VALUATION TERMINOLOGY STANDARDISATION TO IMPLEMENT MASS APPRAISAL AT LOCAL AUTHORITIES FOR AN INTEGRATED GREEN COMPUTING ENVIRONMENT IN MALAYSIA Chitrakala Muthuveerappan, Buang Alias, Mohd Shafie ABSTRACT In property taxation, mass appraisal is the best practice being applied by various developed contries to support paperless administation for Local Authorities. In Malaysia, the existing mass appraisal model being developed at Universiti Teknologi Malaysia is aimed to assist mass appraisal for Local Authorities under Malaysian environment and to standardise the list of mass appraisal parameters at national level. At present, the emerging issues in mass appraisal model that obstruct green computing implementation are the capacity gap, the hedonic model parameters, lack of parameters' value classification, and the parameters' terminology usage by the Local Authorities. The lack of valuation terminology standardisation consequently obstructs to provide an integrated and automated environment among mass appraisal, finance and GIS departments at Local Authority's administration. The vigorous issues at present which is the standardisation of valuation terminology, and the proposed terminology glossary are discussed. KEYWORDS: Mass Appraisal, Mass Appraisal Parameters Standardisation, Valuation Teminology Standardisation. 1. INTRODUCTION valuation. During the interval the property Property Valuation is essential for taxation as it values were not updated according to current is one of the major income resources for every value is a loss for the local authorities and to the Local Authorities (LA). In Malaysia, the Local nation. Government Act 1976 allows the taxing powers among Local Government Units (LGU) to The current practices of valuation from data impose and collect property tax (rates) as long collection until analysis are carried as a pre- as they are within the ceilings that are prescribed stage to implement in a paper based under Act 171. The amount targeted is set so as environment. Such practices effect in long-term to meet their pre-determined annual financial which would be the cause of ever-rising costs budgets which comprises of the costs of and increased space required to store files. At administration, providing public services, present, most local authorities' record keeping infrastructures, maintenance, landscapes, staff are paper based. Retrieving and updating of salaries, etc. information are costly and hevily time- consuming due to paper based (manual) On the other hand, the Act 171 insists every communication either within or inter local government to carry out property departments. For example, change of the inspection within their jurisdiction every 5 years landtitle could be done within the valuation once. According to Dzrull et al (2008), 5.26% of department of any LA. The ownership or local authorities follow this periodical property corresponding information of a property needs inspection whereas 31.58% every 10-15 years to be updated with valuation and finance once and the rest 63.16% of local authorities department whereas renovation approval need to performing the revaluation exercise on a 15 year be updated with the valuation and planning interval or more due to lack of manpower and departments, etc. the budget allocation for property inspection and Managing Assets and Infrastructure in the Chaotic Global Economic Competitiveness 13 The keen examination on the Information many Local Authorities use hedonic model for Technology (IT) tools, and discussion with valuation. Local Authorities and Valuers identified that the IT systems purchased by related organisations A hedonic based mass appraisal The Multiple aimed to increase their performance in day-to• Regression Analysis (MRA) allows estimation day tasks do not assist property valuation of the relative contribution of each variable to efficiently. These IT systems merely store and the property value, and the direction as well as retrieve the property details similar to databases. the magnitude of each variable's impact. The The payments of rates or tax by clients are MRA methodology has been in place for over digitized only in finance departments but the 40 years now and is widely applied in various data are unsynchronized and decentralized as countries and large cities. Hence most of the one copy is digitally kept by fmance department mass valuation or appraisal has been based on whilst other departments using set paper based. multiple regression analysis methods (Mark and Subsequently, the valuation of properties for Goldberg, 1988) which have been popular taxation purposes is performed manually yet. because of their established methodology, long history and wide acceptance among both Hence, the property valuation being carried at practitioners and academicians (Do and present is limited with increased properties in Grudnitski, 1992; Mark and Goldberg, 1988). numbers, limited property inspection time under As mentioned above few have used the system a specific period, less manpower, capacity to conduct the valuation exercise on a mass building inline with technology, and accurate basis including Malaysia. valuation etc., lead to adopt automation and Mass Appraisal. 3. MASS APPRAISAL AND GREEN COMPUTING IN MALAYSIA 2. MASS APPRAISAL IN MALAYSIA Our observations found that there are three mass In Malaysia, the improved property valuation is appraisal models that have been applied for excercised by the state of Johor and the rest of green computing on mass appraisal namely: a) the states are pracitising annual property GIS-based Mass Appraisal Model, b) Computer valuation (Dzrullkamaian et al, 2009). For Aided Mass Appraisal (CAMA), and c). The improved valuation, the land title, ovraership, GIS-based Mass Appraisal model using Spatial property location, building category, and Hedonic Model (SHM) for its location building facilities namely the gate and fencing clustering (Ibrahim and Oliver, 2006) only the which are considered as contributing to the CAMA have been in a more advance stage of value of the property are counted as parameters utilitisation. by the LA in Johor. However, no standard guidelines on the number of parameters and its In the GIS-based Mass Appraisal Model, the range of values consideration for improved GIS component is the main core and valuation values were established among the LAs in as sub-core for this model. Since GIS data are Johor. Other states in peninsular Malaysia such spatial, updating of data as a data entry by as Perak, Pahang, Malacca and Kelantan where clerical staff need GIS knowledge which needs tax were calculated based on the annual value high capacity building at clerical level. also adopt similar nonstandardised approach in Moreover, as the SHM details are large in treating the parameters and their range of values. numbers, the mass appraisal becoming very slow. As in other jurisdiction throughout the world, Second, the Computer Aided Mass Appraisal conducting mass appraisal using automated (CAMA) which has been developed by systems that were developed locally, getting Universiti Teknologi Malaysia (UTM) uses the priority due to the need of forecasting the Hedonic Model with MRA for Mass appraisal. revenue out of property taxation, rapid increase The CAMA has been featured with building of new property developments, time saving, and drawing, GIS and valuation successfully. green computing since the whole process life- However, CAMA is limited with intranet based, cycle is paperless. However, as mentioned decentralized GIS, and above all Windows XP above, most mass appraisal exercise used by platform dependant and implemented in the 14 Managing Assets and Infrastructure in the Chaotic Global Economic Competitiveness Local Authority organizations including: sharing with e-PBT or within the LA's inter Tangkak District Council, Kluang District departments due to their parameters terminology Council, Johor Bahru Tengah Municipal and its unstandardised value (refer Table 1). Council, Johor Bahru City Council, Kuala Krai District Coimcil, Tumpat District Council, 5. EMERGING ISSUES IN MASS Tanah Merah District Council, Batu Pahat APPRAISAL STANDARDISATION Municipal Council and Kuala Pilah District A number of related issues have emerged over Council (Dzrullkamaian and Buang, 2006). recent times which challenge the implementation of mass appraisal as a single The third is a computerized mass appraisal system, share the valuation data within the local named e-Penilaian. For this system, no authorities various departments for an integrated published document about the model environment, and also standardisation of mass implementation was found (Azmi. 2011). appraisal practices in Malaysia. The following However, it was observed that the location of main issues have greater priority to pave smooth property using this system goes through a surface to start apply mass appraisal without manual selection process which could be delay. considered individual processing as the property i. Lack of Terminology Standardization: selection is neither location nor cluster based. A Malaysian tailored mass appraisal system by various local system Though the mass appraisal has been developers are facing problems in implemented to support green computing, the standardizing terminologies when preliminary fmdings made while implementing developing the computerized mass the inland tailored mass appraisal model's appraisal systems as the terms used by interface has been redesigned without changing local authorities in particular are