Section 50IAC27-4-5. Ratio study statistics and standards

   (a) Except for agricultural land, ratio study statistics shall be calculated based on the methods and procedures contained in the IAAO Standard on Ratio Studies (July 2007), as incorporated by reference in 50 IAC 27-1-4.

  (b) The level of assessment, as determined by the median ratio, must fall between 0.90 and 1.10 for any class of property. However, confidence intervals, rather than the median ratio itself, will be used to determine compliance with this benchmark.

  (c) The coefficient of dispersion (COD) standard for improved residential property is 15.0 or less. Income-producing property, vacant land, and other real property have a COD standard of 20.0 or less.

  (d) The price-related differential (PRD) must be between 0.98 and 1.03. However, in accordance with the Standard on Ratio Studies, as incorporated by reference in 50 IAC 27-1-4, if there are fewer than twenty (20) sales in a particular township or class of property, the Spearman Rank test will be relied upon to determine if vertical equity has been met for that stratum. This will resolve the well-known sensitivity of the PRD to outliers in small samples.

  (e) Confidence intervals are a way of capturing the variation in a sample of properties. For example, the median ratio is generally relied upon as the best estimate of the overall level of assessment for a given property stratum. However, the sample median itself is not an exact estimate of the population median, only the assessor's best guess. The accuracy of this estimate improves when more sales are used. For example, one would have more confidence that the sample median represented the actual level of assessment, if the stratum contained fifty (50) sales rather than five (5) sales. A confidence interval consists of a lower and upper bound for the median ratio and a given level of confidence that the actual median ratio is between those two (2) bounds. In all cases, the level of confidence used by the department will be ninety-five percent (95%) (two-tailed).

  (f) The goal is to achieve an overall assessment level equal to one hundred percent (100%) of market value-in-use. However, ensuring uniformity in assessment levels among strata is also important. Therefore, the assessment level of each township and major property class (residential improved, residential vacant, commercial improved, commercial vacant, industrial improved, and industrial vacant), must be within five percent (5%) of the overall assessment level of the county. (Department of Local Government Finance; 50 IAC 27-4-5; filed Apr 8, 2010, 1:45 p.m.: 20100505-IR-050090502FRA)