AASBO Bi-Monthly Meeting Preparing for More Property Tax Increases May 9, 2012 Presented by: Judy...
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Transcript of AASBO Bi-Monthly Meeting Preparing for More Property Tax Increases May 9, 2012 Presented by: Judy...
AASBO Bi-Monthly Meeting
Preparing for More Property Tax Increases
May 9, 2012
Presented by: Judy Richardson602-794-4012
Page 2
FY 2013 Property Tax Increases
Property tax rates in most school districts will increase again for FY 2013
Primary causes QTR increase Decreases in primary and secondary assessed
valuations (PAV and SAV)
A few districts will not be affected: If no state aid and no PAV or SAV decrease If federal impact aid is used to control tax rates
How can you prepare your Governing Board?
Page 3
Step 1. Estimate Your FY 2013 Tax Rates
Various methods can be used One option is to use the formula from
the County and plug in your FY 2013 estimated amounts
Page 4
Step 2. Analyze the Change from FY 2012
Calculate the % change in tax rates from FY 2012
Identify the amounts that show major changes from FY 2012
Determine the reasons for the major changes For most districts, this will include the
QTR increase
Page 5
The QTR Increase
Statewide Primary Assessed Valuation (PAV) decreased again for FY 2013 9.7% decline for existing property Caused primarily by continued decreases in several
counties Qualifying Tax Rate (QTR) increased by 10.8%
To keep the total amount “raised” from existing property about the same
To prevent the cost of state aid from increasing QTR increase = $0.3804 (USD) or $0.1902
(ESD/UHSD) (less than the FY 2012 increase)
Page 6
The QTR Increase Note that PAV percentage decrease (9.7)
and offsetting QTR percentage increase (10.8) don’t match The % increase is always larger than the %
decrease The larger the percentages, the larger the
differential 5.0% decrease requires 5.3% increase to
offset 30% decrease requires 43% increase 50% decrease requires 100% increase
Page 7
The QTR Increase
Legislative action was not required Rate determined by “Truth in Taxation”
formula Normally, the formula causes the rate to
decrease when property values increase QTR is not an actual tax rate
A theoretical rate used to calculate your equalization assistance
A QTR increase reduces equalization assistance, which causes an increase in the primary property tax rate (in a state aid district)
Page 8
Other Reasons for Tax Rate Changes
Changes in adjacent ways levy (primary rate)
An unusually low or high tax rate last year Unusually large or negative cash balance
State aid withholding or repayment Tax judgments or delinquent taxes
Changes in district wide PAV For state aid districts, affects the tax rate for
items outside the RCL, such as desegregation For non-state aid districts, district PAV
decreases cause tax rate increases
Page 9
Other Reasons for Tax Rate Changes
Changes in secondary levy Override increased or decreased You issued new bonds or your payments on existing
bonds went up or down Budget increases caused by reductions in
formula cuts for FY 2013 (increased spending over FY 2012 levels), the transportation adjustment or increases in enrollment Increase primary tax rates in non state-aid districts Do NOT impact primary tax rates in state aid
districts (paid by increases in equalization assistance)
Page 10
Explaining Tax Rate Changes Some of the changes can be offsetting
For example, the increase in QTR can be offset by repayment of state aid withheld in a prior year
Remember any one-time payment will increase the tax rate next year when it is no longer available
The changes in the homeowner’s rebate formula impacted last year’s tax bills and should not cause any additional tax increases in FY 2013
Page 11
Step 3. Summarize Your Tax Rate Changes
Primary Tax Rate
Secondary Tax Rate
FY 2012 3.7288 1.6604FY 2013 4.1250 1.9770Difference 0.3962 0.3166% Change 10.6% 19.1%Main reasons for change
The Legislature increased the QTR by 0.38
Our cash balance was lower than last year because of low tax collections
Our SAV decreased by 19%
Our override was about the same but our bond payment was 5% lower so the total levy was lower
Page 12
Step 4. Anticipate the Reaction to Tax Rate Increases
Even if property values are declining in your district, some tax bills will increase when tax rates increase Property values do not change uniformly
with in a district The value of some properties will not
have declined or not declined enough to offset the rate increase
You can calculate the % decline needed to offset your tax rate increase
Page 13
Anticipate the Reaction to Tax Rate Increases
Formula to calculate the % decline needed to offset your tax rate increase D = I/(1+I) D = % decrease needed to offset the increase I = percentage increase in the tax rate
Example Tax rate increase is 10.8% D = .108/1.108 = .975 or 9.75% If the property value decreases by at least
9.75%, the 10.8% rate increase will not cause a tax bill increase
Page 14
Table to Estimate Offsetting Decreases
Offsetting Offsetting Offsetting
Percentage Percentage Percentage Percentage Percentage Percentage
Tax Rate Valuation Tax Rate Valuation Tax Rate Valuation
Increase Decrease Increase Decrease Increase Decrease
5.0% 4.8% 16.0% 13.8% 27.0% 21.3%
6.0% 5.7% 17.0% 14.5% 28.0% 21.9%
7.0% 6.5% 18.0% 15.3% 29.0% 22.5%
8.0% 7.4% 19.0% 16.0% 30.0% 23.1%
9.0% 8.3% 20.0% 16.7% 31.0% 23.7%
10.0% 9.1% 21.0% 17.4% 32.0% 24.2%
11.0% 9.9% 22.0% 18.0% 33.0% 24.8%
12.0% 10.7% 23.0% 18.7% 34.0% 25.4%
13.0% 11.5% 24.0% 19.4% 35.0% 25.9%
14.0% 12.3% 25.0% 20.0% 36.0% 26.5%
15.0% 13.0% 26.0% 20.6% 37.0% 27.0%
Page 15
Anticipate the Reaction to Tax Rate Increases
Review the information available on tax bills in your county
Prior year valuation information is not usually on the tax bill
Taxpayers who call to complain about tax bills usually do not know how their property value changed
To explain why their bill changed, you need to know the % change in their valuation
This can be calculated from the prior year tax bill
(The valuation notice they got this past February covers the wrong years)
Page 16
Explaining Tax Bill Increases
If you don’t know how a specific property value changed, you can: Explain why the district’s rates changed Provide the offsetting percentage valuation
decreases needed to prevent a tax bill increase You can also explain
If their school district taxes increased because of the QTR increase (or district PAV or SAV decreases)
Those additional taxes are used to offset tax cuts for owners of property which had a greater decrease in value
Page 17
Explaining Tax Bill Increases
Increases in the total tax bill may also be caused by Increases by other jurisdictions Increase in the county equalization tax rate
(State Equalization Tax Rate) of 0.0458 Also caused by “Truth in Taxation” To offset statewide PAV decrease
Educating your Governing Board about these issues can start now, with a follow-up when the tax rates are actually set in August
Page 18
Questions
It’s all perfectly clear, right?