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1 .~ ZB"x.. wr R2774 l5:i' RESEt 2.:nto t.\.. N PUBLC LAND TAX EXEMPT LAND AND PROPERTY TAXES "- :'.\ ~. ) 'V- Research Division College o Agricultural and Lie Sciences University o Wisconsin-Madison i " ia ~

2 Summary ntroduction Wisconsin's Property Tax System Categories o Public Land And Other Tax-Exempt Land Research Design Town Selection Hypothesized Changes in Land Ownership Analysis Tax Base Change has Little Eect on Tax Rate Property Tax mpacts o Dierent Tax-Exempt Land Programs Variation in Property Tax mpact by Town Type Elasticity: Tax Base and Tax Rate Changes Compared Conclusions TABLE OF CONTENTS Page No. Appendix A: Review o Categories o Public Lands And Other Tax-Exempt Land 19 Lands Making Payments n Lieu o Taxes 1. U.S. Fish and Wildlie Service; National Wildlie Reuges 2. U.S. Forest Service; National Forests 3. U.S. Army Corps o Engineers 4. Wisconsin Department o Natural Resources 5. County Forests 6. Forest Crop Law 7. Woodland Tax Law 8. Summary o n-lieu Payments on Tax-Exempt Lands Lands Not Making n-lieu Payments 1. Trust Lands 2. ndian Reservations 3. National Park Service 4. Community Forests; County and Municipal Parks 5. Military nstallations Appendix B: Wisconsin Property Tax Structure Popular Conception o Tax Structure Model o Tax Rate Showing Linkages Between Tax Base Tax Levy and Tax Rate Worksheet to Calculate Eect o Tax Base Change upon Tax Rate Wisconsin System o General School Aids Worksheets to Calculate General School Aids Shared Taxes and General Property Tax Relie 'i JJ SUMMARY Many public oicials and citizens are interested in how public lands aect property taxes and many ear that public land or tax-exempt land leads to higher property taxes or local citizens. This research examines the impact o public lands or tax-exempt lands on property taxes. Our study looked at nine representative Wisconsin towns. <';. The research concludes that public lands or tax-exempt lands have very little eect on property taxes. n each o the towns studied property tax rates changed only slightly when the acreage o public or other tax-exempt land expanded. The impact o several types o public lands is Similar except or certain DNR lands. For these lands increased local acreage means lower property tax rates or local citizens at least or several years ater public acquisition because o substantial in-lieu payments. The property tax system reduces the tax rate impact o removing land rom the tax rolls. First in-lieu payments compensate or part o the tax revenue lost. Second and most important the system o state payments reduces the tax rate impact o changes in the tax base. The system o general school aids osets decreases in local tax base as the shared tax and general property tax relie (tax credit) ormulae. Thus increases in state payments largely oset tax base losses due to increases in public or other tax-exempt land. Finally any remaining revenue losses are shared among many taxpayers in the overlying county school and vocational-technical districts. Thus tax rates are not very sensitive to changes in tax base. Public land and other tax-exempt land does not mean higher taxes or local citizens.

3 PUBLC LAND TAX-EXEMPT LAND AND PROPERTY TAXES* by Monroe H. Rosner and Richard L. Barrows * * NTRODUCTON The eect o public land and other tax-exempt land on local property taxes has been a public policy issue or many years. n 1966 Wisconsin Governor Warren Knowles requested a special study o the impact o state land acquisitions on local taxes [Public Lands mpact Study Comm. 1967]. A special committee examined and debated the many issues involving public lands and property taxes and recommended the principles o a system o state payments to local governments in-lieu o property taxes on state lands. Much o the concern over the property tax eects o public! land and other tax-exempt land can be traced to the widely held belie that the removal o land rom the tax rolls results in higher taxes or local property owners. Many argue that the tax revenue lost rom these lands must be made up by having other property owners pay higher taxes. This concern over the tax impacts o public lands is partially responsible or the requent introduction o bills in the Wisconsin State Legislature to limit purchases o land by state agencies. 1 Thus local taxpayers may view the advantages and disadvantages o public land ownership according to the eect they think public land will have upon their property taxes. The widely held view that public land ownership means higher property taxes is based upon a undamental misconception o Wisconsin's property tax system. The misconception results rom the mistaken belie that: tax rate = government spending property value Many assume that or a given level o expenditure the tax rate is determined by the amount o property value (the size o the tax base) ; thus a loss in value means higher tax rates. Since the removal o land rom the tax rolls because o public ownership means a loss in value many assume that public lands must result in higher tax rates. Since a property owner's taxes are equal to the tax rate times the value o his property a higher rate means higher taxes. Thus it is assumed that i taxable property is removed rom the tax rolls because o public purchase or inclusion in some tax-exempt program the result will be higher property taxes or local citizens. This Simple conception o the property tax structure in Wisconsin ails to take account o an extensive system o state payments to local government. a community's tax base declines due to increased public land ownership the community will receive increased payments rom state or ederal government. These payments mean that the tax rate impact o public land (or other tax-exempt land) is not as great as might otherwise occur. These payments include increased state school aids increased state shared tax payments increased property tax credits rom the state and special payments in lieu o property taxes. Governmental spending is not the same as the property tax levy. The levy diers rom total spending essentially by the amount ollids credits shared taxes and in-lieu payments all o which are inluenced by the amount o public and other taxexempt land. Removal o land rom the tax rolls means a lower tax base which would increase the property tax rate i the state payments did not change. However a lower tax base means increased school aids tax credits and shared taxes which reduce the state payments did not change. However a lower tax base means increased school property tax levy and the tax rate. The loss in tax revenue because o the decline in the tax base is partially or wholly oset by changes in state or ederal payments. Thus the primary question or both research and public policy is: Given the complex nature o state-local iscal relationships what is the eect o public land and other taxexempt land on the property taxes o local citizens? n order to analyze the property tax impacts o various categories o public land and other tax-exempt land it is helpul to understand the system o property taxation in Wisconsin. Thus the next section o this study will be devoted to a brie discussion o the tax system and the eects o an increase or decrease in the amount o public land and other tax-exempt land. n addition to a basic review o the property tax system it is also necessary to systematically review the dierent types o public lands other tax-exempt lands and the in-lieu payments or each type (i any). Each type o land may have dierent impacts on local property taxes because o dierences in the type o in-lieu payments. Thus the third section will be devoted to a general discussion o the various types o public land and other tax-exempt land. n the ourth section the research design will be discussed in detail. t is possible that a single type o public land e.g. nationarorest;will have varying iscal impacts among various communities depending on local government iscal position the amount o public land the size o the tax base the level o local government expenditures and many other actors. These inluences will be discussed and several Wisconsin towns will be selected to illustrate the tax impacts o public land or other tax-exempt land. n the ith section the results o the analysis will be presented and the actors aecting the property tax impacts o these land programs will be discussed in detail. The inal section will summarize the indings o the analysis and discuss the public policy implications. *This research was unded under the Rural Development Act o 1972 through the College o Agricultural and Lie Sciences University o Wisconsin-Madison. * *Monroe H. Rosner is project specialist and Richard L. Barrows is assistant proessor department o agricultural economics College o Agricultural and Lie SCiences University o Wisconsin-Madison. 'See or example 1975 Senate Bill 61 and 1975 Assembly Bills 41 and 68.

