“Property taxes are a major source of funding for local governments, and are often the focus of citizen scrutiny. One of the most important aspects of any tax, but particularly the property tax, is fairness. The property tax is based on the appraised value of the property in question. The appraised value should represent government’s best estimate of the value of the property. How do we know if the government . . . is applying the property tax fairly? . . . .

“The government is doing a good job in estimating value if the assessed value is close to the market value as shown by the selling price. [To see if the government is doing a good job in assessments over all, it] calculates what is called the assessment-to-sales ratio, or simply “sales ratio,” which is the ratio of the appraisals of various properties to the actual prices for those properties when sales occur. . . . 

“To test the fairness of assessments, local governments use a second measure to understand how consistent they are in measuring the value of a property subject to property tax in its jurisdiction; this is the coefficient of dispersion (COD). . . . A low COD means greater consistency between assessment and more fairness in assessment. A COD of 15% or below is a common benchmark.” 

Rediscover just how important an understanding of statistics is to your management of policies and practices that hugely impact your community: check out ICMA’s Statistics for Public Administration: Practical Uses for Better Decision Making, Second Edition, from which this material was excerpted.