HomeMy WebLinkAboutCOM 0813.005 1998-2000
Stephen K. Yamashiro Richard Wurdeman
Mayor - Corporatlrm Couruel
(EXTUITtij of panivaii
OFFICE OF THE CORPORATION COUNSEL
101 Auputu Street, Suite 325 - Hilo, Hawaii 96720.4262 - (808) 961.8251 - Fax (808) 961.8622
August 4, 2000
TO Councilman J. Curtis Tyler, III
FROM: Gerald Takas ly
Deputy Corpo~Fation Counsel
RE Valuation of Public Utilities--Bill 276
COPIES/ITEMS DATE DESCRIPTION
Copy Research for PUC tax assessment bill.
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[ ] Signature and Forwarding As Noted Below [ ] See Remarks Below
[x] Pursuant to Your Request [ ] Filing and Return (Envelope Enclosed)
REMARKS:
Me
Enc.
a: kamikawa\transtyler.wpd
Comm. No. 6 /3 r ~S
P~ilc No.
AUG c
Rji. Date AUG 0 8 Iwu
Procedures Page 1 of 16
NYS Office of Real Property Services
O RP S ORPS Procedures Index v
Market Value Survey
Valuation Procedures U
For questions concerning this Procedure please contact:
Name: Jim O'Keeffe
Phone Number: (518) 474-8821
E-Mail Address: ,Hm.o'keeffe&a orps.state.ny.us
Web Address: http://w_wn.orDs.state.ny.us
1. Defiuitions
1. Appraisal process means a systematic analysis of the factors that bear upon the value of
real estate; an orderly program by which the problem is defined, the work necessary to
solve the problem is planned, and the data involved are acquired, classified, analyzed,
and interpreted into an estimate of value.
2. Appraisal selection report is a list of sample parcels to be appraised.
3. Appraised value means an opinion of an appraiser which is based upon an interpretation
of facts and judgements and their incorporation into an estimate of value, as of a stated
date.
4. Arm's Length Transfer means a transfer of real property described as appropriate for
appraisal purposes in a market value survey by the procedures for that market value
survey.
5. Assessor's Manual means Volume 6 of the Assessor's Manual, entitled "Data Collection
and Maintenance of Property Inventories," published by the Office of Real Property
Services (ORPS).
6. Boeckh refers to a service company that provides construction cost information for
appraisers to use to estimate costs for buildings and improvements. ORPS contracts with
Boeckh to obtain computerized tables of construction cost data for use in the computer-
assisted mass appraisal system.
7. Computer-assisted mass appraisal system (CAMA) means any mass appraisal system
which uses a computer as an integral part of the system to process property inventory
data and related information into individual value estimates, as of a given data, for a
large number of properties. Such a system usually employs the three approaches to value,
and often uses statistical estimating techniques.
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8. Depreciation means the loss in value of improvements to a property arising from
physical, functional, and economic causes.
9. Effective gross income (rent) multiplier means the relationship (ratio) between sales price
(value) and effective gross income.
10. Inventory means the physical characteristics of a parcel.
11. Market approach means an appraisal procedure in which the market value estimate is
predicated upon prices paid in actual market transactions. It is a process of analyzing
sales of similar recently sold properties in order to derive an indication of the most
probably sales price of the property being appraised.
12. Market value means the most probably price expressed in terms of money that a property
would bring if exposed for sale in the open market in an arm's-length transaction
between a seller who desires but is not compelled to sell and a buyer who desires but is
not compelled to purchase, both of whom are knowledgeable concerning all the uses to
which it is adapted and for which it is currently being used.
13. Non-complex industrial properties mean properties which can be appraised without
requiring either the professional use of engineering skills or the development of complex
earnings or economic analyses.
14. Replacement cost means the cost, including material, labor, and overhead, that would be
incurred in constructing an improvement having the same utility as the improvement in
question, without necessarily reproducing exactly any particular characteristic of the
property.
15. Reproduction cost means the cost, including material, labor, and overhead, that would be
incurred in constructing an improvement having exactly the same characteristics as the
improvement in question.
16. RPS means the New York State Real Property System, a set of instructions,
documentation and computer software provided by the State Office to assist localities
with assessment administration, inventory maintenance and property valuation. The
valuation component provides the capability of using statistical estimating techniques
such as, but not limited to: multiple regression analysis, automatic cost calibration, and
adaptive estimating procedures as part of the analysis.