4 WSCONSN'S PROPERTY TAX SYSTEM Property taxes are levied by municipalities (towns villages and cities) counties school districts vocational technical and adult education districts (VT AE) the state and a variety o special districts which are established or certain speciic purposes. n rural areas where most public land is located the important taxing jurisdictions are the county VTAE district school district town and the state. (Table 1 indicates the relative importance o these components o the property tax or all Wisconsin towns in 1974). The state tax is ixed at 20 per $1000 o property value and this rate will not be aected by public land or tax-exempt land. The VTAE tax rate is also quite low-in the neighborhood o $ per $1000 o property value and is aected very little by public land. n consequence this discussion will ocus on the town county and school district tax rates. Normally school districts will include several towns and district boundaries may not coincide with town or county boundaries. Each school district establishes its budget and determines how much it must raise rom the property tax. This levy is allocated to each municipality in the district based on the proportion o the district's ull value o property located in the municipality. For example a town containing 10% o the ull value o the school district would be responsible or raising 10 % o the school district levy. Full value o property in each school district is determined by the State Department o Revenue based upon an annual analysis o sales and other data! Within each municipality the tax levy or school purposes is allocated among property owners on the basis o assessed value as determined by the local assessor. Although dierent local assessors may assess property at dierent percentages o ull value the school district's tax levy is nevertheless equitably distributed among taxpayers in dierent municipalities at least in theory since: (1) the tax apportioned to each municipality is determined on the basis o ull value; and (2) the property tax bill o each irdividual owner is proportional to his share o the municipality's assessed value. Thus an individual whose property comprises 2 % o the total assessed value in the municipality will pay 2 % o the taxes levied in the municipality regardless o the relationship between assessed value and ull value. This procedure insures that all taxpayers in the same school district will pay the same tax rate or school purposes regardless o the municipality in which they reside. A change in the value o property in a town such as removal o land rom the tax rolls by public purchase would have several eects. First the levy or town government would be spread over less property so the tax rate or town purposes would increase. Second the town would contain a smaller proportion o the total value o the county and school district so the town would be responsible or rai$ing less tax or these other jurisdictions. However since the value o property in the county and school district declined slightly the ull value tax rate or these jurisdictions would increase slightly. Thus the loss o tax revenue rom the addition o public land is spread over all taxpayers in the county and school district not simply those in the town in which the new public land is located. Other eects will occur through the system o state payments. land is removed rom the tax rolls because o public purchase the property value per pupil in the school district is reduced and the state will pay increased school aids. These additional school aids may oset most or all o the loss in school tax revenue so the school tax rate may change very little or not at all. n addition the higher tax rates or town and county governments will trigger increased tax credits and shared taxes which serve to reduce tax rates in subsequent years. Thus the overall property tax eect o the increase in public land cannot be easily predicted. ncreased state payments oset the loss in tax base. To determine the inal result in a speciic town it is necessary to study the iscal situation in the local area the state payment system and any in-lieu payments which may be made or the land. 'Chap Wis. Stat. directs the Department o Revenue to establish "the valuation o the property o each county city village and town o the state [using] all the sources o inormation accessable to it. The valuation so determined "shall be the ull value according to its best judgment." TABLE 1 PROPERTY TAXES N WSCONSN TOWNS 1974 Total Taxes County Vocational Public Levied Education Schools Town State Amount (Millions) $378.4 $65.1 $21.5 $265.1 $23.2 $3.5 Percent 100% 17.2% 5.7% 70.1 % 6.1 % 0.9% Tax rate.02078* *General property tax relie or towns amounted to about $37 million in 1974 reducing the eective tax rate to Statewide the total tax rate in 1974 was (eective rate.02440). The dierence between the total rate or towns and the statewide total is explained largely by the greater importance o the municipal rate in the case o villages and cities. Source: Wisconsin Department o Revenue and Wisconsin Board o Vocational Technical and Adult Education. 8: 2

