Over 23,000 commercial properties located in Jefferson County are assessed annually by the PVA using a market (or sales), cost, or income approach to value. Property assessments are based on the method that represents the property’s best use and highest value. Values are determined with the assistance of a computer-assisted mass appraisal (CAMA) system. PVA research, local market and property characteristic data are applied to CAMA. CAMA utilizes the data to produce assessments at current fair market value. Depreciation factors and other adjustments that influence value are also applied in CAMA when applicable. CAMA is closely monitored by PVA for quality control.
Market (Sales) Approach: The market (sales) approach to value is based on recent valid (fair arm’s-length transactions) sales that represent current fair market value. Property sales in Jefferson County are researched annually and valid sales are verified. When a sale price is accepted by the PVA as a valid sale, it represents the property value for approximately 2 years. All valid sales are compiled and applied into CAMA. CAMA utilizes valid sales and property characteristics such as location (or area), lot size, and square footage of improvements (buildings, structures, paving, fencing, etc.), age and condition, etc. in order to value comparable properties at current fair market value. Depreciation factors and other adjustments that influence value are also applied in CAMA when applicable. The market (sales) method of value is best suitable for assessing the same type of properties that periodically transfer in the local market, and for assessing parcels of land without improvements.
Cost Approach: The cost approach to value is based on the principle of substitution, for example, a rational, informed purchaser would pay no more for a property than the cost of building a replacement with similar function. The cost approach seeks to determine the replacement cost new of an improvement (buildings, structures, paving, fencing, etc.), less depreciation, plus land value. CAMA contains cost tables from Marshall & Swift, an industry leader in building cost guides. Valuation by the cost approach method ensures assessments are applied fairly and equitably to all commercial properties. The cost method of value is suitable for assessing all commercial properties although older properties are more subjective to adjustments such as age, depreciation and estimates of functional and economic obsolescence.
Income (or Capitalization) Approach: The income (or capitalization) approach to value estimates the value of a property based on its income produced. The investor who purchases an income producing property is essentially trading present dollars for an income stream of future dollars, plus the return of the initial investment. The approach relies on the economic value of a property with regard to investment decisions and desires for income flow from operation of the property. The process of converting a series of anticipated income into present value is capitalization. Capitalization transforms net operating income produced by a property into the property value. The income (or capitalization) method of value is best suitable for assessing income producing properties.
PVA field inspections are an important part of achieving equitable property assessments. The inspection verifies property identification and ensures a correct listing of property characteristics.
PVA field inspectors are authorized by statute to inspect real property in Jefferson County (KRS 132.450 (1)). The PVA is required by statute to inspect property at least once every 4 years (KRS 132.690 (1)).
A PVA field inspection is assigned when a property sells, a building or wrecking permit is issued, a property is damaged, or by request of the property owner. Field inspections are made Monday through Friday between 8:00 a.m. and 4:00 p.m. Field inspectors can be identified by their PVA identification badge and/or shirt or jacket with PVA logo. The field inspector’s vehicle can be identified by a magnetic sign that displays PVA logo. Upon arriving at an inspection site, the field inspector first announces his arrival to the property owner and/or occupant. In the absence of the property owner, the PVA inspector has the legal right to complete an exterior inspection. However, with the exception of buildings under construction or not yet occupied, an interior inspection of the nonpublic portions of commercial buildings shall not be conducted in the absence or without permission of the property owner (KRS 132.220 (3)). Upon completion, confirmation of the inspection is left at the property. The property owner’s assistance during an inspection results in a more accurate inspection and resulting property assessment. Measurements of exterior dimensions of improvements are made, characteristics are identified and listed, conditions are determined and recorded, photos are taken and improvements are sketched. Exterior measurements of property improvements are made based on standards by The American National Standards Institute (ANSI). All information collected at the inspection is entered into the property record stored in the CAMA system.