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The Issues

We all know the story of the "Three Little Pigs"; each constructed a home of different quality in an attempt to prevent the "Big Bad Wolf" from making them his dinner. In the end, each pig (and the wolf) recognized that quality of construction does make a tremendous difference in the true value of a home.

That story may have been fantasy, but it demonstrates very well the concept that quality does add real value to a home. For hundreds of homes in Pueblo County, that basic understanding appears to have been abandoned by the office of the Pueblo County Assessor.

The office of the County Assessor is charged with valuing your homes and businesses in order to determine the amount of property tax that you pay each year. Unfortunately, that office continues to utilize an extremely outdated method of valuing your properties that is very prone to error. Other large counties along the front range such as El Paso, Douglas, Jefferson, Boulder, Arapahoe, Denver, etc., have abandoned such outdated methods in favor of a modern method of mass appraisal that is far more efficient and reliable. Pueblo County needs to follow their lead.

The County Assessor's office currently utilizes a mass appraisal method known as "market adjusted cost" to value your homes. They break residential properties down into one of five quality classifications from "low" to "well above average", and then assign "market adjusted" costs to each quality class. The errors produced by this outdated method are very apparent. Consider the current "market adjusted" square foot costs in use by the County Assessor's office for homes in Pueblo County:

2013 (and 2014) square foot costs for frame construction homes for 2013 and 2014 taxable value

first floor area (sq.ft.) low quality sqft costs below average quality sqft costs average quality sqft costs above average sqft costs well above average sqft costs
500 $96.98 $85.65 $95.67 N/A N/A
600 $92.94 $85.65 $95.67 $119.40 N/A
800 $86.89 $81.08 $90.59 $119.40 N/A
1,000 $82.49 $77.70 $86.86 $114.51 $153.08
1,200 $79.04 $75.04 $83.92 $110.66 $153.08
1,400 $76.25 $72.88 $81.50 $107.51 $148.43
1,600 $73.91 $71.04 $79.47 $104.86 $144.52
1,800 $71.90 $69.47 $77.72 $102.57 $141.14

Notice anything unusual in the above table? Why are the "market adjusted costs" for low quality homes up to 13% more than those for similarly sized homes in the next higher quality class? The County Assessor's office is Constitutionally mandated to value homes based on the local Real Estate market; given that information, these "market adjusted" costs appear to indicate that there are instances where low quality homes are selling for more than similar homes of higher quality. Is that really the "market" for such properties in this area?

Consider the implications of these "market adjusted" costs; if two homes are constructed right next to each other, one using low quality materials and design considerations, and the other using higher quality materials and architectural designs, the lower quality home would be valued for tax purposes up to 13% more than the higher quality home. The property tax liability for the lower quality home would similarly be up to 13% higher than that of the home built using superior materials and designs.

Consider the actual taxable values involved; if your financial situation were tight, and you were to build a small, 500 square foot home to "below average" construction standards for you and your family, that home would currently be valued for tax purposes at $42,825 (refer to the above table; $85.65 per square foot X 500 square feet). If your new home were then to suffer significant damage which you could not afford to repair to the same level of quality, your home could well be re-classified into the "low quality" property classification. The cost structure above would consider that damage and subsequent inferior repair work to be an asset to your home; the taxable value of your property would increase by more than 13% to $48,490 ($96.98 per square foot X 500). Your property taxes would similarly go up by 13%. Does this make sense?

Now consider the "real world" effects of these over-valuations on low quality homes in Pueblo County. On Pueblo's lower East Side, for example, the vast majority of the owners of low quality homes saw a slight increase in their taxable values. When you consider that residential properties countywide (as a consequence of the battered Real Estate market) went down by around 6%, there is absolutely no justification to support such value increases on low quality homes. This issue is not isolated to homes on the lower East Side; these inflated costs are effecting hundreds of low quality homes across Pueblo County. The unfortunate owners of these homes are now paying the real consequences of these over-valuations in their current property tax bills, and they will continue to do so in 2015.

Unfortunately, this is not the first time this has occurred; consider the following square foot costs that were used to value homes for taxes that were collected in 2010 and 2011:

Square foot costs for frame construction homes for 2010 and 2011 taxable value

first floor area (sq.ft.) low quality sqft costs below average quality sqft costs average quality sqft costs
500 $95.84 $104.30 $99.48
600 $91.91 $104.30 $99.48
800 $86.05 $98.89 $94.42
1,000 $81.76 $94.88 $90.67
1,200 $78.40 $91.72 $87.71
1,400 $75.69 $89.14 $85.29
1,600 $73.41 $86.95 $83.25
1,800 $71.45 $85.08 $81.49

In this case, it was the square foot costs of "below average quality" homes that exceeded the costs of similar "average quality" properties. Since the taxable values on your homes are required by the State Constitution to be based on recent sales, could it have been possible that substantially renovating such homes during those years yielded a lower value in the local Real Estate market? Did neglecting your home, or repairing your severely damaging home using low quality materials result in an increased market value at that time?

