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IMPROVED SMV Revision Process & Local RPT Reforms COMPONENTS 4.3 & 4.1B


OBJECTIVES 

To introduce the application of the Standards on market value & mass appraisal in the SMV

To determine their implications on property values & on real property tax revenue

To recommend necessary real property tax policy adjustments


SCOPE

OF THE

PROGRAM

Revision of the SMV in accordance with Standards

Real Property Tax (RPT)/Revenue Impact Calculation of the revised SMV

Preparation of RPT policy options

RPT compliance study

Capacity building & training


WHY REVISE

THE

SMV?

Mandated by law (LGC Book II, Sec. 219)

Seeks to reflect true market levels

Updates the classification of real properties

Discovers new properties or rediscover ‘lost’ properties from the assessment roll

Corrects erroneous entries & duplications in the real property database

Rationalizes the real property tax base


BENEFITS

OF

UPDATED SMV

More accurate basis for revenue forecasting & targeting

More transparent & active property market

Fair and equitable distribution of the tax burden

Improved revenue collection

Improved credibility of the SMV

SMV

Better informed property owners


SMV REVISION PROCESS Data Collection & Field Inspection

Data Entry into RESAS database

Data Analysis

Quality Testing of Values

Application of SMV to individual properties

Preparation of SMV


data collection & field inspection SMV REVISION PROCESS


D ATA C OLLECTION & F IELD I NSPECTION P ROCESS STEP 2. STEP 1. Gather recent sales transactions

Record property details of sold properties in the Data Collection Sheet (DCS)

STEP 3.

STEP 4.

Conduct property inspection

Verify & update property data

STEP 5. Interview parties involved in the transaction for the sales details & record in the DCS


sales DCS SMV REVISION PROCESS


T HE S ALES D ATA C OLLECTION S HEET (DCS)


T HE S ALES D ATA C OLLECTION S HEET (DCS)


WHAT

THE

DCS GENERATES

PROPERTY DETAILS

SALES DETAILS

• Location • Area • Actual use • Street width • Road surface • Shape • Topography • Corner • Improvements • Others

• Actual sale price • Actual date of sale • Sales category • Type of financing • Special factors • Others


THE SALES DCS 

VDIS (formerly RESAS) as storage system of sales transactions Before inputting into VDIS, data collected should be reviewed/validated first

Data Entry into VDIS database


LAND data analysis SMV REVISION PROCESS


LAND

Data Analysis VALUATION APPROACHES

Sales Analysis Approach (preferred)

Direct comparison on unit basis (m2)

Residual or Extraction Approach

Total property value less depreciated replacement cost

Income Capitalization Approach


L A N D

PROCEDURES STEP 1. Set base date of valuation

STEP 2. Plot suitable sales on maps

STEP 3. Select standard or typical land parcel as benchmark

STEP 4. Identify factors that influence value

STEP 5. Analyze sales data considering: 1. Time adjustments to date of valuation 2. Adjustments for physical characteristics that affect value 3. Other allowances

Data Analysis

STEP 6. Determine benchmark (base) land value and adjustment factors


SMV preparation SMV REVISION PROCESS


PROCEDURES

Preparation of SMV

STEP 1

STEP 2

Prepare SMV from base land value in each sub-market area (SMA)

Develop tables of adjustments & allowances.

STEP 3 Revisit/inspect various areas to ensure homogeneity of SMAs & consistency in values. Consult real estate industry professionals.

STEP 4 Finalize SMV


F INAL O UTPUT : P ROPOSED 2009 SMV Republic of the Philippines City of Naga OFFICE OF THE CITY ASSESSOR LAMP2 SIMULATION PROJECT IN NAGA CITY

SCHEDULE OF MARKET VALUES (2001 SMV & LAMP2 VALUES) MARKET VALUE STREET/SUBDIVISION ABELLA 001 Abella Street

Bayawas Street Felix Plazo Street J. Hernandez Ave. General Luna St P. Burgos Street Prieto Street BISALA All Blighted Areas

VICINITY

Gen. Luna St. J. Hernandez Ave. J. Hernandez Ave. - 1st 100m. after 100m - Cnr Felix Plazo St. Cnr F. Plazo St.-Naga/Camaligan Boundary Abella Street-Looban 8 Abella St.- Igualdad Boundary All inner lots Prieto St.-P. Burgos St. Prieto St.-P. Burgos St. Gen. Luna St.-J. Hernandez J. Hernandez St.-Gen. Luna St.

STUDY VALUES

2001 BASE 2006 BASE SUB CLASS SUB CLASS VALUE VALUE

12,900 9,700 2,500 1,200 1,200 1,200 720 12,900 12,900 12,900 12,900 720 200

C-1 C-2 C-5 R-1 R-1 R-1 R-3 C-1 C-1 C-1 C-1 R-3 R-5

25,000 15,000 12,500 4,000 4,000 4,000 2,000 25,000 35,000 35,000 25,000 2,000 500

C-2 C-3 C-4 R-1 R-1 R-1 R-5 C-2 C-1 C-1 C-2 R-5 R-8

ANALYSIS SMV % +

94% 55% 400% 233% 233% 233% 178% 94% 171% 171% 94% 178% 150%


BUILDINGS data analysis SMV REVISION PROCESS


BUILDINGS

Data Analysis VALUATION APPROACHES

Market-related Cost Approach

Residual or Extraction Method

Total property value less land value

Income Capitalization Approach


B U I L D I N G S

PROCEDURES STEP 1. Establish building class benchmarks

STEP 3. Determine base unit construction cost of benchmark building types

STEP 2. Conduct local unit cost study (material prices & labor rates, price comparison of builders’ model homes, cost trends, etc.)