17. Sale means an arm-length transfer of real property.
18. Site is a sample parcel, or a separately appraised component of a sample parcel.
19. Special purpose property means a structure which in uniquely adapted to the business
conducted upon it or use made of it and which cannot be converted to other uses without
the expenditure of substantial sums of money. It may also mean real property with
respect to the value of which some intangible element inheres, such as the owner's
prestige.
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20. SWIS code or statewide information system code means a numbering system established
by ORPS to uniquely identify each county, city, town and village, and that portion of a
town outside of incorporated villages.
2. Overview
1. These procedures govern the valuation of sample parcels in market value surveys for the
establishment of State equalization rates and other equalization products. Responsibility
for valuation of these parcels is in the regional offices of ORPS and in State Assessment
Services (SAS). Final determination of value is based upon the current use of a parcel.
2. Staff review the volume of current sales available and the number of selections that need
to be valued for each municipality. From this review, a decision is made on whether a
mass appraisal or individual appraisal approach should be used for the valuation of
particular parcels. If there are limited sales, an individual appraisal is most often done. If
there are limited selections to be valued, an individual appraisal approach may also be
employed. If there are an adequate number of sales, value estimates are generally
produced using a computer-assisted mass appraisal (CAMA) system. Using LAMA,
valuation is typically run at a county level.
3. At a minimum, staff shall determine appraised values in accordance with Standard 6 for
ad valorem taxation of the Uniform standards of Professional Appraisal Practice
(USPAP) promulgated by the Appraisal Standards Board, except that the provisions of
Part 13 will supersede Standard 6.
4. Valuation of real property can be accomplished by three basic approaches: cost, market,
and income. Where feasible, valuations reflect consideration of all three approaches to
value. However, in some instances, such as the valuation of vacant land, one approach
may not be relevant (cost) and another (income) may be precluded by a lack of data. For
specialized properties, market sales and income data are likely to be scarce; therefore, the
cost approach assumes a dominant role.
5. Staff determines appraised values using the appropriate approach or approaches to bleu
(cost, market, and income) for each of the sample parcels selected from the measured roll
as of the market value survey valuation date.
3. Data Acquisition
1. Inventory records for residential, farm and vacant sample and sale parcels shall be
provided by city, town or county assessing units to the State Office in an RPS or other
computerized format agreed to by the State Office. Assessing units not providing
computerized inventory records shall provide inventories for sample parcels and sales on
property record cards (Forms RP 3100 and RP 3105) in accordance with procedures
outlined in the Assessor's Manual or on property record cards maintained by the
assessing unit, accompanied by an explanation enabling staff to use the data in RPS.
2. Each city, town or county assessing unit shall furnish to the State Office inventories, as
required in subdivision (a) of this part, of the physical characteristics of sample parcels
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and sales necessary to value the sampled parcels by at least one of the standard
approaches to value. Inventories as of the measured roll must be furnished for the
sampled parcels for surveys subsequent to the 1994 survey. Inventories as of the sale date
must be furnished for sales occurring after January 1, 1994.
3. Inventories as required in subdivision (a) must be furnished as follows:
1. For assessing units using RPS to maintain inventory information or a
computerized system with a format previously agreed to by the State Office.
1. Sample parcel inventories for surveys subsequent to the 1994 survey as of
the taxable status date of the measured roll shall be provided in a computer
readable format within sixty days of receipt by the assessing unit of the
appraisal selection report.
2. Sale inventories for calendar year 1994 and subsequent shall be provided in
a computer readable format for all sales by June 1 or earlier of the next
calendar year.
2. For assessing units not using RPS to maintain inventory information or not having
a computerized system with a format previously agreed to by the State Office.
1. Sample parcel inventories for surveys subsequent to the 1994 survey as of
the taxable status date of the measured roll shall be provided within sixty
days of receipt by the assessing unit of the appraisal selection report on
property record cards (Forms RP 3100 and RP 3105) in accordance with
procedures outlined in the Assessor's Manual or on property record cards
maintained by the assessing unit and accompanied by an explanation
enabling staff to use the data in -PS.