5 CATEGORES OF PUBLC LAND AND OTHER TAX-EXEMPT LAND :r There are about a dozen major categories o public land or other tax-exempt land in Wisconsin. Some land is directly owned and managed by public agencies such as the county orests and state parks. Other land such as private orest land enrolled in the Woodland raxor-fo'resc'rop programs is privately owned but is exempted rom the property tax.reor some lands in-lieu payments are made such as Woodland Tax lands or Forest Crop lands. For other lands no in-lieu payments are made such as National Park Service lands or county and municipal parks. ThELeroperty tax impacts o these dierent types o land may vary. '. Although in-lieu payments or a given land area are usually less than the corresponding property tax the distribution o inlieu payments among the town county and school district may be quite dierent rom property tax receipts. Consider the example o a town which has no local tax levy; nearly one-ith o all towns in Wisconsin levied no tax against property or town purposes in 1974.' The town would receive none o the property taxes paid on an extra dollar o tax base within its borders and would not lose any property tax revenue i land was removed rom the tax rolls. the town's tax base does decline the loss in tax revenue would be shared equally among a/property taxpayers in the county and school district. n this same town consider a public land program which provides or a payment o 10 per acre payment to the town treasurer. Since the town has no town levy and thereore loses no property tax revenues the 10 per acre is a net gain. However the county and school district will lose potential revenue and i state payments do not oset the loss other taxpayers within those taxing jurisdictions may pay slightly higher taxes. The town could use the 10 per acre to oset any increase in school or county taxes. The inal result may be that town residents would pay lower property taxes while other taxpayers in the school district and county would pay Slightly higher taxes. (n act. the school tax rate may not change because o increased state aids and the county tax rate may change very little so other taxpayers may not be aected at all). Thus the system o in-lieu payments or public land or tax-exempt land and the iscal conditions in the town will inluence the property tax impacts o public land programs. n-lieu payments are made or nearly 6 million acres o public land or other tax-exempt land in Wisconsin. Payments in lieu o property taxes can be made in three basic ways: (1) ad valorem (according to the land value); (2) lat rate per acre; and (3) percent o receipts rom the land. An. ad valorem payment is based upon value o the land multiplied by some rate per dollar o value. Payments o a lat rate per acre vary rom 20 to 50 per acre in Wisconsin. For the National Forests the payment is based on timber sale revenues. Figure 1 summarizes the dierent tax-exempt classes o land according to the in-lieu payments scheme or each. Five major categories o public land or other tax-exempt land will be analyzed in this research. A brie explanation o each category ollows and a more detailed discussion may be ound in Appendix A. 1. National Forests: The Chequamegon and the Nicolet contain 1.5 million acres. By ederal law 25 % o gross receipts rom the orests are returned to the state; hal goes to the towns and hal to their school districts.' n Fiscal Year (FY) 1974 net town proceeds were 4.2 per acre in the ChequalT'egon and 8.6 in the Nicolet. 2. Wisconsin Department o Natural Resources lands: DNR lands are located in approximately one-hal o the towns in the state. ncluded are state parks orests and ish and wildlie management lands. For FY 1974 per acre payments o 50 were made on about acres; "ormula" aids averaging $3.10 per acre were paid on acres acquired ater July County Forests: The county orest system was established in the 1920's and today totals over 2.25 million acres. The state pays 20 per acre to the town and 10 per acre to the county. When timber is cut the state receives a severance payment o 20 % o gross value the towns receive 10% and the remainder is kept by the county. 4. Private Forest Crop Law: An owner o 40 acres or more o orest land may sign a 50 (or 25) year contract with the state agreeing to practice sound orest management and to pay annually 10 per acre (i enrolled in 1971 or beore) or 20 per acre (i enrolled in 1972 or ater) in lieu o property taxes. The state also contributes 20 per acre. The proceeds (30 or 40 per acre) are divided between town (40 % ) school district (40 % ) and county (20 % ).5 The landowner pays a 10 % severance tax to the state when timber is cut or the contract terminates. 5. Private Woodland Tax Law: An owner o less than 40 acres o orest may sign a 10 year contract agreeing to practice sound orestry and to pay 20 per acre annually in lieu o property taxes to the town. Selected characteristics o these ive programs are summarized in Table 2. The amount o in-lieu payments ranges rom 8.3 per acre to $3.80 per acre. For other types o public land such as Trust Lands or Community Forests no in-lieu payments are made (see Appendix A). Because o dierences in the in-lieu payment schemes it is possible that dierent categories o public or tax-exempt land may have quite dierent impacts on property taxes. 'n towns levied no tax or town purposes; another 427 levied taxes at a rate o less than $1.00 per $1000 o equalized valuation. There are 1270 towns in Wisconsin. The 1975 State Budget eliminates the requirement to share these receipts with the school district. 5 The 1975 State Budget requires that henceorth the town receive 80 % o the proceeds and the county 20 %. 3

6 Figure 1 n-lieu Payment Schemes or Public Land and Other Tax-Exempt Land n-lieu Payment Scheme Category o Tax-Exempt Land Ad Valorem Flat Rate ;; ~ DNR Properties: (State Parks State Forests Fish and Game Lands) Private Forest Crop Lands Private Woodland Tax Lands National Wildlie Reuges County Forests Percent o Receipts National Forests Army Corps o Engineers Lands )l:! No n-lieu Payment Wisconsin Trust Lands ndian Reservations National Park Service Lands Community Forests Municipal and County Parks Military nstallations Others: Boy Scout Church

7 Table 2 Wisconsin: "n-lieu" Payments to Local Governments on Tax-Exempt Lands 1974 ( Land Ownership Class U.S. Forest Service National Forests Dept. o Natural Resources State Parks and Forests Fish and Game Management Areas County Forest System Forest Crop Law (Private) Woodi"and Tax Law (Private) av.) ad valorem r.) lat rate per acre pc.) percent o receipts Payment Scheme' pc.) 25% o gross receipts Greater o: av.) 100 % declining to 10% o initial year's property tax r.) 50 per acre Sum o: r.) 30 per acre and pc.) 80% o aver. gross receipts r.) 10 or 20 per acre paid by landowner plus 20 per acre paid by state r.) 20 per acre paid by Landowner Per Acre Payment Average Hange or $ $ or or State Budget eliminated requirement to share 50 % with school district State Budget gives 80 % to town and 20 % to county. Distribution o Payment Town's Aver. Net Proceeds Per Acre 50% or School District' 4.2 or 50% or Town % to Town % o gross re- 24 ceipts to town % o gross receipts to County 20 % to County 12 or % to School Districts 40% to Town 2 100% to Town 20 TOTAL: Number o Acres in State

