mass appraisal guidance and performance standards technical standards of professional practice ......

International Property Tax Institute

Institut international de la fiscalité immobilière

11th Mass Appraisal Valuation Symposium

Innovation, Transformation, Knowledge

Enhancement and Improved Efficiencies in

Mass Appraisal Niagara Falls, Canada – May 17-18, 2016

Mass Appraisal Guidance and

Performance Standards Randy J. Ripperger, CAE

IAAO President-Elect




Introduction

Mass appraisal has permeated

valuation systems in the US and

Canada

Mass appraisal helps maintain

equitable treatment of large groups

of properties by enabling current

market value to be maintained



Introduction

When results need to meet objective

thresholds and level and uniformity

criteria, mass appraisal techniques

are more prevalent



Introduction

Countries that are in the early stages

of understanding, developing, or

implementing mass appraisal

systems for property tax purposes

often find themselves without

authoritative support



Introduction

Nations with newly developing mass

appraisal systems know the mass

appraisal methods work well

Problem - they can’t easily cite a

written source that reflects the

perspective of the larger community

outside North America



Introduction

Nations need authoritative outside

resources to provide guidance on

the technical side

There is a need for guidance, a need

to be able to point to accepted

standards and best practices

promulgated by outside,

independent organizations



What is a Standard?

A model accepted as correct by

custom, consent, or authority*

A criterion for measuring

acceptability, quality, or accuracy*

*Black’s Law Dictionary (2004)



What is a Standard?

In essence, a standard is an agreed

way of doing something

Standards represent the distilled

wisdom of an organization’s subject

matter experts – those who know

and understand the needs of the

members they represent



Standard-setting Organization

A body that sets, describes, or

documents uniform operating,

technological, or other norms for

participants in a particular field or

industry

*Black’s Law Dictionary (2004)



Principles-based vs Rules-based

Principles-based Standards

Norms are expressed as guidelines

The exact implementation is left to the

subject of the norm

Rules-based Standards

Prescribes implementation in detail

May prescribe specific quality criteria

or thresholds





General, universal, abstract – point in a

certain direction


Specific, particular, concrete - prescribe





Qualitative

What is required


Quantitative

How to achieve an objective





Allow for exceptions


All or nothing – no exceptions




By adding qualifications and

exceptions, rules can become more

principle-like – more qualitative

By adding best-practices and

requirements, or specifics such as

measureable outcome metrics,

principles can become more rule-like

– more quantitative




Principles and rules are extremes on

a range or continuum

Differences between principles and

rules are simply a matter of degree

In practice the distinction between

the two is not so apparent




Relatively younger standard setting

organizations are typically principles-

based because they haven’t had as

much time to accumulate rules

In the more mature standard-setting

bodies, their standards will contain a

mixture of principles and rules




In the more mature standard-setting

bodies, standards will exist

somewhere along the continuum

between rules-based and principles-

based

Idea is to find the ‘sweet spot’ or

consensus on that scale



Principles-based Example

5.4 Standards of Appraisal Level

and Uniformity 5.4.1 In the interests of assessment equity,

standards of appraisal level (the proximity

between assessments and actual prices) and

uniformity (the statistical measure of valuation

consistency) must be observed in the

application of mass appraisal systems*

*IVSC Guidance Note No. 13



Rules-based Example

9.1 Level of Appraisal While the theoretically desired level of

appraisal is 1.00, an acceptable level between

0.90 and 1.10 is considered acceptable for

any class of property

*IAAO Standard on Ratio Studies



Principles-based or Rules-based?

3.1 Overview Assessing offices must establish effective

procedures for collecting and maintaining

property data (i.e., property ownership,

location, size, use, physical characteristics,

sales price, rents, costs, and operating

expenses) ….*

*IAAO Standard on Mass Appraisal of Real

Property



3.3.2.4 Data Accuracy Standards Continuous or area measurement data, such

as living area or exterior wall height, should be

accurate within 1 foot (rounded to the nearest

foot) of the true dimensions or within 5 percent

of the area*

*IAAO Standard on Mass Appraisal of Real

Property

Principles-based or Rules-based?



Why Use Standards?

Provides authoritative support

Facilitate compliance with the law

Promote excellence in assessment

administration

Promote public trust in assessment

administration



Available Mass Appraisal

Guidance

IVSC Guidance Note 13

Published by the International

Valuation Standards Council (IVSC)

