|
How might the change impact local government levies and budgeting and
<br />property taxes?
<br />There are three key considerations:
<br />Local governments will receive the full amount they levy from their taxpayers.
<br />Local governments do not need to plan for further state reimbursement cuts -because
<br />there is no longer a payment to cut.
<br />Local governments should recognize that removing $292 million of credits from the
<br />system, and changing the composition of the tax base, will create large tax increases for
<br />some properties. This may increase sensitivity by taxpayers to levy decisions.
<br />Example: Budgeting and Tax Shift Scenario
<br />Context for Taxes Payable in 2011. In August 2010, "City A" was planning fora 2011 levy of
<br />$2,000,000. Approximately $1,900,000 was going to be paid by taxpayers and $100,000 by the
<br />state in the form of Market Value Credit reimbursements. Local officials then learned the city
<br />would have a $50,000 cut to its MVC Reimbursements, which meant the city would only receive
<br />$1,950,000 of a $2 million levy.
<br />City A decided to levy $2,040,000 for 2011. Officials anticipated they would make up almost
<br />$40,000 of the $50,000 cut with the levy increase, and cut their planned spending by $10,000.
<br />City A expected the levy of $2,040,000 would bring in approximately $1,990,000 (with
<br />$1,940,000 from taxpayers and $50,000 from the state).
<br />Decisions for Taxes Payable in 2012. Because there is no longer a credit, and thus no longer a
<br />portion of the levy coming from the state, the full levy will come from taxpayers. As a starting
<br />point, eliminating the credit for 2012 means city officials will have three general approaches:
<br />• Constant Levy: If City A keeps its levy constant at $2,040,000, taxpayers are actually
<br />asked to pay $100,000 more than the $1,940,000 they paid in 2011 (a 5.2% increase).
<br />• Constant Taxes: Levying $1,940,000, keeps the total coming from taxpayers the same (a
<br />0% increase), but the city loses $50,000 in revenue.
<br />• Constant Revenue: Levying $1,990,000 keeps the amount of revenue constant, but the
<br />city is asking taxpayers to pay $50,000 more (a 2.6% increase).
<br />Example Assumptions
<br />To give some perspective of the tax shifts that might enter into this decision, assume the
<br />following net tax capacity (NTC) tax base information:
<br />.Taxes Payable 2011 Taxes Payable 2012
<br />Total NTC tax base $6,700,000 $6,366,384
<br />Non-Homestead NTC $3,000,000 $3,000,000
<br />Homestead NTC $3,700,000 $3,366,384
<br />620 homes at $70,000 MV $434,000 $260,400
<br />644 homes at $150,000 MV $966,000 $813,114
<br />575 homes at $400,000 MV $2,300,000 $2,292,870
<br />Also assume that the city rate is 30% of the total tax rate (for allocating the credits for 2011).
<br />
|