8 RESEARCH DESGN A model was constructed to simulate the operation o the Wisconsin property tax system rom the perspective o local property taxpayers. The model S discussed in Appendix B. The model incorporates the determinants o town school district and VT AE district levies including the system o state payments or school aids tax credits shared taxes and other orms o aid. Also included are the systems or in-lieu payments on the various classes o public land and other taxexempt land. The model was supplied with relevant historical data or 1973 and 1974 on the inances o certain selected towns and their overlying school districts counties and VT AE districts. The model was then run or each o these towns to generate 1973 and 1974 tax rates. General agreement between actual 1973 and 1974 tax rates with those which the model generated served to veriy the model's ability to accurately simulate the actual iscal processes which determine property tax rates. Next the model was used to generate a series o tax rates or each town or the period Those projected tax rates are based on the assumption that there is no change in the amount o public or other tax-exempt land. The model was then utilized to estimate property tax rates in the towns rom 1973 to 1979 based on various hypothesized changes in the amount and type o public land or other taxexempt land. These tax rates were then compared to the "standard" set o tax rates generated earlier under the assumption o no change in the amount or type o public or other tax-exempt land. n order to generate the tax rates it was necessary to postulate growth rates or many variables such as school enrollment expenditure levels o local governments population and other actors inluencing public expenditures and state aids. When oicial projections were available they were used to establish the uture values o the relevant variables. When oicial projections were not available uture values were estimated based on past trends and consultation with public oicials in the relevant agencies. Because the analysis is a comparison between uture tax rates with changes in public and other tax-exempt land and uture tax rates with no changes the assumptions concerning the uture value o dierent variables in the model are not as critical as i the absolute level o uture tax rates were o primary interest. The "with-without" nature o the analysis reduces the importance o the assumptions. Town Selection A given land use change such as the purchase o private property or inclusion in a public orest may have quite dierent property tax impacts in dierent communities. Based upon the system o property taxation it was hypothesized that the tax rate or town purposes and the overall tax rate would strongly aect the impact o property tax on various types o. public and tax-exempt land. n addition many believe that the amount o public land and the per capita tax base are important determinants o public land tax impacts. Thus representative study towns were selected on the basis o a/ our criteria. To begin the sampling process 125 towns (about 10% o the towns in Wisconsin) were randomly selected as potential study areas. The sample o 125 towns was subsequently reduced to 49 by eliminating those which were part o more than one school district. This was done to acilitate analysis because towns located in two or more school districts necessitate over twice as many equations in the simulation model as well as additional assumptions. As a consequence however a pro-northern bias was introduced into the sample since school districts in the northern part o the state tend to be relatively large in area and thus the likelihood that a northern town would remain in the sample was greater than that or a southern town. However public land or other taxexempt land is ar more common in the north than in the south. The remaining 49 towns were then displayed on the diagram shown in Figure 2. The results are summarized in the ollowing table. Percent Land in Public Ownership Table 3 Number o Towns in Sample by Tax Base Per Capita and Percent Public land Tax Base Per Capita Less than $8000 to More than $8000 $13000 $13000 Under 10% % Over 40% Nine towns were inally selected or study as representative town types two rom each o the our corners o the table: (1) low tax base low public land; (2) low tax base high public land; (3) high tax base low public land; and (4) high tax base high public land-and one rom the center group characterizing an average mix o tax base and public land. Within each group towns were selected or study according to dierences in local and total tax rates. The inal selection o study towns included a concern or geographical diversity. The nine towns selected and the data which were considered in the screening process are presented in Table 4. Maple Plain in Barron County was selected as characteristic o a town type with average levels o public land and tax base. The statewide average o tax base per capita or all Wisconsin towns in 1973 was $11502.' Maple Plain had a tax base per capita o $11257 in Approximately 14.7 % o the state total land area is accounted or by the public land ownership classes discussed earlier. The proportion is somewhat higher or towns and ar lower or villages and cities. For Maple Plain 12.3 % o the land area is in public ownership. o Wisconsin Department o Revenue Town Vii/age and City Taxes a 1973 p. 54. The high and low or 1972 was $62982 and $1852; see ~ Wisconsin Department o Revenue Taxes Aids and Shared Taxes EJ)! i 6

9 - Figure 2 $25000 G Scatter Diagram o Tax Base Per Capita and Percent Public Land or 49 Wisconsin Towns $39900 $20000! E) $ " $ ' ".. <!) 0 + $11502 <! 14.7%.@ '. $ % 20% 30% 40% 50% 60% 70% 80% 90% o Study Towns T State Average PERCENT OF LAND W PUBLC OHNERSHP Source: See Table 4. Table 4 Representative Town Types: 1973 Town Type Town County Population Tax Base Tax Base Per Capita (2) + (1) ( 1) (2) (3) Public Land as Percent o Total Land Area (4) Tax Rate or Town Purposes (5) Total Tax Rate (6) Low*-Low** Sigel Wood 1441 $ $ 5284 Pound Marinette % Low*-High** Ackley Langlade Angelo Monroe Average* * * Maple Plain Barron High' -Low* Jacksonport Door Clinton Rock High' -High' * Florence Florence Draper Sawyer 'Tax base per capita "Public land as a per cent o total land area Source: Columns 12 5 and 6 are rom Wisconsin Dept. o Revenue Town Village and City Taxes (taxes levied in 1973 collected 1974) Tax base and tax rates are expressed in terms o state equalized ull values. Column 4 is rom a tabulation made available to us by Wendell Beckwith o the UW-Madison Dept. o Geography. The data were developed by the Wisconsin Department o Natural Resources in the early 1960's by means o cartographic techniques. 7