from January 1, 2005 until July 19,

2011

Principles-based




Guidance

IVSC Guidance Note 13

IVSC discontinued its mass appraisal

standard in 2011

Created a gap with respect to the

international mass appraisal

community




Guidance

IAAO Technical Standards of

Professional Practice

Address property valuation, property

tax administration, and property tax

policy

Describe desirable models for the

profession

Provide criterion for acceptability,

quality and accuracy




Guidance

IAAO History of Standards

Began standard-setting in 1937 with

the publication of principles

Started calling them “standards” in the

1956 published report – approved by

the Executive Board




Guidance

IAAO History of Standards

Minimum Assessment Standards

document published in 1963

Principles-based

Qualitative




Guidance

Preeminent Standards - First Adopted

Standard on Assessment-Ratio Studies

– 1980

Standard on Mass Appraisal of Real

Property – 1984

Standard on Property Tax Policy – 1997

Standard on Automated Valuation

Models - 2003



Nature of IAAO Standards

Professional consensus

Best practices in the industry

Use is voluntary

Do not have the force of law

Cross both technical and policy lines

Hybrid – on spectrum between

principles-based and rules-based




We try to cover everything assessing

officers would need guidance on

Establish and maintain valuation

information related to property tax

Evaluating the nature and features of

model assessment administration

Developing tax policy or responding to

criticisms of tax policy




Our standards are the foundation of

modern mass appraisal practice in

much of the developed world

Mass appraisal can be successfully

implemented even if some

recommendations are not

implemented – not all or nothing




There is room within our standards

for a lot of local discretion

For example, Standard on Property

Tax Policy emphasized advantages

and disadvantages to market value

as the basis of taxation – it then

supports current market value as

best practice




The Standard on Ratio Studies

discusses the meaning and use of

confidence intervals but does not

specify the precise degree of

confidence and suggests lower

confidence as appropriate in some

cases




Reminder – the US is multifaceted as

every state is different and has

considerable discretion in determining

its tax and assessment structure




With our history, we’ve experienced

about everything you are experiencing

If a country is experiencing a certain

issue, chances are we have already

experienced and dealt with it




Our standards often are developed

when none previously existed in order

to deal with emerging issues Standard on the Valuation of Property

Affected By Environmental Contamination –

hot topic around 1990 with some definitive

appraisal work and court cases in the late

1980s

AVM Standard – around 2000 as these

became widespread




IAAO tries to be both proactive and

reactive as assessment or property

tax related issues arise or are

considered

Our standards are a key way of

communicating industry best practices



Current List of IAAO Standards

Standard on Digital Cadastral Maps and Parcel Identifiers (July 2003, updated January, 2012, 2015)

Standard on Oversight Agency Responsibilities (2010)

Standard on Mass Appraisal Real Property (April, 2013)

Standard on Contracting for Assessment Services (December 2008)

Standard on Assessment Appeal (Jan. 2014)

Standard on Public Relations (July 2011)



Current List of IAAO Standards

Standard on Professional Development (Jan. 2013)

Standard on the Valuation of Property Affected by Environmental Contamination (July 2001)

Standard on Ratio Studies (April, 2013)

Standard on Verification and Adjustment of Sales (2010)

Standard on Property Tax Policy (August 1997, re. 2010)

Standard on Personal Property Valuation ( Dec.2005)

Standard on Automated Valuation Models (Sept. 2003 – currently being rewritten)




If adhered to, IAAO standards can

enable governmental property tax

administrators to produce excellent

quality appraisals and assessments,

particularly when mass appraisal

practices are employed



Online Resource

Our technical standards are publicly

accessible on the IAAO website:

www.iaao.org

Reproduction is allowed for personal

use, educational purposes, property

tax hearings, legislative development,

and as a supplement to local

guidelines



Online Resource

Users should request permission to

reproduce all or a portion of a

standard for the stated purposes

The entire standard should be cited

in a bibliography or reference list



Other Resources

Guidance on International Mass

Appraisal and Related Tax Policy

Represents a consensus in the

property valuation profession

Considerable international influence

Prepared as an international overview

of recommended practices regarding

mass appraisal and property tax policy



Other Resources



Guidance but not a standard

Nations with mature, functioning mass

appraisal systems

Nations with emerging systems

May provide developing countries with

a more complete package



Other Resources



Provides a systematic means by which

valuers and other property tax

professionals can improve and

standardize the operation of their offices

Advisory in nature – its use is purely

voluntary



Other Resources

Guide to Assessment Standards

Reference tool for all our standards

Allows easy searches

Can find specific information that can

be located in one or more standards



Other Resources

Guide to Assessment Standards

Serves as a subject index to help

identify which standard would be the

most appropriate reference for any

topic

Most underutilized document out there



Other Resources

Body of Knowledge

Compendium that captures a

description of the expertise required to

effectively work within the assessment

profession

Anticipated April 2017



Other Resources

Published Surveys – Practices in

U.S. & Canadian Providences

Property Tax Assessment Policies &

Practices Survey – since 1990

Although main audience is property tax

administrators and policy makers in the

two countries, other countries may find it

useful as well



Other Resources

Published Surveys – Practices in

U.S. & Canadian Providences

Ratio Studies Survey – over the past

30 years

Although main audience is property tax

administrators and policy makers in the

two countries, other countries may find it

useful as well



Interest in IAAO Standards and

International Guidance Document

Nations around the world have

expressed interest

Korea, China, South Africa, Russia

have either asked to use our

Guidance document or Standards or

have asked permission to translate

standards into their language



Interest in IAAO Standards and

International Guidance Document

China uses the standards to

evaluate mass appraisal for the

purpose of a transfer tax

The most common use is the

specific guidance in the Ratio Study

Standard



IAAO 10th International Research

Symposium



IAAO 10th International Research

Symposium

Amsterdam September 19-20, 2016

Focus will be on the exchange of

knowledge for continuous

improvement of property tax systems

Optional one day forum – IAAO’s

Standard on Mass Appraisal of Real

Property Sunday September 18th



Summary

IPTI’s President Paul Sanderson’s

April 2016 message:

“No matter how developed a property tax

system may be, all have room for

improvement”



Summary

As the international community

develops or enhances mass

appraisal systems, standards are

crucial for modernization

IAAO standards are the preeminent

source for best practices in mass

appraisal



Thank you!

www.iaao.org

[email protected]

http://www.iaao.org/

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