Two Proposed Assessments
Here are the two assessments proposed for Arden's land rent for fiscal year 2005-2006. To the extent possible, they are presented here side-by-side for easier comparison. The Alternative Assessment, on the right, was approved by referendum in November, 2004. This was, according to Mike Curtis, the first time an alternative assessment was ever approved in our village's history.
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BOARD OF ASSESSORS REPORT TO TOWN ASSEMBLY, JUNE 28, 2004 ASSESSMENT FOR LAND RENT DUE MARCH 25, 2005
SECTION I 䴋
The assessment for land rent due on March 25, 2005 is presented in this report. In determining the total rent to be raised by the Trustees, the Board of Assessors adopted the concepts presented by the 1980 Board of Assessors and used in some form by all succeeding Boards. The rental revenue from this assessment will provide adequate income for the Village to:
The rental value of Arden‰¥ús leaseholds varies from lot to lot. The differences in the value of these assessments were derived by estimating the additional or reduced rental value of each of the following advantages or disadvantages: size, special privileges and location. Based on projected expenses, the current fiscal year assessment will leave a ‰¥þprudent reserve‰¥ÿ for the Village of approximately $173,000 at the end of the fiscal year, March 2005. The term ‰¥þprudent reserve‰¥ÿ refers to the amount of money projected to remain in the Village‰¥ús General Fund at the end of the fiscal year. To forecast expenditures the Assessors used information from the Three-year Budget Projection prepared by the Budget Committee of the Village Assembly. The Assessors have determined that the total land rent to be collected in the year beginning in March 2005 will be approximately $384,000. The amount to be collected is 2.4% higher than last year‰¥ús assessment. Based on projected expenses, this assessment should leave a ‰¥þprudent reserve‰¥ÿ for the Village of approximately $147,000 at the end of the fiscal year, March 2006. This ‰¥þprudent reserve‰¥ÿ is about one third of total village expenses.
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ALTERNATIVE ASSESSMENT FOR LAND RENT DUE MARCH 25, 2005 PREPARED BY THE "FAIR LAND RENT NEIGHBORS" Approved by the Town Assembly by a 2/3 majority on Sept. 27, 2004 and then approved in referendum in November, 2004. BACKGROUND The assessment for land rent due on March 25, 2005, as presented by the Board of Assessors in June, has been the subject of controversy since last spring. This assessment is a radical departure from the way land rent has generally been assessed since at least 1980. The 2005 assessment was presented without an objective, factual basis to support it and without a consensus within the town. It was also adopted despite the effect it will have on certain groups of residents, namely those with large leaseholds and those with multiple domiciles. The assessment presented in June is a somewhat modified version of a plan passed by the Board of Assessors on April 19, 2004, which would have had even more extreme consequences than the one finally presented. At two public hearings of the Board, and again at the June Town Assembly, an ever-growing number of residents tried to get the Board to reconsider its decision based on the adverse financial impact their plan would have on a large number of leaseholders. The Board responded by modifying its original plan, but, in the end, the assessment reported to the town in June still presents many leaseholders with financial hardships. Further, the Board䴜s assessment for 2005 disproportionately and adversely affects some leaseholders, while benefiting others. That is because, under this assessment, approximately half of Arden䴜s leaseholders will see tax increases next year while the other half will benefit from tax cuts. RATIONALE The Village of Arden does not exist in a vacuum when it comes to real estate valuation. Property values here in Arden are governed by the same forces that affect property values in the surrounding county, state, and across the nation. Real estate reality simply does not support the notion that all square feet of a property are equally valuable. The historic valuation studies that supported a multi-tiered rate system for land rent and which previous Boards of Assessors have relied upon (Von Dreele, 1970䴜s; Gladstone, 1980䴜s; Curtis, 1990䴜s) continue to be valid today and are supported by current property sale data available from New Castle County䴜s Department of Land Use. All of these sources support the fact that as property size increases, value per unit (i.e., square foot) decreases. A good explanation as to why this is true can be found in the Illinois Real Estate Letter, published by the Office of Real Estate Research at the University of Illinois at Urbana-Champaign, Spring 1999 (copy available on request). In addition, the Village of Arden attaches considerable value to its current combination of woodlands and open space. It is inconsistent, therefore, with both real estate reality and with our own community䴜s values to institute land rent policies which encourage development. Beyond these considerations are the more basic values of fairness and consensus. The decisions we make with regard to land rent are ones that the entire community must live with. They affect our own household budgets, our ability to sell our properties should we move, and our ability to attract new residents. Consequently, any changes we make to our land rent system, especially dramatic changes, must be based on need, not ideology; on facts, rather than beliefs. And, in good Arden tradition, they must be arrived at through public discussion leading to consensus. Until we have good supporting data for making a change, untilour leaseholders have had the opportunity for discussion, and untilwe have arrived at a consensus in our community, we should maintain the land rent system we have. ALTERNATIVE ASSESSMENT Based on the rationale given above, our alternative is to continue using the 2004 land rent formula with an additional 2.2% to cover the projected increase in total land rent (as indicated by the Board of Assessors in their June report). The alternative assessment is based on the concepts presented by the 1980 Board of Assessors which, in general, have been used by all succeeding Boards. Specifically, our model is the assessment used by the 2003 Board of Assessors for land rent due in March 2004. The land rent revenue provided from this assessment will provide adequate income for the Village to:
The total land rent to be collected in the fiscal year beginning in March 2005 will be approximately $384,000, based on figures provided by the Board of Assessors in their Report to the Town Assembly on June 28, 2004. The amount to be collected is approximately 2.2% more than last year䴜s assessment. The prudent reserve, or the amount of money left in the Village䴜s general fund at the end of the fiscal year, will be approximately $147,000, again based on information provided in the Board of Assessors䴜 Report to the Town Assembly in June.