10 HYPOTHESZED CHANGES N LAND OWNERSHP For each o the nine representative towns ten dierent scenarios were hypothesized with respect to changes in ownership and tax status o land. Each scenario is based on the same 1000 acre tract o orest land assumed to have a ull value assessment o $ ($200 per acre) at May '. The hypothesized scenarios are: 1. The land is privately owned and is assess_ed and taxed as any other property in the municipa/ity (standard or comparison). 2. The land is purchased by the U.S. Forest Service or inclusion in a national orest. 3. The land is purchased by the Wisconsin Department o Natural Resources or public hunting and ishing. 4. The land is purchased by the county or inclusion in the county orest. 5. The land is purchased or a tax-exempt purpose or which no in-lieu payments are made such as a county or municipal park school orest or YMCA/YWCA camp. 6. The land is entered under the orest crop law by the private owner. 7. The land is entered under the woodland tax law (in tracts o less than 40 acres) by the private owner. 8. The land was originally county orest but is sold or private orestry purposes and hence enters the tax rolls 9. The land was originally county orest; it is sold to a private individual who immediately enrolls the land under the Forest Crop law. 10. The land was originally trust land (or some other type o tax-exempt land or which no in-lieu payments a're made) ; it is sold or private orestry purposes and hence enters the tax rolls. ' n summary scenario 1 assumes no change in public land ownership and serves as the standard or comparison. Scenarios and 5 are transers o land rom private taxpaying status to public ownership. Scenarios 6 and 7 are transers o land rom private taxpaying status to preerential taxation status. Scenarios 8 9 and 10 are transers rom public to private ownership. Under scenarios 8 and 10 the land is ully taxed; under scenario 9 it receives preerential taxation status Tax rate changes or each scenario are calculated or each town even though the tax-exempt land category may not in act be present in the town. For example the Town o Clinton Rock County contains no County Forest but scenario 8 indicates the tax rate changes that would occur ithere were a County Forest in the town and land was withdrawn rom it. For this analysis it is not critical that each town have the amount or category o public land indicated in the various scenarios. Rathe-r each 'town was included in the study because it is typical o many other towns in the state. with respect to local tax rate total tax rate tax base per capita and amount o public land. Thus each.town is representative o many similar towns and need not have the precise amount o each public land category assumed in the anaiysis. The average ull value assessment o orest land in Wisconsin is about $75 per acre. However sales o such lands typically occur at prices ar in excess o their assessments. The use o a relatively high valuation per acre in this analysis is intended to overstate or exaggerate the impacts under study. ~':) ~4J 8

11 ANALYSS The analysis was completed or each o the land ownership changes in each o the representative towns. n each case the property tax impact o increasing or decreasing the amount o land in a given tax exempt category was determined by comparing the tax rate under the hypothesized scenario with the tax rate under the "standard" scenario in which no change in-~md ownership occurred. The major results o the analysis indicate that: 1. The impact on the property tax o the removal o land rom the tax rolls was extremely modest or all nine towns studied. 2. There was no signiicant dierence so ar as impact on the property tax is concerned between any o the programs or payments in lieu o taxes with the exception o "ormula payments" or lands acquired by the DNR. 3. Formula payments by the DNR were ar higher than those under any o the other in-lieu payment programs. The DNR payment served to reduce property taxes or all o the towns studied or at least the irst ive years ater state acquisition. 4. The impact on property taxes o public land or which no in-lieu payments are made is only very slightly more adverse than the impact under our dierent in-lieu payments programs whose impacts were themselves quite small. 5. Sale o public land or private orestry purposes caused only a very slight decline in property taxes. 6. The major eect o land ownership changes on property taxes operates through the tax rate or town purposes. The eect is greatest in towns with a small tax base and a large local levy. Figure 3 summarizes the results o the analysis and provides the basis or most o these conclusions. The nine representative towns are displayed along the horizontal axis arranged by town type-low tax base per capita low proportion o public land (reerred to as low-low) ; low tax base high public land (low-high) ; average tax base and public land (average); high tax base low public land (high-low); and high tax base high public. land (high-high). On the vertical axis is the annual average tax rate change or each o the nine towns under the various scenarios.' The scale describes tax rate changes in cents per $1 000 o equalized or ull value assessment. The horizontal axis implicitly describes the "standard curve" under scenario 1-no change in amount o public or other tax exempt land. Points above the horizontal axis indicate increased tax rates; points below the axis indicate rate decreases. Thus the uppermost curve labeled "no in-lieu payments" describes the average impact on the tax rate o the removal o $ o valuation rom the tax rolls with no in-lieu payment made or any property taxes oregone. Each point on this curve represents the Six-year average tax rate change or one o the nine study towns. Scenario 9 sale o County Forest land to a private landowner who then enrolls the land in the Forest Crop program had no perceptible impact on property taxes and will not be included in this discussion. The main conclusion to be drawn rom Figure 3 is that removal o land rom the tax rolls or public purposes has very little eect on property tax rates. For example addition o 1000 acres o orest land valued at $200 per acre to the County Forest would result in an overall average annual increase in property tax rates in the nine towns o only 3 per $1000 o property value an increase o less than two-tenths o one percent. Stated dierently or the owner o property with an equalized valuation o $25000 the tax rate change would represent a tax increase o 75 per year. Removal o land rom the County Forest thus adding $ to the tax rolls would decrease the overall average annual tax rates in the nine towns by only 2.5 per $1000 o property value implying a 63 saving or the owner o a 2.50 $25000 property. n all cases with the exception o the DNR lands public land and other tax-exempt land had very little impact on property taxes. These conclusions are developed in more detail in the ollowing sections. The irst section provides an explanation or the low level o property tax impacts generally..the next section discusses dierential property tax impacts o the various public land and other tax-exempt land classes. The third section examines the causes o dierences in property tax impact among the various towns. A inal section discusses the relative response o tax rates to tax base changes. TAX BASE CHANGE HAS LTTLE EFFECT ON TAX RATE The reason that tax base changes have so little eect upon tax rates can be best understood by thinking in terms o two separate eects-a dilution eect and an aids eect. The dilution eect describes the process by which a tax base change in a single municipality becomes diluted by the total value o all property within overlying taxing jurisdictions. As noted earlier the total tax rate is a composite o the tax rates o several governmental jurisdictions each o which is deined by dierent boundaries and hence dierent valuations. Thus a 10% change in the tax base o a certain town may correspond to only a 2 % change in the value o the corresponding school district and smaller per cent changes in the value o the county and vocational education district respectively. The aids eect describes several payment mechanisms such as general school aids shared taxes payments in-lieu o taxes and property tax relie. These payments neutralize at least in part the impact o tax base changes upon the tax rate. The way in which the dilution and aids eects combine to neutralize changes in tax base diers or each o the governmental jursidictions levying taxes against property. With the county or example dilution accounts or nearly the entire adjustment. The eect o the tax base change is borne equally by all taxpayers in the county thereby minimizing its impact so ar as any single taxpayer is concerned. The same is true or the vocational education district; dilution accounts or the entire adjustment. 9