2. In assessing units where 100 or fewer sales occur for calendar year 1994 and
subsequent, inventories shall be provided for all sales by June 1 or earlier of
the next calendar year on property record cards (Forms RP 3100 and RP
3105) in accordance with procedures outlined in the Assessor's Manual or
on property record cards maintained by the assessing unit and accompanied
by an explanation enabling staff to use the data in RPS.
3. In assessing units where more than 100 ales occur for calendar year 1994
and subsequent, inventories of sale parcels shall be provided on property
record cards (RP forms 3100 and 3105) in accordance with procedures
outlined in the Assessor's Manual or on property record cards maintained by
the assessing unit and accompanied by an explanation enabling staff to use
the data in RPS:
1. as soon as possible but no later than June 1 of the next calendar year if
the assessing unit is providing the State Office with all such sales; or
2. within 60 days of receipt of a list of sales required or upon agreement
after discussion with the assessor or their designee and State Office
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staff of those sales required for valuation of the sample parcels. At
least one (1) and a maximum of three (3) sales for every sample parcel
are required.
3. The information submitted in accordance with this paragraph must be
accompanied by an explanation of its maintenance and its relevance to
the condition of sample parcels as of the taxable status date of the
measured roll and the condition of parcels which sell on the date of
sale.
4. Sales information is reported to the State Office pursuant to 9
NYCRR 191. Staff will, upon learning of errors in reported sales
price, condition of sale, or extraneous issues that bring the usability of
the sale into question, correct the appropriate sales information.
5. State Office staff are responsible for reviewing submitted data to
ensure that the data is in conformance with inventory collection
definitions and procedures, as defined in the Assessor's Manual or in
conformance with collection standards mutually agreed to by the State
Office and assessing unit.
1. If staff determines that the submitted inventory data is
materially or consistently erroneous, information for sample and
sale parcels will be returned, with the errors noted to the
assessor, for correction of the sample parcels and sales
inventories. The corrected inventories are to be returned to the
State Office within 30 days of receipt.
2. If staff determines that the submitted inventory data is of
sufficient quality, the data will be used directly in the market
value survey.
4. Cost Approach, generally.
1. The cost approach is based upon the premise that the value of an improved parcel is
equal to the value of the land plus the replacement or reproduction cost as appropriate of
the improvements less accrued depreciation. There are three basic steps in the application
of the cost approach:
1. Estimate replacement or reproduction cost new as appropriate of the improvements
(RCN);
2. Subtract the accrued depreciation to arrive at replacement or reproduction cost new
less depreciation (RCNLD); and
3. Add the value of the land. This is the value estimate.
2. For a specific market value survey, current costs are as of the valuation data of the survey
as specified in the rules for that survey.
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3. The cost schedules are tabulated by structure codes or use code and contain costs,
location multipliers, service lives, depreciation equations and condition factors.
4. In the case of special purpose properties, the cost approach alone is utilized.
5. Market Approach, generally.
1. Analysis of market data is used to develop a valuation model or land schedule to apply to
groups of properties. Depending upon the availability of data within each group,
valuation models or land schedules may be applied to other groups in areas of limited or
similar market activity. Depending on availability of data, analysis may include statistical
analysis techniques which have been incorporated into the New York State Real Property
System (RPS). Valuation models or land schedules are in the form of a predictive
equation which is then applied as appropriate to the sample parcels. The resulting
estimate is known as the model estimate of value or the land estimate is using land
schedules.
2. Comparable sales are selected, and could involved utilizing a valuation model
developed. As many as five comparable sales may be selected for a sample parcel based
upon their physical and locational similarity to the sample parcel.
3. When sales are used in the mass appraisal system, time adjustments may be made from
the date of sale to the survey valuation date. Sale prices are not adjusted for brokers' fees.
4. After development of land schedules, land values are extended to the parcels being
valued and the result is a market value estimate for land that is the basis for subsequent
staff review.
6. Income Approach, generally.
1. The income approach provides value estimates by capitalizing the projected net income
stream of the sample parcel. The income approach begins with obtaining typical or
normal income and expense data. This includes typical or normal rents, or incomes,
vacancy rates and expenses. Expenses are deducted from effective gross income to arrive
at net income.