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Definitions The General Rate, called Rate A, reflects a value all leaseholds share. The Multiple Dwelling Rate, called Rate B, reflects the added value of those leaseholds that have the privilege under zoning regulations or allowance by the trustees of establishing and maintaining more than one dwelling unit on the leasehold. In applying this rate, the definition of a dwelling unit is an independent living facility for one or more persons, containing permanent cooking facilities (not a hot plate) and other permanent facilities for living, sleeping, eating and sanitation. Existence of a kitchen is an essential ingredient of a dwelling unit. The Lot Size Adjustment Rate called Rate C, reflects the fact that large lots have less rental value per 1,000 square feet than smaller lots. This fact was derived from a 1971 study of lot values updated by a 1987 professional appraisal and a separate study of market values. Data obtained by this year䴜s Board of Assessors indicates that this concept is still valid. The Commercial Rate, called Rate D, reflects the added value of a leasehold with the privilege of accommodating commercial as opposed to residential use. This rate currently applies to only one lot. The Specific Location Factors make adjustments to appropriate leasehold land rent in accordance with uniformly applicable rules based on the physical situation of the leasehold.
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Definitions The General Rate (also called the A Rate), covering the first 6,500 square feet of a leasehold, is the area on which the primary domicile rests. This rate, and dollar value, is the same for all leaseholds. The Multiple Dwelling Rate (also called the B Rate) reflects the added value of those leaseholds having the privilege under zoning regulations or allowance by the Trustees of establishing and maintaining more than one dwelling unit on a leasehold. A dwelling unit is defined as an independent living facility for one or more persons containing permanent cooking facilities (not a hot plate) and other permanent facilities for living, sleeping, eating and sanitation; existence of a kitchen is an essential ingredient of a dwelling unit. The Lot-Size Adjustment Rate (also called the C Rate) is the rate applied to the area remaining where additional domiciles are not allowed by zoning codes or by Trustees䴜 action. This ratereflects the fact that large lots have less rental value per 1,000 square feet than smaller lots. The Commercial Rate (also called the D Rate) reflects the added value of a leasehold with the privilege of accommodating commercial, as opposed to residential, use. This rate currently applies to only one lot. Specific Location Factors make adjustments to appropriate leasehold land rent in accordance with uniformly applicable rules based on the physical situation of the leasehold. |
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SECTION II 䴋 Calculation of Total Revenue Required The computation of rental revenue required from the Arden Trust (based on projected data of the budget committee) is as follows:
1. A: The forecasted amount needed for the county and school tax =$252,000 2. The amount needed to achieve the desired 2005/06 year-end prudent reserve
2005/06 year end target =$147,000 TOTAL REVENUE REQUIRED $415,000 3. Revenue from interest, grants, right-of-ways, fines, etc. =$31,000 TOTAL REVENUE FROM LAND RENT =$384,000
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Calculation of Total Revenue Required The Board of Assessors reported to the Town Assembly in June that the total revenue required from land rent for 2005 is $384,000. We accept this figure and the Board䴜s calculations to obtain it. Our rates are based on the need to raise that amount of revenue.
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SECTION III 䴋 The 2005/06 Fiscal Year Rental Rates (year beginning March 25,
2005)
General Rates Rate A: $137.00 per 1,000 square feet, applied to the first 6,500 square feet of each leasehold. This is compared to the previous year‰¥ús ‰¥þA‰¥ÿ Rate of $158.00. Rate A applies equally to all leaseholds and provides 46% of total land rent.
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Rental Rates for Fiscal Year 2005/06 (for FY beginning March 25, 2005) General Rates A Rate: $161.54 per 1,000 square feet applied to the first 6,500 square feet of each leasehold. The A Rate for 2004 land rent was $158.00. The A Rate applies equally to all leaseholds. |
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Rate B: $229.48 = 167.5% of Rate A. For each dwelling unit beyond the first, the leasehold is charged Rate B rent for an additional 2,000 square feet. Using this formula for extra dwelling units, each extra dwelling unit is charged about 1/2 of the rent of a primary dwelling unit. Rate B applies to 50 extra dwelling units and provides 6% of total land rent.
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B Rate: $161.4 = 100% of A Rate. For each dwelling unit beyond the first, the leasehold is charged the B Rate for an additional 2,000 square feet but is not charged for more than the actual area of the leasehold. | |
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Rate C: $75.21 = 54.9% of Rate A. Rate C was set so that the land rent obtained from land in excess of the area charged for dwelling units equals the land rent obtained from primary dwelling units. Thus, Rate C applies equally to all excess land and provides 46% of total land rent.
