Technological Innovation and Its Impact on Public Sector Efficiency and Performance: Aerial Imagery in Property Tax Assessment Administration

ABSTRACT

Technological innovations can help public organizations deliver higher quality public goods and services at lower average costs. While a considerable literature exploring the determinants of technology adoption and diffusion exists, much less is known on whether technology innovations improve public sector outputs. This study investigates the impact of high-resolution, oblique aerial imagery, an increasingly common technology used by local governments in the US, on the inspection efficiency and quality of property assessment administration. Aerial imagery is often argued to be a low-cost substitute to in-person inspections of property. Drawing on data from 2013 through 2017 for property assessing districts in Texas, aerial imagery use is found to improve the rate at which properties are inspected as well as improve the quality of assessments. The results further provide evidence that investments in aerial imagery are best justified on budgetary grounds rather than as a means to improve organizational performance.

KEYWORDS:

• Property tax
• technology
• innovation
• local government

Notes

1. This is often summarized by property tax officials in the saying, “You can only tax what you can see.”

2. Aerial imagery is also used for other public services such as disaster preparedness and response, street planning and repair, green space density and usage, and public safety such as police investigations.

3. While a COD of zero percent indicates perfect assessment uniformity, the IAAO further provides that CODs less than five percent signal a problem with the data underlying the metric (Tomberlin, 2007).

4. The Comptroller publishes assessment performance data for each CAD every other year as part of the Property Value Study, which is used to equalize state education funding across counties.

5. See Texas Tax Code §25.18(b).

6. While this is a counterintuitive artifact of the COD’s computation that could be remedied by regressing the COD’s inverse, I do not take this step because it trades one inconvenience for another. By taking the inverse the sign is made more intuitively interpretable, but then the reader would need to recall that a positive (negative) direction indicates decreasing (increasing) dispersion in its place.

7. See Texas Tax Code §5.12(d)(2).

8. See Texas Tax Code §5.12(a) and Texas Comptroller (2018).

9. Some CADs also serve as a county tax collector, and thus have a larger budget to finance this public service. The tax collection budget was excluded to create an apples-to-apples budgetary comparison.

10. See Texas Tax Code Section 5.10.