2. Net income may be capitalized into estimates of value, using overall capitalization rates,
simple mortgage equity or band of investment analysis, and residual techniques. Values
are estimated using the above capitalization techniques based upon the availability of
data. Appraisal estimates with overall capitalization rates must taken into consideration
the appropriate equalized tax rate.
3. The analysis of income and expense data is used in the development of valuation factors
relating to the income approach. These factors may be used for sample parcels and
include income per square foot or unit or both, and vacancy and expense percentages.
Expense categories may include such factors as insurance, building services, utilities,
maintenance reserve for replacement, and management. Real estate taxes are not
considered an expense item, but are included in the capitalization rate.
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4. Tax rate data is obtained from the Office of the State Comptroller. Tax rates used for
commercial valuation in the development of capitalization rates are based on the
respective SWIS and school district. Special district taxes are included with the tax rates
when appropriate.
5. Income approach estimates of value for the parcel are provided to staff for review. These
estimates are for the total income value including that land considered a normal or
standard site for the neighborhood or market. Excess land, above the amount allocated to
the primary commercial site, is valued separately.
7. Valuation of Residential, Farm and Vacant Land Properties
1. The market (comparable sales) and/or cost approaches are the primary methods of
valuation for residential, farm, and vacant land properties. Residential property is
typically appraised using a market approach. The cost approach supplements the sales
approach, and may be the primary approach is sales data are inadequate. Although the
primary approach for residential properties is the sales approach, cost values are typically
generated for all residential properties.
2. Using computer-assisted mass appraisal, the following options are available:
1. Land Value and Land Schedules. A land schedule or land table is developed from
an analysis of vacant land sales. Vacant land sales are analyzed to develop dollars
per-unit figures (i.e., dollars/acre, dollars/front foot, dollars/waterfront feet,
dollars/square feet, etc.) for the different land types and land sizes that exist in the
market area being valued. The dollars' per-unit figures are put into tables (land
schedules) and tested for accuracy against the sales they were developed from.
Adjustments are made if needed. The land scheduled are then applied to land
inventory items for survey selections to generated land value estimates. This
approach for determination of land values is frequently used for residential, farm
and vacant land properties. It could be the approach used for valuation of vacant
land where the value of small improvements would then be accounted for by using
a cost approach. With limited availability of sales, it could also be the valuation
approach for farms, where building and improvement values would be accounted
for using a cost approach.
2. Land values for improved properties may also be determined by applying a
percentage of land to total value or by trending values between market value
surveys.
3. RCN and RCNLD Cost Values. Cost values can be generated through a Computer
Assisted Mass Appraisal (CAMA) system utilizing cost tables coinciding with the
survey valuation date. The CAMA system generated RCN's (cost values for
Replacement Cost New) and RCNLD's (cost values for Replacement Cost New
Less Depreciation) for each property type. If land values are derived from land
schedules, these values are systematically added to cost values to generate a total
estimate of value using a cost approach. The land schedule/cost approach is more
often used as a primary approach for farm and vacant land, than for residential
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properties.
4. Modeling Techniques. Given adequate sales, statistical modeling techniques such
as multiple regression analysis, adaptive estimation procedures, and/or the
automatic cost calibrator are used.
1. Statistical models or equations are systematically developed through a
computerized analysis of sales. The models developed relate variations in
sale prices to variations in property characteristics. The equations or models
developed are applied to subject properties to produce an estimated market
value for each subject. These model estimates can be used on their own or in
conjunction with comparable sales.
2. In a CAMA system, multiple regression analysis (MRA) is a statistical
technique whereby sales data are analyzed in order to predict the value of a
known (dependent) variable (i.e., sale price), from the known value of other
(independent) variables such as property characteristics of the sold property
which could include land size, the square feet of living area, the number of
baths, construction quality, condition, age, and garage square feet to name a
few.
3. Adaptive Estimation Procedure (AEP or feedback) is an accepted mass
appraisal technique adapted from the engineering sciences. The basic
principle of AEP is that continual corrections to a process can be made from
information obtained from its current course or movement. In mass
appraisal, a valuation equation is initially specified based upon previous
experience. The equation is adjusted by sequentially processing individual
sales that occurred subsequently. The process continues, with each sale
processed many times, until the model converges on a satisfactory solution.
AEP would more typically be chosen over regression if there were limited
sales.