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C Rate: $64.62 = 40% of A Rate. This rate is applied to that area of a leasehold in excess of the area charged by the A and B rates. | |
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[NOTE: Rate D and the Specific Location Factors are the same in both assessments.] Base Land Rent: The sum of the charges (in dollars) from applying the General Location Rates A, B, and C to the area of a leasehold. Rate D: A surcharge of 75% of the Base Land Rent for a leasehold with commercial privileges; no deduction for frontage on Marsh Road. Specific Location Factor Rates (See Notes):
Notes
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[NOTE: Rate D and the Specific Location Factors are the same in both assessments.] Base Land Rent: The sum of the charges, in dollars, from applying the A, B and C Rates to the area of a leasehold. D Rate: A surcharge of 75% of the Base Land Rent for a leasehold with commercial privileges; no deduction for frontage on Marsh Road. Specific Location Factor Rates (See Notes):
Notes
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SECTION IV - Rent Collection The Trustees are requested to collect, by using the prescribed rates, the following approximate amounts: From the A rate applied to 6500 sq. ft. for each leasehold: $176,300 From the B rate applied to 2000 sq. ft. for each extra dwelling unit: $ 22,000
From the C rate applied to all land not attributed to a dwelling unit: $176,300 Total Land Rent $383,800 Revenue from interest, grants, right-of-ways, fines, etc. $31,000 TOTAL REVENUE $414,800
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SECTION V 䴋 Examples
SAMPLES OF BASE RENTALS
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EXAMPLES OF RENT CALCULATION
EXAMPLE 1
6,500 sq. ft. X $137/M sq. ft. = $890.50
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SAMPLE LAND RENT CALCULATIONS
EXAMPLE 1
6,500 sq. ft. x $161.54/M sq. ft. = $1,050.01
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EXAMPLE 2
A 30,000 sq. ft. lot containing three dwelling units and adjacent to Arden Forest:
6,500 sq. ft. X $137/M sq. ft. = $890.50
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EXAMPLE 2
6,500 sq. ft. x $161.54/M. sq. ft. = $1,050.01
EXAMPLE 3
6,500 sq. ft. x $161.54/M. sq. ft. = $1,050.01
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SECTION VIa. Explanation of change in Rate B, the Multiple Dwelling Rate Rate B has been set at 167.5% of Rate A for 2000 additional sq. ft. (over the first 6500 sq. ft. to which the Rate A applies) for each additional dwelling unit; 2000 sq. ft is the amount of additional land area required for conversion of a single-family dwelling into two dwelling units for a 10,000 sq. ft. lot, according to the New Castle County code, Section 40.03.304. Rate B reflects the added land value associated with the privilege under zoning regulations or allowance by the Trustees of establishing and maintaining more than one dwelling unit on a leasehold. This privilege has restrictions that do not apply to the primary dwelling unit, e.g. the footprint of the extra dwelling unit cannot be changed. Using the formula above for extra dwelling units, each extra dwelling unit is charged about 1/2 of the land rent of a primary dwelling unit (Rate A for 6500 sq.ft.). The difference in land rent for 2000 sq. ft. for an extra dwelling unit at Rate B versus the land rent for 2000 sq. ft. at Rate C for excess land is $308.52.
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CONCLUSION The Board of Assessors䴜 2005 land rent assessment has drawn much-needed attention to the subject of land rent assessment and to the power wielded by the Board of Assessors. However, it has also generated a great deal of controversy and unnecessary divisiveness. While it is clear that our current land rent assessment system is not perfect, it is also clear that dramatic changes should not be made in the absence of hard facts and consensus. Until we have had time to gather objective, factual data and to consider all the different (and strongly held) points of view on land rent assessment in our community, we submit that our best course of action is to leave in place the system that has been in use for more than twenty years. We respectfully submit this alternative assessment and ask that the Town Assembly approveit for consideration by the Village in a general referendum. |
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SECTION VIb. Explanation of change in Rate C, the Excess Land Rate Rate C determines the land rent collected from land not attributed to primary or extra dwelling units. Rate C is less than Rate A or Rate because of the belief that a substantial part of any leasehold䴜s value derives from the privilege of maintaining one or more dwelling units on the leasehold regardless of its size. For many years Rate C had been set at 40% of Rate A. However, there has been considerable debate over the years about this. Over the years large additions to houses and replacement of smaller houses with larger ones provide clear indications that extra land on leaseholds can be developed. The more land available to a leaseholder, the more opportunity for development. After much discussion and input from residents at public hearings, this year䴜s Board of Assessors decided to increase Rate C. Rate C was set so that land in excess of the area charged for dwelling units (about 63% of total leasehold land) would provide land rent equal to the amount obtained from all the primary dwelling units. Using this formula Rate C equals 54.9% of Rate A.
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An Excel Spreadsheet Comparing the Two Assessments |
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Board of Assessors and their vote on the Assessment
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The "Fair Land Rent Neighbors" who prepared this report are:
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