Property Taxes and How They Affect Cities. What is Property Tax? 6/4/2018. Really, All I Care About is... How Much Money Can My City Get?

Transcription

1 Property Taxes and How They Affect Cities Presented by Wendy Semmler Property Tax Program Manager SD Dept. of Revenue What is Property Tax? Ad valorem tax on all property that has been deemed taxable by the South Dakota Legislature Means according to value SDCL All real property [...] is subject to taxation Real property land and any improvements Personal property is not taxable Primary source of revenue for local governments The State does not collect or spend any property tax revenue. Really, All I Care About is... How Much Money Can My City Get? To determine that, you need the following info: What did the city receive in property taxes last year? Was any of that Opt Out money? What is the current year growth percentage for the city? What is the current year CPI? Does the city have any stored CPI? 1

2 How Much Can My City Get? What amount of property taxes did the city receive last year? You may have records of this but it doesn t hurt to double check with the County Auditor Was any of that Opt Out money? Opt Out dollars are treated differently than normal tax requests What is the current growth percentage for the city? Contact the Director of Equalization (between May and September) or the County Auditor (after September) Calculating Growth To calculate growth percentage: Column 3 total divided by Column 1 total 674,565 21,051,985 =.0320 = 3.20% What is CPI? CPI = Consumer Price Index Determined on the Federal level by US Department of Labor CPI is available to all taxing entities and is the same for everyone Pay 2019 CPI = 2.1% The index factor is the annual percentage change in the consumer price index for urban wage earners and clerical workers as computed by the Bureau of Labor Statistics, United States Department of Labor for the year prior to the year immediately preceding the year in which the taxes are payable. 2

3 What Is Stored CPI? Statute allows for certain entities to store any unused CPI from the previous 3 years County was allowed in 2002 Legislative Session Fire Districts were allowed in 2004 Session Cities were allowed in 2010 (for Taxes Payable 2011) Revenue payable from real property taxes may be increased. The county or municipality may increase the total amount of revenue payable from taxes on real property in any year up to the maximum amount calculated in accordance with utilizing any unused index factor from the prior three years. However, such an amount may not exceed the prior three year index factor total or ten percent, whichever is less. Who Keeps Track of That? Does My City Have Any? The Department of Revenue is the Keeper of the CPI Some County Auditors may have the information as well Hold Up! How Am I Supposed to Read That!?!?? 3

4 Okay...So I Have All the Info What did the city receive in property taxes previous tax year? $163, for Taxes Payable 2018 Was any of that Opt Out money? No What is the current year growth percentage for the city? 3.2% What is the current year CPI? 2.1% Does the city have any stored CPI? Yes 0.3% Now What? Let s calculate how much the city can request in property taxes for Pay 2019 Last year taxes increased by growth + cpi 163, X (3.2%+2.1%+0.3%) = 9,141 = amount the city can increase their tax call 163, ,141 = 172,378 = maximum amount the city can request How Do We Actually Get That Money? Every property owner will have to pay their fair share of the tax request. This is determined by spreading the same levy across all value in the city. Tax levies for each taxing jurisdiction are determined by dividing the tax request by the total taxable value within the taxing jurisdiction and multiplying the result by 1000 Request Value = Tax Rate 4

5 Calculating Levies To do this, the County Auditor needs to know the Taxable Value of City (from their growth form) and the Tax Request from City (from you) Current Taxable Value of City City Tax Request $172,378 Levy Formula Request Value = Tax Rate 172,378 24,299,059 = Multiply that by 1000 and you get the Mill Levy X 1000 = You Just Used the Words Mill Levy...?? Tax Rate, Mill Levy, and Levy are often used interchangeably One mill is one dollar of taxes per $1,000 dollars of assessed value 5

6 Calculating Individual Taxes Plankinton City has a levy Every taxpayer in Clark will have to pay $7.094 per $1,000 of value So... If a house has a taxable value of $100,000, their city taxes will be $ (100,000 X ) Why Are Taxes Different In Each County? Factors: Property Tax Limitation Act Where were their tax requests at the time of the freeze? Growth How much value is in the district? How quickly is it growing? Opt Outs Number of Taxing Districts New authority for levies Is This True? My assessed value of my house went up 50%, therefore my taxes are going to increase 50% 6

7 An Increase in Value Does NOT Equate a Direct Increase in Taxes Example: City has 10,000,000 of value. They asked for $50,000 of taxes last year. Their levy is $5.00 House of 100,000 pays $500 in taxes Assessor comes out and increases values by 50%. The City now has 15,000,000 in value. The City increases their tax request by growth + cpi (total of 3%), making their request 51,500. This creates a levy of $3.43 House is now assessed at 150,000 pays $515 in taxes Taxes did increase. BUT the increase was 3% due to the increase in the tax call...not the 50% increase in value. Why Are Taxes So High Then? Has your city, school, or county recently passed an Opt Out? An Opt Out is a brand new levy that is outside of the Property Tax Limitation act If an Opt Out is new, then that means it was not there before...but is now suddenly on everyone s tax bills Let s look at how an opt out will affect a taxpayer using our previous example... Why Are Taxes So High Then? Example: City has 10,000,000 of value. They ask for $50,000 of taxes last year. Their levy is $5.00 House of 100,000 pays $500 in taxes Assessor comes out and increases everything by 50% making it so the City has 15,000,000 in value. On top of their 3% growth + cpi increase, the City also passed a $50,000 Opt Out. Their total request is now 101,500 with a levy of $6.77 House is now assessed at 150,000 pays $1, in taxes **taxes doubled because tax request doubled** 7

8 Other Factors Legislature have passed laws in the last few years allowing Counties and Townships to pass new levies for Road and Bridge purposes Again, this is a brand new levy that was not there before. It will increase taxes! One Piece of the Puzzle Cities are only ONE entity asking for tax dollars There are also levies from County School Fire Districts Ambulance Districts Road Districts Townships Questions? Wendy Semmler wendy.semmler@state.sd.us