4. The automatic cost calibrator (ACC) uses stepwise regression to produce a
total market-adjusted cost value which includes land. A separate land value
estimate can also be generated for each subject property, in addition to a
total value estimate. The ACC emulates the field-tested knowledge of mass
appraisal experts to determine market adjustment factors for the replacement
cost, as well as depreciation factors and a land valuation schedule that are
consistent with local sales. The ACC is typically only run on residential
properties.
5. A modeling approach is most typically used for residential properties.
Depending on number of sales, a modeling approach may also be used for
vacant land and farms. AEP is used more often than multiple regression for
vacant land and farms due to limited sales data.
5. Comparable Sales. Computerized comparable sale reports can be generated to
predict market estimates of value. Comparable sales can be run with or without
generating model estimates of value. A market/comp sales approach is typically
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used for residential properties, where there is usually an abundance of sales. With
adequate sales, this market approach is also used for vacant land and farm
properties.
6. Land schedules, cost values, models, and comparable sales are typically developed
and processed at a county level.
7. Value Review. Staff review and consider each of the computer-predicted value
estimates from the different valuation approaches for each survey selection. The
reviewer decides which approach or approaches are most applicable based on
availability and quality of cost, and sales data, and determines the final appraised
value after considering all available data. Final value determinations and value
support data, including comparable sales used are maintained onto computerized
RPS files.
3. Using an individual appraisal approach, the following step maybe utilized:
1. Perform a manual analysis of recent sales. Perform an individual appraisal for the
property using available sales for value determination and support. Maintain value
support data, such as comparable sales used, onto RPS files as an audit trail of
what was done.
2. Reference cost values generated from CAMA, or generate individual cost values
using online PC Boeckh cost software. Analyze vacant land sales to determine
land values.
8. Valuation of Commercial Properties
1. Commercial property is typically appraised using a market and/or income approach to
value. The cost approach supplements these approaches, and is sometimes the only
feasible approach for special purpose property lacking market and/or income data. Cost
values are typically generated for all improved property types. The most appropriate
method(s) of valuation to use depends upon property types, available data, and volume of
sales.
2. For commercials, the following options are available using a CAMA system:
I . Land Values and Land Schedules. Develop land schedules (land tables) from an
analysis of vacant land sales. To develop land schedules, vacant land sales are
analyzed to derive dollars per-unit figures (i.e., dollars/acre, dollars/front foot,
dollars/waterfront foot, dollars/square feet, etc.) for all the different land types and
land sizes that exist in the market area being valued. The dollars per unit figures
are put into tables (land schedules) and tested for accuracy against sales they were
developed from. Adjustments are made if needed. The land schedules are then
applied to land inventory items for survey selections to generate land value
estimates.
2. Land values for improved properties may also be determined by applying a
percentage of land to total value or by trending values between market value
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surveys.
3. RCN and RCNLD Cost Values. Cost values are generated through CAMA
utilizing cost tables coinciding with the survey valuation date. The CAMA system
generates RCN's and RCNLD's for each commercial property. Cost values for
commercial properties are based upon classifications of structures according to
building use. If land values are derived from land schedules, these values are
systematically added to cost values to generate a total estimate of value using a
cost approach.
4. Modeling Techniques. Statistical models may be developed using AEP (feedback),
or multiple regression given adequate sales. Feedback is generally used more often
than regression in instances when commercial modeling is done. Fewer sales are
generally needed for AEP, than for regression. Statistical models would be
developed through a computerized analysis of sales. The models would be applied
to subject properties to generate model estimates of value. These model estimates
could be used on their own or in conjunction with comparable sales.
5. Comparable Sales. Comparable sales analysis is possible for commercial
properties. Comparable sale reports can be run with or without generating model
estimates of value.
6. Market/Income Approach.
1. A commercial valuation module is available in RPS to value properties
using both market and income approaches to value. This is the most
common method used for valuing commercial properties using CAMA. This
method of valuation begins with a valuation factor file (VFF). The VFF
contains factors for income per square foot and/or unit, market value per
square foot and/or unit, vacancy and expense percentages, gross income
multipliers, as well as adjustment factors for size, age, condition, and
desirability. Factors are typically developed according to property use, and
location. Locational factors utilized may include SWIS, municipal code,
neighborhood code or school districts. Both sale and subject parcels are
analyzed to derive factors for the VFF.
