Understanding Equalization Rates

An equalization rate is how NYS measures a municipality's level of assessment. (Still confused about assessments? See here: Assessments)
Technically:

    Total Assessed Value of a municipality 
    ---------------------------------------------------    =  Equalization Rate
      Total Market Value of a municipality 

So, if Town A is assigned (by the State) an equalization rate of 100, that means that it assesses its properties at 100% of market value: a property that has a fair market value of $500,000 would also have an assessment of $500,000. If Town B is assigned an equalization rate of 50, it assesses its properties at 50% of market value: a property that has a fair market value of $500,000 would have an assessment of $250,000.

School districts that cross municipality boundaries (like the BCSD) need to use equalization rates to fairly distribute the tax levy across the municipalities. For instance:

School District AB needs to raise $1 million through property taxes to balance their budget (tax levy = $1 million). The district contains all of Town A and all of Town B. Each town has a total assessed value of $10 million. If the $1 million tax levy simply were allocated on the basis of the assessed values, the taxpayers in both towns would evenly split the levy, with each town paying $500,000.

However, the two towns have different levels of assessment. Town A has an equalization rate of 33.33 and Town B has an equalization rate of 50.00. (Remember: this means that the market value of properties in Town A is actually $30 million vs. the market value of properties in Town B, which is only $20 million.)

Town A and Town B need to be equalized in order to fairly distribute the school tax levy:

  Town A Town B
 Assessed Value $10 million $10 million
 Equalization Rate 33.33 50.00
 Market Value
(Total Market Value of School District = $50 million)
 $30 million$20 million 
 % of Total School District Market Value 60% 40%
 Tax Levy per town
(Total Tax Levy of School District = $1 million)
 $600,000 $400,000
 Tax Rate per town
(Levy/Assessed Value) x 1000
 $60/$1000 $40/$1000
*Source:  NY State Dept of Taxation & Finance

In this example, the property owners in Town A would pay a total of $600,000 in school taxes, while the property owners in Town B would pay a total of $400,000. How much each individual property owner would pay is determined by their assessed value and their town's tax rate (seen in the last row of the table above). Example:

Property A in Town A: 

Assessed Value: $200,000 (remember: that means a market value of $600,000)

Tax Rate: $60/$1000 (that means $60 for every $1000 of assessed value)

School taxes for Property A:  ($200,000/$1000) x $60 = $12,000

Property B in Town B:

Assessed Value: $200,000 (remember: that means a market value of $400,000)

Tax Rate: $40/$1000 (that means $40 for every $1000 of assessed value)

School taxes for Property B:  ($200,000/$1000) x $40 = $8,000

Curious how this all works in the BCSD? Check this out: BCSD Taxes