STEP 4. Determine base cost for additional structure (e.g. garage, carport, gazebos, basement, terrace, etc.)

STEP 5. Build up the value from the costing & validate this value with the asking prices for buildings by developers & builders

Data Analysis


BUCC Schedule Prepare Building Cost Schedule from the base unit construction cost of each building type and class.

Develop base cost of additional structures.

Sample BUCC Schedule (Iloilo City) TYPE OF BUILDING

(1) ONE FAMILY DWELLING NIPA HUT

I II-A II-B III-A III-B III-C IV-A IV-B IV-C IV-D V-A V-B V-C

2,000-3,000 4,600-4,800 5,700-5,900 6,000-6,200 6,300-6,500 6,600-6,800 7,100-7,400 7,500-7,800 7,900-8,200 8,300-8,600 8,700-9,000 9,100-9,400 9,500-9,800

(2) TWO FAMILY DWELLING (3) MULTIPLE DWELLING

(4) ACCESSORIA OR ROW HOUSE

(5) APARTMENT (6) BOARDING HOUSE (7) LODGING HOUSE

4,200-4,800 5,300-5,500 5,600-5,800 5,900-6,100 6,200-6,400 6,700-7,000 7,100-7,400 7,500-7,800 7,900-8,200 8,300-8,600 8,700-9,000 9,100-9,400

3,200-3,400 4,300-5,000 4,600-4,800 4,900-5,100 5,200-5,400 5,700-6,000 6,100-6,400 6,500-6,800 6,900-7,200 7,300-7,600 7,700-8,000 8,100-8,400

4,800-5,000 5,900-6,100 6,200-6,400 6,500-6,700 6,800-7,000 7,300-7,600 7,700-8,000 8,100-8,400 8,500-8,800 8,900-9,200 9,300-9,600 9,700-10,000


Depreciation Schedule Develop Depreciation Schedule based on actual/effective age

Establish depreciation benchmarks

Sample Draft Depreciation Schedule (Naga City) TYPE V

V B

V C

IV A

IV B

III A&B

III C&D

III E

II A*

II B*

I*

Each of 1st 5 years

2.75

2.75

3

3.5

4

4.5

4.5

4.5

5

6

7.5

Progressive Depn.

13.75

13.75

15

17.5

20

22.5

22.5

22.5

25

30

37.5

Each of 2nd 5 years

2.75

2.75

2.75

3.5

3.5

4

4

4.5

4.5

5

7

Progressive Depn.

27.5

27.5

28.75

35

37.5

42.5

42.5

45

47.5

55

72.5

Each of 3rd 5 years

2.5

2.5

2.5

3

3.5

3.5

4

4

4

4

5

Progressive Depn.

40

40

41.25

50

55

60

62.5

65

67.5

75

95

Each of 4th 5 years

2

2.5

2.25

2

3

3

3.5

3.5

3.5

3.5

Progressive Depn.

50

52.5

52.5

60

70

75

80

82.5

85

85

95

Each year after 20 years

1

1.25

1.5

1.5

1.5

2

2

2

Residual

25

25

25

20

20

15

15

15

15

15

5

Years to get to Residual = (Useful Life)

45

38

35

33.3

26.7

25

22.5

21

20

18

14.5

NO. OF YEARS


SMV application to individual properties SMV REVISION PROCESS


SMV REVISION PROCESS

2009 SCHEDULE OF MARKET VALUES

Application of SMV to individual properties


SMV A PPLICATION

TO I NDIVIDUAL

P ROPERTIES

LAND APPRAISAL

BUILDING APPRAISAL

Apply base rate /m2 from SMV

Determine building classification & apply appropriate base unit construction cost

Apply adjustments and allowances, e.g. corner allowance (10%?)

Add for any other land improvements not included in the base (e.g. site preparation, filling, retaining walls, driveways, landscaping, etc)

Add cost of additional buildings (e.g. garages, carports gazebos, sheds, outbuildings, etc)

Establish the effective age & apply percentage good from Depreciation Schedule


SMV quality testing SMV REVISION PROCESS


ELEMENTS ACCURACY

Quality Testing of Values

the closeness of a valuation to actual prices

 Median Value to Price Ratio  Acceptable Tolerance: Median VPR > = 90%

U N I FO R M I T Y measures the consistency of the level of accuracy

 Coefficient of Dispersion (COD) measures the average % deviation of the Ratios from the Median Value to Price Ratio

 IAAO Standard: COD <=20% For example, a valuer who values 3 properties each at 80% of actual price, although uniform, is not accurate.


RPT REFORM PROCESS LOCAL TAXATION REFORMS


LOCAL REAL PROPERTY TAX REFORMS

1. RPT Compliance Study

2. RPT Impact Study 3. RPT Policy Options


POSSIBLE RPT POLICY OPTIONS For large increases in values, the following options may be considered to mitigate their impact on real property taxes:

Option 1:

Adjust the assessment level

Option 2:

Adjust the tax rate

Option 3:

Phased implementation of the increase in the tax, e.g.:  1st year: 50% of the increase  2nd year: 60% of the increase  3rd year: 100% of the increase


Thank You!

Canned Presentation - SMV & Tax Reform Program  

SMV Revision Process &amp; Local RPT Reforms C O M P O N E N T S 4 . 3 &amp; 4 . 1 B  To introduce the application of the Standards on mark...

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