2. A VFF may be developed from scratch based on analysis of subjects and
recent sales, or by building on and/or modifying a historical VFF. If a
current local project VFF is available, or a historical survey VFF, this may
be used as a starting point for developing a new VFF, and incorporating
appropriate adjustments supported by an analysis of current sales, and
current income data for subject properties.
3. Market and income-based value estimates are generated for subject
properties based on factors residing on the VFF, and the data available for
each subject property. The VFF factors are extended to subject property
characteristics and a commercial report is produced where up to five value
predictions are provided. Two value estimates are from an income approach,
two use a market approach, and the cost value estimate from the cost module
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also displays on the commercial report. Values using the income approach
are derived by dividing net operating income by each of two capitalization
rates. Capitalization rates always include an equalized tax rate, since taxes
are not taken out as an expense. One income value estimate is generated
using an overall capitalization rates, and the other by using a simple
mortgage equity capitalization rate. Market values generated include an
effective gross income multiplier value devised by multiplying effective
gross income by the effective gross income multiplier, and an indicated
market value determined by applying dollars/unit factors from the VFF.
4. Land schedules, cost values, VFF's, models and comparable sales if
applicable, are typically developed and processed at a county level.
7. Value Review. Final appraised values are determined by regional staff, taking all
information and observations into consideration subsequent to inspection of the
properties. When the CAMA system is used for value prediction, a number of
review reports are generated. These may include cost sheets with land values
derived from land schedules, comparable sale reports, income and expense reports
for commercial properties, data arrays of sales, sales models, and valuation factor
files. Regional staff review reports and value estimates generated from the CAMA
system, and determine both the final land and total value for each subject parcel
being appraised. Appropriate value support data is documented and maintained
onto RPS files depending on which approach or combination of approaches (cost,
market, income) are used to determine a final appraised value.
3. Using an individual appraisal approach, the following options may be utilized:
1. Reference cost values generated from LAMA, or generate individual cost values
using online PC Boeckh cost software. Analyze sales to arrive at land values.
2. Manually perform an income approach to capitalize net income using band of
investment or simple mortgage equity techniques, or overall capitalization rates,
after analyzing economic and actual income data for similar type properties as the
appraisal. Document final value determination with appropriate value support data.
3. Derive values using a market approach after manually analyzing available market
data for sales of similar type properties. Document final value determinations with
appropriate value support data, including comparable sales used.
4. Whether CAMA or an individual appraisal is done, value support data used to determine
final land and total value is documented and maintained onto computerized RPS files for
future reference.
9. Estimated Land Values for Improved Properties
The land value estimate for improved properties may be determined by calculating a percentage
of land to total value, by applying the developed land schedule, or by trending values between
market value surveys.
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10. Valuation of Industrial Properties
1. Appraisal of industrial parcels begins with an identification of the property's general
purpose, special purpose or single purpose. In appraising parcels classified as general
purpose, staff will normally make use of the three approaches to value. In the case of
special or single purpose properties, staff will typically use the cost approach alone.
2. Land. This component within each sample parcel, is valued by the market data approach
to value. Sales of vacant lands, similar to the parcel being appraised, are compared to the
subject land, with necessary adjustments being made for differences between each sale
and the sample parcel. A land value is selected from the indicated values.
3. Total.
1.
1. Appropriate data being available, general purpose industrial property is
valued by each of the three approaches to value;
1. Cost approach for improvements. hi estimating the replacement or
reproduction cost of the improvements of each sample parcel, an
onsite inspection is made of the premises to obtain relevant data,
including a description of the improvements, a determination of
suitability to existing use, original costs, and dates of construction or
installation. The data is recorded by staff engineers and appraisers.
From the data acquired, a unit cost is calculated for each item
(building, equipment, and land improvements), for the various units
included in the appraisal. Based on the data acquired, the effective age
and economic, or service life of the several items are estimated. The
unit cost make-up data sheets are submitted for review. Those
portions of the reviewed data that are relevant to the reproduction cost
new, are processed by computer, through a program that correlates the
several cost elements that have been estimated for each unit of the
appraisal, as well as predetermined indices that adjust the unit prices
to the survey valuation date. The result of this process is a preliminary
valuation cost report, for use by the appraiser in determining the
property's value.
