Research
Dissertation Research
An Analysis of Public vs. Private Contracting Performance in Michigan Property Tax Assessment [job-market paper]
The discussion on privatization has been focusing on determining whether the private sector is superior to government agencies in providing a range of services. However, this might not be an “either-or” question. It is possible that each performs better under different circumstances; optimum results can be achieved by mixing and combining them This research aims to test the hypothesis that neither public or private sector is inherently superior to the other using the case of Michigan tax assessment to determine the respective comparative advantages. I also attempt to identify the optimal allocation of assessors, and compare that to the existing arrangement to determine the degree of misallocation.
By analyzing panel data of all property parcels in Michigan (over 5 million parcels) within more than 1,000 local assessing offices from 2008 through 2016, I identify three main results: (i) Neither private nor public assessors is always superior or inferior to the other, and they both have relative strengths within different types of communities; (ii) they both tend to perform better in larger communities and communities with higher average property values; and (iii) there is a misallocation of assessors in Michigan. Private contractors perform better in communities with more parcels, but are more employed in communities with fewer parcels. Based on the results, I recommend merging small assessing districts in Michigan to form larger assessing areas, and then allocate different types of assessors to move toward a more optimal arrangement. Scenario forecasts suggest that following my recommendation would improve assessment performance by 32 percent as compared to the current situation.
Drastic housing price declines during financial crisis challenged the property tax as a historically stable revenue source for states and local government. I use detailed parcel level housing price and property tax data during and following the financial crisis for five counties that comprise the Detroit Metropolitan Area in Michigan to evaluate the relationship between changing housing prices and property assessments. My findings are generally consistent with previous research in that there is about a three-year lag between the housing price changes and changes in property assessments for tax purposes. However, I also find that before the crisis-hit struggling communities tended to over-state assessments to support property tax revenue streams. Assessment adjustments to market declines in these places also lagged in other fiscally healthier cities. On a positive note, the evaluation shows that local authorities in these struggling communities used the financial crisis period to align assessments more closely to actual market conditions as per Michigan property assessment policies.
Determinants of Property Assessment Costs in the State of Michigan
I estimate the cost function of property assessment for Michigan local government units (townships and cities) wherein I use panel data with 1,310 government units for years 2015 through 2017 to determine the relationship between assessment cost and the number of property parcels within the jurisdiction. For a local unit with 1700 parcels (the local unit with medium size in my dataset), each one percent increase in the number of parcel reduce the assessment cost per parcel by 0.58 percent. Each one percent increase of average property assessed value is associated with a 0.46 percent decrease of assessment cost per parcel. Interestingly, the hiring of private or county level assessors as alternatives to in-house local government assessors fails to reduce assessment cost. Requiring higher level certified assessors does not significantly increase assessment costs.
Works in Progress
Ranking Technical Inefficiency in Michigan property assessments
Who over-estimate properties? (with Mark Skidmore)
How useful are monetary policies to guide housing market in different regimes?