12 Figure 3 TAX EXEMPT LAND CATEGORES EFFECT ON PROPERTY TAX T A X R A T E C H A N G E N C E N T S ACK EY ANGELO l- LOW-HGH.' " j / ; NO N- LEU PAYMENT / NATONAL FOREin ' ". FQREST CROP ;" WOODLAND TAX /.)~ COUNTY FOREST /<.~~/ //}~/ //~l5" ~~~~~ / :--t:'''- it ' / "..._... ~... "" ~~; 'P " ~... ~... ~..." ---~ ~~~ -:.-;;~.E.p './ MAPLE PLAN JAi;:~N- CUi'HON AVE~AGE -!-- i 'TAX BASE PER CAPTA 0 HGH-LOWttil'./.' / - PROPORTON OF" PUBLC LAND OF COUNTY FOREST '\HGtHGW' ~~L~N_~~EbA~Y~tNK.!NG i... 'a.... i i \ \ i i \ \ D.NR. 10

13 ! -! n the case o the tax rate PCSphool purposes the primary adjustment occurs through the aids eect. Wisconsin's school inance system guarantees a certain property valuation behind each pupil such that a reasonable tax rate applied against this guaranteed valuation will meet average school district costs. For school districts in which property valuation per pupil ails short o the state guarantee the state assumes the role o taxpayer on the amount o the shortall. the amount o taxexempt land increases per pupil valuation will decline and the state assumes the role o taxpayer or this extra shortall as well. Thus the tax rate or the school district is essentially stabilized since changes in its tax base will be oset by corresponding changes in general school aids. Any remaining impact on the school tax is subject to dilution eects. The combined operation o the aids and dilution eects reduces the impact o tax base change on the school tax rate to practically zero. This is important since the schaal tax accounts or about 70 % o the total property tax in Wisconsin towns. (For more detail on.school aids see Appendix B). With the tax rate or town purposes only the aids eect operates to oset the tax base loss. Osetting aid payments include shared taxes ("per cent o levies") and payments in lieu o property taxes. Since the town's tax levy must be borne wholly by the town's tax base the dilution eect does not operate. For this reason the town's tax rate will be relatively more sensitive to tax base changes than the tax rates o other governmental jurisdictions. However this relative sensitivity is oset by the small size o the town tax as a percent o the total tax (average 6 %). On the other hand the county and school district tax rates which together represent 87 % o the total tax rate are much less sensitive to tax base changes. To illustrate how insensitive the tax rate is to tax base changes it is useul to examine the changes in the various components o the total tax rate or a single town as its tax base is altered. As an illustration consider the town o Ackley in Langlade County and examine the tax rate changes when land valued at $ is removed rom the tax rolls and entered into the County Forest program. t is useul to examine the tax impact or 1977 since the tax base change which we have assumed occurs in 1974 will be ully relected in the compensatory state aids mechanisms which require three years to ully respond." Under the assumption that the land was not put into public ownership (scenario 1) the predicted 1977 ull value tax rate in Ackley is $16.82 per $1000 o equalized valuation. The components o the total rate are: County + Vocational + School District District $4.33 $1.43 $9.38 ' Towo 1= $ The state orestry tax o 20 per $1 000 is assessed against all taxable property in the state. General property tax relie is treated as a state credit to the individual taxpayer rather than as a payment to' any particular governmental jurisdiction. So tax credits reduce the total tax rate but not the rate o any speciic taxing jurisdiction. The 1977 tax rates generated by the model or Ackley under scenario 4 (purchase o 1000 acres or inclusion in the County Forest) are: County + Vocational + School District District $4.33 $ Towo 1= $9.38 $1.81 L-...J State General Total Sub- Forestry Property Tax Total Tax Tax Relie Rate $16.92 $0.20 $0.30 $16.82 (credit) -- State General Total Sub- Forestry Property Tax + - Total Tax -Tax Relie Rate $16.95 $0.20 $0.31 $16.84 (credit) -- The resultant total eective tax rate is $ Note that the tax rates or the county vocational education and the school district are unchanged despite the loss o $ in the 1974 tax base o each o these taxing jurisdictions.. For example the county tax rate o $4.33 is unchanged because the tax base loss is diluted by the size o the total tax base. Under scenario 1 (no change in land ownership or tax status) the 1977 county tax rate o $4.33 results rom a levy o $ and a tax base o $ Under scenario 4 the levy is unchanged at $ ; although the 1977 tax base is reduced by$ ($ compounded to 1977) this represents only 0.1 % o the original valuation. Thus the tax rate or county purposes rises very slightly-rom $ to $ equal to one-hal cent per $1 000 o valuation. For the vocational district the impact is even smaller. The levy is unchanged at $ and the valuation declines by only 0.01 %. The result is an increase in the tax rate o only 0.02 rom $ to $ per $1000 o equalized valuation. For the school district the reduced tax base leads to an increase in state aids o about $2850 so the levy declines by the same amount. n eect this entire reduction in the school district's levy is passed on to the town o Ackley in the process o apportioning the school district levy among underlying municipalities. The result is that the school tax rate does not change. Note that the increased state aids o $2850 divided by the loss in 1977 tax base o $ yields the original (and thereore unchanged) school tax rate o $9.38. n eect the state has paid the school tax on the lost tax base. Thus the major component o the property tax accounting or approximately 70 % o the total tax rate is insulated rom tax base changes. " Tax levied in 1977 and collected in By 1977 the $ loss is hypothesized to grow to the equivalent o a $ loss or the school district county and town (compounding at 15%) and a $ loss or the VTAE district (compounding at 9%).

