV, in the eastern portion of the state.

For more information on EQVs, please visit the Division of Local Services’ EQV webpage.

Data Highlight of the Month: Municipal Revenue Growth Factor

Anthonia Bakare - Municipal Databank

The Division of Local Services calculates Municipal Revenue Growth Factors annually. MRGF is a percentage used to determine increases or decreases in the community’s required local contribution component of the school aid (Chapter 70) funding formula determined by the Department of Elementary and Secondary Education (DESE). The MRGF measures changes in a community’s property tax levy, projected new growth recurring local receipts, and state general sharing aid (Unrestricted General Government aid and State-Owned Land). DLS provides reports on the calculation via the website. These reports provide details of the calculation of a city or town's MRGF.

Remember to visit the Municipal Finance Trend Dashboard which includes additional financial data related to communities.

We hope you become better acquainted with the data the Division of Local Services has to offer through the Data Highlight of the Month. For more information, contact us directly at databank@dor.state.ma.us or (617) 626-2384.