Author ORCID Identifier

https://orcid.org/0009-0000-8650-774X

Date Available

7-2-2024

Year of Publication

2024

Document Type

Doctoral Dissertation

Degree Name

Doctor of Philosophy (PhD)

College

Graduate School

Department/School/Program

Public Policy and Administration

Advisor

Dr. William Hoyt

Abstract

This dissertation consists of three essays on urban/local public finance, specifically residential property tax assessment and the provision of local public services. A general theme of the essays is the interplay between local financial policies and housing markets. Both revenue (tax) and expenditure policies can have significant effects on housing prices which can, in turn, have feedback effects on current and future revenues and expenditures. In the first chapter, Assessment Regressivity and Capitalization of Property Taxes, I consider assessment regressivity, the phenomenon in which higher-priced homes tend to be underassessed while lower priced homes tend to be overassessed. This may result in an unfair tax burden for owners of lower-priced homes, who tend to have lower incomes and are more likely to be racial minorities. Drawing on decades of research suggesting that effective property tax rates are at least partially offset by responses in housing prices, I argue that assessment quality has a feedback effect on sales price, which might explain some of the apparent assessment regressivity. Using data from Lexington-Fayette County, Kentucky; Cook County, Illinois; and Alachua County, Florida, I investigate whether market prices seem to respond to variation in assessment quality and provide evidence across multiple residential property tax contexts that residents do respond to over- and underassessment. This suggests that the magnitude of assessment regressivity may be somewhat overstated. In the second chapter, Externalities in the Production of Public Services: Evidence from Fire Station Openings in Lexington, Kentucky, I investigate whether the net value of fire and emergency services for residents varies with proximity to production of these services. Fire stations provide services such as fire protection, emergency medical treatment, public education, and community initiatives, that are highly valuable to residents. At the same time, however, fire stations produce noise, flashing lights, and increased emergency vehicle traffic which residents might like to avoid. By analyzing how prices change when new fire stations open, I find evidence from ten fire station openings across four decades in Lexington-Fayette County, Kentucky that the benefits of new fire stations are at least partially offset by production externalities for residents at very close distances. The implication of these findings is that choosing fire station sites that minimize the distance to residents is not necessarily optimal. In the final chapter, Anticipated Property Tax Increases and the Timing of Home Sales: Evidence from Administrative Data (with coauthors William Hoyt and Aaron iii Yelowitz), we consider the relationship between assessment timing and the timing of home sales. Restrictions on property assessment practices such as Proposition 13 in California and Proposition 2½ in Massachusetts can lead to significant divergences between the assessed and market values of property. We consider the effects of the infrequent reassessment of properties that also results in a divergence between the assessed values of current owners and prospective purchasers. This divergence is reduced when properties are reassessed. Using data on homes in Lexington-Fayette County, Kentucky, we investigate how infrequent (neighborhood) reassessments affect the timing of sales and find that neighborhood reassessments are associated with an increase in property sales of approximately five percent.

Digital Object Identifier (DOI)

https://doi.org/10.30123/etd.2024.244

Funding Information

Lincoln Institute of Land Policy, 2023 - 2024

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