14 The tax rate or town purposes is the only component o the total tax rate which changes by more than 1. For Ackley in 1977 the impact is estimated at 3 representing an increase rom $1.78 to $1.81 per $1000 o valuation. The tax base loss to Ackley equivalent to $ in 1977 represents 3.2% o the town's 1977 valuation under the standard scenario. the levy or town purposes was unaected by the loss o tax base it would have to be borne by 3.2 % less property valuation resulting in an increase in the tax rate or town purposes o about 6 or 3.3 %. However the aids eect operates to oset some o the tax base loss through increases in payments in lieu o taxes and shared taxes limiting the increase in the town tax rate to only 3 or 1.7 %. The in-lieu payment or the new County Forest land (24 per acre x 1000 acres) reduces the town tax rate by 2.6. Another aids eect operates through shared tax payments. n the standard scenario (no change in ownership) the shared tax payment reduced the town tax rate by 15.1 per $1000 o property value. With the 1000 acre addition to the County Forest the shared tax payment reduces the town tax rate by 15.4 a dierence o 0.3. The total aids eect is about 3 ( ). So instead o the 6 increase in tax rate which would have occurred in the absence o increases in shared tax and in-lieu payments the rate increases by only 3. Payments or general property tax relie (tax credits) also respond to changes in tax base and tax eort. n the standard scenario (no change in land ownership) the general property tax relie payment reduced Ackley's 1977 tax rate by about 30 per $1000 o value. With the addition o land to the County Forest general property tax relie reduces the 1977 tax rate by a bout 31. The net result o the dilution and aids eects is a very small change in the total tax rate. The only measurable change is in the tax rate or town purposes and even that change is quite small. PROPERTY TAX MPACTS OF DFFERENT TAX EXEMPT LAND PROGRAMS The similarity o the ive curves in the upper part o Figure 3 suggests there is no signiicant dierence so ar as the impact on the property tax is concerned among any o the in-lieu payment programs including the "no in-lieu" payment program (but excluding the DNR program during its initial years). The upper two curves in the lower part o Figure 3 depict the average tax rate change rom selling public land and placing it on the tax rolls. The eect on the tax rate is similar to the changes rom adding more public lands-the rate changes very little although in this case the rate declines slightly. The lower -two curves in Figure 3 are virtually mirror images o the upper ive curves. The bottom curve in Figure 3 represents the six-year average tax impact o a DNR purchase. However a six-year average is not as meaningul or DNR purchases because o the system o DNR in-lieu payments. Annual payments under all other in-lieu payment programs are relatively stable over time. DNR payments decline annually by 10 percent stabilizing at the level o the tenth year's payment or 50 per acre w~ichever is greater. Thus an average o the tax impact o the irst six years' payments is not a useul statistic or comparison with the other payment programs. The tax rate eect o DNR purchases is better relected in Figure 4 which depicts the impact on the tax rate year by year or each o the nine study towns. For comparative purposes Figure 5 depicts the year by year impact on each town's tax rate o scenario 6 removal o $ o property rom the tax rolls and its entry instead under the Forest Crop law. The main point is that purchase o land by the DNR will result in signiicantly lower property taxes or several years ater the initial purchase because o the nature o the DNR inlieu payments program. Ater several years however the tax impact becomes airly insigniicant. Regardless o the payments scheme and the amount o the per acre payment public land or other tax-exempt land has very little eect on property taxes. The only exception is the DNR in-lieu payments program; increases in DNR holdings will mean lower property taxes or local residents especially or the irst 5-6 years. The reason that there is no signiicant dierence in the tax rate impact o dierent public or taxexempt land programs is due to the eectiveness o Wisconsin's system o shared taxes and state aids. n other states which do not have mechanisms or insulating tax rates against changes in the tax base this conclusion might not apply. VARATON N PROPERTY TAX MPACT BY TOWN TYPE The dierences among towns in the average annual tax rate impact o public land and tax-exempt land is depicted in Figure 6. The scenarios included in this igure are (2) National Forest (4) County Forest (5) a program providing no in-lieu payments (6) Forest Crop and (7) Woodland Tax corresponding to the top ive curves in Figure 3. n general property tax impacts o public land and other tax exempt lands are quite small and are concentrated in the tax rate or town purposes. However there are some slight dierences among towns. The most curious case is that o the town o Angelo in Monroe County (see igures 3 and 6). For Angelo a reduction in the tax base coupled with in-lieu payments leads to a decrease in the tax rate. Conversely increasing the tax base (and oregoing in-lieu payments) causes the tax rate to increase. Hence public lands which provide in-lieu payments are an asset to the town holding down the tax rate. Why this curious result or the town o Angelo? The answer is because Angelo does not levy a (town) tax against property. About a ith o all towns in Wisconsin did not levy a property tax or local government purposes in n addition many o these towns actually had surplus revenues which they used to reduce county and school district levies thus easing the tax burden or owners o property within the municipality. Angelo is an example o such a town. 12

15 Figure 4 DNR PROPE RTY EFFECT ON PROPERTY TAX T A X R A T E C H A N G E N C E N T S O~----r-----~ r--~~~~~~ :80-90 POUND SGEL.i/.i/ i //.t' i. MAPLEPLAN/ ACKLEY i/ i.it' ; J' i / /7 d ;/ 'i i ANGELO! DRAPER ~ // ::-::.:::

16 Figure 5 10 FOREST CROP EFFECT ON PROPERTY TAX T A X R A T E C H A N G E N C E N T S 5-10 DRAPER./ SGEL SGEL ACKLEY """"""... /~... POUND... /'//... " //~ ;-".~ / JACKSONPORT EY //~/... / ~~~SON~t /' ~//~ANGELO... ~ ~~// ". ~---;:::'"'< MAPLE PLAN MAPLE PLAN..:..:;.:::-.".."""'" / // FLORENCE ~' 01 ~:~L~:~:~:_:T:~.~_..._ /_..._/ CLiNTON~'~.' ANGELO " ' ".. "" :>-~ <'~ CLlNTON "'....~_.~_.~19~~~~~~-"----~- -19~lr76---/~/!~/-/--1-9r~ r~ T~ " / " / 14

17 Figure 6 Average Annual Tax Rate Changes or Selected Tax-Exempt Programs (Assuming a Tax Base Loss o $ in 1974). CHANGE N TAX RATE PER $1000 PROPERTY VALUE 10 5 a (/) <C C1l -0 o c: ::l a. Low*--Low** J> J> n ::l 7\ l.c Cil ~ -< 0 ~ Low*--High** s:: c... OJ OJ "C n Cil 7\ ~ '" 0 ::l ~. "C ::l Q ri- Q ::l ri- 0 ::l ~ * Average ** High*--Low** " C1l OJ ::l "C n C1l ~ High*--High** REPRESENT A TVE TOWN TYPES *Tax base per capita * * Public land as' percent o total land area. Note: Programs included are National Forest County Forest a program making no in-lieu payments Forest Crop and Woodland Tax (scenarios and 7). 15