2. Income approach. The reliability of this approach is dependent upon
four conditions: the reasonableness of the estimate of the anticipated
net annual income; the duration of the net annual income, the
economic life of the building; the capitalization (discount) rate; and
the method of conversion (income to capital). The net income is the
difference between the effective gross income (gross income less an
estimate for rent loss and vacancy) and the property expenses; usually,
the term is qualified as net income before depreciation, or net income
before capital recapture. An expense for taxes is not included, rather,
an equalized tax rate is included in the capitalization rate. The
estimate of gross income is based on leasable areas, as determined
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during the initial physical inspection by staff subject to review.
3. Market approach. The reliability of this approach is dependent upon
the degree of comparability of each property with the sample parcel,
the time of the sale, the verification of the sale data, and the absence
of unusual conditions affecting the sale. Included in this approach to
value is an adjustment of the comparable sales by the appraiser to the
subject property, for any dissimilarities.
2. In the case of general purpose properties, the values indicated by the
approaches utilized are correlated and a single estimate of market value is
expressed, based on the strengths and weaknesses of the approaches.
2. Specialty and single purpose properties. These properties are typically valued by
the cost approach alone, which requires a detailed application of the various types
of depreciation: physical deterioration, incurable; physical deterioration, curable;
functional obsolescence, incurable; functional obsolescence, curable; and
economic (or external) obsolescence. An income approach to value could be used
given the availability of appropriate data to work with.
4. Reports are reviewed in the same manner as the cost estimations submitted. If additional
information is required, appropriate action is taken by appraisal staff.
5. Final estimates of market value are analyzed and determined as they pertain to the
survey.
11. Valuation of Forestry Properties
1. The market value of wild or forest lands shall be determined by the summation of the
following three factors which shall be derived from the market:
1. The contributory value of timber stumpage of the parcel, determined from a
schedule that contains the per-acre price representing the market value of timber
stumpage. When calculating the contributory value of merchantable timber, all
stumpage values shall be discounted by 50% to reflect ownership risks and other
costs of land ownership;
2. The market value of the parcel's land without improvement or merchantable
timber, determined from a schedule of per-acre bare land value. Within each
municipality, values shall be separately designated for lands located within a
quarter mile of an all-weather, maintained road and lands not so located; and
3. The additional value of any water frontage, determined from a schedule of per unit
values for any wild or forested land that is within or adjacent to any section of a
water body determined to have a recreational or residential use. Water frontage
shall be distinguished according to water body, shoreline desirability, and
shoreline accessibility.
2. Wild and forest land shall be classified according to the following characteristics:
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1. Forest regions;
2. Forest types;
3. A forest site;
4. Gross timber volume per acre;
5. Cut class;
6. Accessibility; and
7. Ease of logging.
12. Valuation of Utility Properties
J 1. Land. Land value5ekiwrates are determined by the market value approach in accordance
with Aazt9 "
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2. Outside plant. (1)Outside plant is public utility real property, predominantly transmission
and distribution facilities, that consists of one or more of the following:
1. Units that have physical and functional characteristics that are so similar that they
are accounted for as a group or class and are generally installed on easements;
2. Transmission cable or wire including supporf/structures;
3. Substation equipment;
4. Measuring and regulating equipment.
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3. Public utility real property which is physically equivalent to tangible special franchise
property, but is not in the public right-of-way, is appraised on the basis of its
reproduction cost new less allowances for physical depreciation, functional obsolescence
and economic obsolescence, if any. Such 4` is shall be made, to the extent possible,
in accordance with the
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Publilcc utility real property generally classed asa at1~an mission~or distribution substation
equipment or measuring and regulating equipment is appraised on the basis of its
reproduction cost new less allowances for physical depreciation, functional obsolescence
and economic obsolescence, if any. The reproduction cost new is determined by
multiplying reported inventory original cost by appropriate price indices and/or by
multiplying physical inventories by appropriate unit prices. The rate of depreciation is a
function of the appraised property's age, estimated service life and salvage factor.
4. Structures. The value of improvements that are not outside plant, such as buildings,
generating stations, gas compressor stations, dams and reservoirs, is determined using
the same methodology as is used in appraising industrial properties .