These types of errors resulted in very questionable valuations and associated tax liabilities on thousands of homes in Pueblo County from 2008 through 2011. Now that unfortunate history is being repeated under the current values as established by the office of the County Assessor. The valuation errors and associated tax penalties have now simply been shifted from "below average quality" homes to "low quality" homes. Why are disproportionate values and associated tax burdens being imposed on the owners of lower quality homes? Why are homeowners in the most economically distressed areas of Pueblo County being marginalized? These types of valuation errors are becoming more and more commonplace in Pueblo County, but they are no less troubling.

Lower quality homes are not the only properties being effected by such errors; they are simply the most obvious. Higher quality properties are also effected by other valuation anomolies. All such issues are attributable to the continued use of an outdated method of mass appraisal. Given the number of variables involved in the process of mass appraisal, the real question might well be how many such errors have never been discovered, and how have these errors effected your tax bills?

There is a better way.

The simple solution to this problem is to follow the lead of other large front range counties, and implement modern methods of mass appraisal such as Multiple Regression Analysis (MRA) to value properties in Pueblo County. Methods of mass appraisal such as MRA utilize the power of modern computer systems to generate mathematical models that minimize the error in your taxable values.

An easy way to demonstrate the superiority of these methods is to consider a simple measurement of the error in taxable home values known as the "Coefficient of Dispersion" (COD). This simple statistic has long been accepted as one of the prime indicators of the quality of any mass appraisal system. It is rather simple; the larger the COD, the greater the error in your taxable values. As one of the 11 largest counties in the state, Pueblo County is classified as a "Category 1" county; consider the most recent error statistics for all Category 1 counties in Colorado as reported by the State Auditor:

Coefficients of Dispersion for all Category 1 Counties

County Name COD
Arapahoe 3.9
Denver 5.3
Broomfield 6.8
Douglas 7.8
Boulder 7.9
Larimer 8.0
Jefferson 9.1
El Paso 9.2
Adams 9.3
Weld 10.3
Pueblo 11.5

Pueblo County is dead last, with by far the most error in their taxable home values; i.e., YOUR taxable home values. Where the average COD for the other 10 Category 1 counties is 7.6, Pueblo stands alone at 11.5. What do the top 5 counties with the least amount of error in their taxable values have in common? They all use Multiple Regression Analysis to value their residential properties.

The office of the Pueblo County Assessor would argue that they did pass the state audit for 2013; but when you consider that the current audit standards were established around 30 years ago to accomodate the error prone mass appraisal systems in use at the time, this is a statement of minimal competency at best. As demonstrated in the table above, modern methods of mass appraisal such as MRA consistently produce values with much less error than those derived from out-dated methods such as those in use by the office of the Pueblo County Assessor. The fact that the Pueblo County Assessor's office was actually able to pass their audit using the problematic cost structures outlined here is a strong indicator regarding the minimal standards of that audit. We need to demand that our property values be as accurate as possible; to do otherwise simply perpetuates the very tired expression "close enough for government work", and demeans those who do strive for excellence in government.

Over the past decade, MRA models have been demonstrated to the County Assessor's office on numerous occassions, and these methods have ALWAYS provided superior valuations when compared to their current, outdated methods of mass appraisal. Multiple Regression Analysis could be implemented within a matter of months using existing computer technologies already available to the County Assessor's office; there would be no additional costs related to such a conversion. Pueblo County taxpayers have already supplied that office with modern computer hardware and software systems; it is time to put that very expensive technology to work.

Please take a moment to vist the following link regarding The Solutions, which include the qualifications of David Bratina; the candidate who, if elected, will reduce the error in your property values and associated property taxes by immediately implementing Multiple Regression Analysis in the valuation of your homes.

For those who find it hard to believe that this could be a recurring issue in Pueblo County and would like a more detailed look at these and other valuation irregularities, such detail is available by clicking on this link: show me more of the problems.

Why are low quality homes being repeatedly over-valued for taxation in Pueblo County?

The Issues


The Solutions

Graph of the depreciation tables for low quality properties currently in use by the County Assessor (green), as well as a graph of the market depreciation as calculated from actual sales using a modern mathematical modeling technique (blue).