40% Property Tax Relief? Yes – and No.
Since the end of the 2013 Legislative Session we’ve seen several editorials reporting a 40% decrease in property tax thanks to the passage of HB1013, HB1319 and SB2036 – along with statements that if the property owner doesn’t see such relief, they should hold their local government accountable. All true. But, the statements being heard is somewhat misleading in that the 40% is cumulative and includes all the additional state funding going back to 2008. In other words, we will see additional reductions to our property taxes at the end of this year, thanks to the 2013 legislation. Yes. But depending on where we live and what our valuations are, the percentages for 2014 are most likely be closer to a 20-25% reduction for this coming year – not40%.
Perception is reality, and in the days and months coming, I think it’s important to speak deliberately and plainly on this issue – be sure we’re saying this correctly, in full context, and are asking the right questions. As people hear 40% and interpret this to mean an additional amount over and above the previous state funding, a growing misperception is brewing that will no doubt lead to our taxpayers, legislators and local leaders at odds with the math.
In the past several years, we’ve had excellent discussion surrounding the entire topic of property tax, thanks to the 2012 ballot measure centered on its elimination. The consensus was loud and clear – keep it local. But, like most people, I heard a caveat with that vote – get those taxes down and under control! Not a threat, but certainly a directive.
Moving forward into the legislative session, it seemed certain this would be one of our primary goals in the session. We learned quickly this would not be as simple as the interpreted directive. What we heard was property tax is a local thing that is controlled locally. Or, that the state has no real business in direct property tax relief formulas since this only serves to “enable local governments” who perhaps aren’t looking as closely at the bottom line as they should.
And yet, there are mandates that aren’t funded. In other words, both federal and state have requirements for local government to provide services such as county extension, health and social services, but does not allocate the funds to the county to fully fund these needed services. There are state requirements such as land and property valuations and retirement match increases that must be met. And, of course, there are the match requirements for every road and every bridge that involves either state or federal dollars. So, while it is true that the locals establish the levy required to meet the general operating budget that will accommodate the needs – it is also true that locals are affected by external influences from both state and federal levels.
And, how does the local entity pay for these budgetary items? For 45 out of 53 counties and most towns and cities, this is property tax. Unless they have adopted a Home Rule Charter by a vote of the people, there is only one funding mechanism available to the local entity to fund services and infrastructure…. property tax. As a Home Rule county or city, there are a limited and very specific number of alternate mechanisms available such as sales tax, but again – only with a vote of the people.
To be clear, both state and federal levels assist in the funding of certain local programs and infrastructure funding – it’s this partial funding that becomes the point of contention as it pertains to property tax. Is it proportionate to today’s needs as compared to available wealth? For example, 1985 statewide property taxes provided 33% of the needed local funding. Compare this to 2012 property taxes, which provided 31% of the funding, for a mere 2% decline in 27 years.
As we’ve moved forward in time, the state has found itself in unprecedented prosperity, while local governments are bound to the historically limited resources of an already over burdened property tax system. Costs continue to soar in the attempt to sufficiently meet the needs, while revenue is held steady – or forced to decline through cuts – exacerbating an already frustrated population.
When it comes to holding your elected officials accountable – I wholeheartedly agree. But, let’s be sure we’re asking the right questions as we do this. The projected budgets, mill calculations and federal/state funding are all public record. If not available through your county or city website, contact your auditor, commissioner or council member. Then, ask your legislator what their commitments are for meaningful and sustainable property tax solutions going forward.