13. Procedures for certain sample parcels.
1. Residential and commercial condominiums.
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1. The appraised value of units of residential or commercial condominiums which are
sample parcels is subject to the following restrictions:
1. Except as provided in paragraph (2) of this subdivision, the sum of the
appraised values of the individual units may not exceed the appraised value
of all the units in the condominium development, considered as a single
saleable parcel;
2. The appraised value of an individual unit may not be based upon the selling
price of that unit; and
3. The appraised value of all the units considered as a single, saleable parcel
may not be based upon a summing of the selling price of each of those
individual units.
2. The restriction set forth in subparagraph (1)(I) of this subdivision is generally not
applicable to those condominiums (other than those converted from another form
of ownership) classified as class one in special assessing units and have adopted
the provisions of section 1903 of the Real Property Tax Law pertaining to
homestead base proportions. The market approach for individual units may be
used in localities with unrestricted assessments. The restriction does apply,
however, to those condominium units located in the following approved assessing
units: The Cities of North Tonawanda and Niagara Falls; and the Towns of East
Greenbush, Islip, Niagara, Orangetown and Waterford.
2. Residential cooperatives. In valuing a sample parcel owned by a residential cooperative
corporation for the purposes of providing dwellings for its shareholders, staff may not
appraise the value of the sample parcel by analyzing the sale prices of shares in the
owners' corporation.
3. Homeowners' association. Whenever a residential sample parcel is part of a development
in which ownership of a unit is generally transferred together with shares or membership
in a legal entity which owns real property in which the transferee receives a right to use
or an interest, staff shall presume that the value of any such sample parcels includes the
right to use or interest in that real property. In contrast to ownership of a condominium
unit, a member of a homeowner association generally holds fee simple title to the land
under and/or near the unit and to the full structure including outside walls.
4. Timeshares. The fact that a sample parcel is owned or leased under a timesharing
arrangement will not be considered by staff in appraising the value of that parcel.
5.
1. Court-ordered assessments. A court order to enter a reduced value on a particular
assessment roll for a sample parcel, or the approval or adoption of a particular
appraisal method by a court or competent jurisdiction with respect to a sample
parcel shall be considered by staff in valuing that sample parcel or a similar parcel
for any market value survey.
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2. In reviewing a court ordered assessment, staff shall review the court order and
consider the court's determination of full value, the assessor's determination of full
value supported by the appraisal documentation presented in the court proceeding,
or the court's adoption of a method of valuation. Staff shall make such adjustments
as are appropriate for inventory changes, time, market conditions or other relevant
factors affecting the full value of the sample parcel. Alternatively, staff may
determine that another sample parcel will be substituted for the sample parcel
subject to such court order.
6. Income producing properties. Actual data from a sample parcel may be used if it is
indicative of typical managements and economic rent as of the survey valuation date;
provided, however, that only actual rent may be used with respect to to real property
subject to statutorily imposed rent controls or similar limitations on the right of return on
investment, where such statutorily imposed limitations are brought to the attention of
staff and where the property is registered with the appropriate state or local regulating
agency or authority and such agency or authority has current certified and complete, to
the year of the survey valuation date, data which is available to staff.
7. Localities with few sample parcels. In a municipality where there are a very limited
number of sample parcel to be appraised or where there are insufficient sales available
for modeling, staff shall determine appraised values in accordance with standard 6 for ad
valorem taxation of the Uniform Standards of professional Appraisal Practice (USPAP)
promulgated by the Appraisal Standards board to the greatest extent possible.
8. Localities where data is of inferior quality. For municipalities or counties where local
data is of inferior quality, staff shall determine appraised values in accordance with
Standard 6 for ad valorem taxation of the Uniform Standards of Professional Appraisal
Practice (USPAP) promulgated by the Appraisal Standards Board to the greatest extent
possible.
9. An appraisal of a sample parcel shall be in accordance with Standard 6 of USPAP except
that where it is clear that the market value of an improved sample parcel reflects a
potential use rather than the parcel's current use, the appraisal shall be based upon the
current use of the parcel.
For questions concerning this Procedure please contact:
Name: Jim O'Keeffe
Phone Number: (518) 474-8821
E-Mail Address: jim.o'_keeffe@orps.state.ny.us
Web Address: http:/hvv.w.orps.state.ny.tis
I op of Page l l OfGcc of Counsel I J Taxpayer Information I Assessors' Information
ORPS Home Page
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