NTF
worksheet: property9.doc. 4-06.
NEBRASKA TAXPAYERS FOR FREEDOM
WORKSHEET:
PROPERTY TAX RELIEF IN LOCAL GOVERNMENT.
BACKGROUND. Property
valuation statements reach property owners in late spring, and property tax
statements offer a Grinch-like Christmas present in December.
Perhaps the lag time between the two statements is the cause of confusion
and misdirected anger and frustration. The
state legislature is the legal authority that makes the property valuation
laws, and the state tax commissioner and property tax administrator
interpret them. Local government
subdivisions use these valuation statutes when setting property tax rates.
Local government officials sometimes set their tax rates at the same level or
lower than the previous year rate and boast to constituents that they did not
raise or in fact lowered our property taxes.
However, the steady and steep rise in residential, commercial,
industrial, and rural valuations actually results in higher annual property
taxes. Many taxpayers, upon receipt
and viewing of their tax statements, consider local officials liars for having
pronounced no tax hikes or lower taxes. Actually,
some of these public officials are liars, because they fully understand
that their local governments will accrue millions more in property revenues
annually, as the static or lower tax rate levied does not neutralize the dollar
affect of higher valuations. NTF
offers the following property taxing formulas that will limit how much a local
government could increase our property taxes each year for its general fund
budget. These calculations do not
include other revenues accrued, such as sales taxes, state aid, or federal
funding.
FORMULA #1.
This formula would limit a property taxing authority to the amount
received from property taxes the previous fiscal year plus a percentage increase
because of inflation, according to the Consumer Price Index or comparable index,
and additional percentage increase because of new construction.
The three elements in this formula are 1) property taxes received for the
previous fiscal year; 2) growth in new property valuation base; and 3) consumer
price index increase up to a specific percentage.
FIRST EXAMPLE: CITY OF OMAHA.
In FY 2005-06: Property
taxes received: $93,234,870.
Growth in county new property valuation base: 2.78%
Consumer
Price Index increase (3.4%) but not more than 3%: 3%
Property taxes the city may collect in FY
2006-2007: $93,234,870 + $2,591,929 + $2,797,046 = $98,623,845.
The City of Omaha could set its budget about 5.7% higher than the
previous year.
In FY 2005-06, the City of Omaha tax levy was .43387c per $100 of valuation.
In FY 2006-07, the mayor and city council could raise the tax levy to a
number of cents per $100 of valuation that would give them $98,623,845 in
general fund property tax revenue.
SECOND EXAMPLE: OMAHA PUBLIC $CHOOL DISTRICT.
In FY 2005-06: Property taxes received: $151,750,851.
Growth in county new property valuation base: 2.78%.
Consumer Price Index increase (3.4%) but not more than 3%: 3%.
Property taxes the school district may collect in FY
2006-2007: $151,750,851 + $4,218,673 + $4,552,525= $160,522,049.
The Omaha Public School District could set its budget about 5.7%
higher than the previous year.
In FY 2005-2006, the OPS tax levy was $1.21849 per $100 of valuation.
In FY 2006-2007, the school board could raise the tax levy to a number of
cents per $100 of valuation that would give it $160,522,049 in general fund
property tax revenue.
FORMULA #2. This
formula would limit a property taxing authority to the amount received from
property taxes the previous year plus the previous year percentage increase in
Nebraska per capita income.
FIRST EXAMPLE: CITY OF OMAHA.
Per capita income percentage increase from 2004 to 2005: 3.9%
The City of Omaha could set its budget about 3.9% higher
than the previous year.
In FY 2005-06, the City of Omaha tax levy was .43387c per
$100 of valuation. In FY 2006-07,
the mayor and city council could raise the tax levy to a number of cents per
$100 of valuation that would give them $96,871,029 in general fund property tax
revenue.
SECOND EXAMPLE: OMAHA PUBLIC $CHOOL DISTRICT.
Per capita income percentage increase from 2004 to 2005: 3.9%
The Omaha Public School District could set its budget about 3.9% higher than the previous year.
In FY 2005-2006, the OPS tax levy was $1.21849 per $100 of
valuation. In FY 2006-2007, the
school board could raise the tax levy to a number of cents per $100 of valuation
that would give it $157,669,134 in general fund property tax revenue.
ROLLBACK FORMULA. If
the valuation increase for property within a taxing authority area rose “x”%
one year, the property tax levy for the next fiscal year would drop by the same
percentage.
For example,
if the valuation increase for property within the City of Omaha rose 7% as
calculated in May, 2006, the FY 2006-2007 property tax levy for the city would
drop from .43387c per $100 valuation to .40350c per $100 valuation. (.43387 x
.93 = .40350). Then, add the 3.4%
increase in the Consumer Price Index, $2,797,046, to the total property tax
revenues calculated for the budget and recalculate the property tax levy for the
total amount.
For example, if the valuation increase for property within
the Omaha Public School District rose 8 % in May 2006, the FY 2006-2007 property
tax levy for the district would drop from $1.21849 per $100 valuation to
$1.12101 per $100 valuation ($1.21849 x .92 = $1.12101).
Then, add the 3.4% increase in the Consumer Price Index, $5,159,528, to
the total property tax revenues calculated for the budget and recalculate the
property tax levy for the total amount.
Research
and analysis for this worksheet done by Nebraska Taxpayers for Freedom.
This material copyrighted by Nebraska Taxpayers for Freedom, with express
prior permission for its use by Citizens for Local Control, Cherry County
Taxpayers, Dawes County Taxpayers, and other groups in the Tax Freedom
Network. 4-06
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