18 _ _._- Since the town has no property tax levy and has no property tax rate or town purposes the town loses no tax revenue rom a decline in the bax base. Furthermore i that loss in tax base is accompanied by an in-lieu payment the local government will receive revenue rom property which ormerly generated no revenue or local government purposes (since the town's tax rate was zero). The in-lieu payment increases the municipal government's surplus thus allowing it to remove a larger proportion o the county and school levies rom the property tax. This is the reason Angelo's total tax rate declines as property is removed orm the tax rolls." Similary sale o public land would increase the tax rate or local citizens (see the curve corresponding to the sale o County Forest in the lower portion o Figure 3). A town tax rate o $1.00 per $1000 value applied against an acre o orest land valued at $200 generates 20 o revenue. For such a town the removal o that acre rom the tax rolls means a potential revenue loss o 20. an in-lieu payment is provided which nets the town less than 20 the town must increase its tax rate in order to restore the lost revenue. On the other hand i the value o that acre had been $75" the loss in potential revenue would be only 7~ and smaller in-lieu payment would compensate or the loss. The dierence between the potential loss in property tax revenue and the compensatory in-lieu payment explains the magnitude o the impact on the town tax rate. n actual operation the loss in property tax revenue does not materialize. nstead the original levy reduced by in-lieu payments in borne by a smaller tax base. The ultimate impact on the town tax rate whether it increases or declines depends upon the relative change in numerator and denominator o the basic tax rate equation: Tax rate = Levy Tax base the percent decline in the levy is exceeded by the percent decline in the tax base the tax rate will increase. This apparently is the case or all o our study towns with the exception o Angelo. The tax rate changes in Clinton and Florence are extremely slight because o the large size o the tax base o each (see igure 3). n Clinton the $ tax base loss represents only 1.01 % o total 1974 valuation; or Florence it represents 0.81 % (see column 1 Table 5). The tax rate change is somewhat larger in Draper because o the town's small tax base; $ represents nearly 5 % o its 1974 valuation (see Table 5). The response in Sigel is due to a combination o high levy and small tax base. ts 1974 tax rate or local government purposes under the standard scenario is: Levy $31960 Tax Base $ = $3.22 per $1000 value Removing $ rom the tax base in Sigel causes the denominator to decline by 2.02 %. For the tax rate to hold steady at 3.22 in-lieu payments and other adjustments would have to reduce the levy by 2.02 % or $646 equal to about 65 per acre. On the other hand were the land valued at $75 per acre the tax base loss would have been $75000 equal to 0.76 %; in that case a levy reduction o $243 about 24 per acre would neutralize the impact on the tax rate. in-lieu payments and other adjustments exceeded 24 per acre the tax rate would decline." The net eect o tax-exempt land on the tax rate or town purposes will depend on the dierence between the percent reduction in the town tax levy due to payments in lieu o taxes and the percent reduction in the tax base. For the towns which have no local levy increased public land holdings may mean more in-lieu payments which might actually decrease the property taxes o local property owners. For towns which levy a town tax the eect o public lands depends on the amount o lna in-lieu payment relative to the tax revenue previously. collected on the land. The largest impacts will occur in towns i with a large tax levy and small tax base. n all cases however the overall impact o public land or other tax-exempiland on property taxes is slight. 11 Surplus revenues o $22517 were applied by Angelo in the ollowing manner to reduce 1974 property taxes: Monroe County $1097; VTAE District No.2 - $2381; Sparta School District - $18750; State - $289. Although no tax was levied or town purposes $2270 was levied by two special purpose districts against those parts o the town contained within those districts. 12 n 1973 the state average ull value assessment o an acre o timber land was $78. "The use o a relatively high valuation per acre or the analysis in this paper is intended to overstate or exaggerate the impact o tax base change upon the tax rate. Use o average or below average valuations would result in even more modest impacts than those which have been identiied. Table 5 Comparison o Tax Base Change with Tax Rate Change Tax Rate Change as a $ as a Percent Percent o Original Total Town Type Town o 1974 Valuation Tax Rate (1) (2) Low*-ow* * Low* -high * * Average* ** High*-ow** High*-high** Sigel Pound Ackley Angelo Maple Plain Jacksonport Clinton Florence Draper *Tax base per capita * * Public land as a percent o total area 2.02% 0.36% Ratio o mpacts: % Change in Tax Rate -; % Change in Tax Base (Col. 2 -;- Col. 1)

19 ELASTCTY: TAX BASE AND TAX RATE CHANGES COMPARED Previous discussion ocused on the sensitivity o the property tax rate to a given change-$ in the tax base o several representative towns. A somewhat dierent perspective is presented in Table 5. The irst column shows the percent change in each town's 1974 tax base represented by $ The second column presents the average change in the total tax rate or the ive scenarios in Figure 6. The inal column relates the percent change in tax rate to the percent. change in tax base or each o the nine towns. This "ratio o impacts" an elasticity concept ranges rom or Angelo to 0.18 or Sigel. These igures may be interpereted as the average percent change in the tax rate rom a 1 % change in tax base due to changes in the amount o public tax-exempt land. n the case o Angelo despite a tax base loss o 3.77% the tax rate did not increase (actually it decreased slightly). For Sigel on the other hand the tax base loss o 2.02 % caused the total tax rate to increase by 7 per $1000 o valuation equal to 0.36 % o the original rate. The sensitivity o tax rates to tax base changes in the remaining towns was intermediate between these two extremes. 17

20 CONCLUSONS The present study began by questioning the property tax impact o removing land rom the tax rolls. To understand these eects some basic inormation was provided on the types o land which are exempt rom property taxation in Wisconsin. Nine representative towns diering in their proportion o tax-exempt land and property valuation per capita were selected or detailed study. Secondary selection criteria included geographic diversity and tax rate dierences. Several changes in land use and ownership were hypothesized such as purchase by the U.S. Forest Service the Wisconsin DNR or a county orest; enrollment under the Forest Crop or Woodland Tax law or the sale o public land such as trust land or county orest or private orestry purposes. The eect o the hypothesized land use changes on property tax rates in each o the nine towns was determined. Comparisons were made or each individual land use change in all towns and or all the land use changes or each town. From this analysis certain important conclusions may be drawn with respect to the eect o public land and other taxexempt land on property taxes. The major conclusion o this research is that increases (or decreases) in the amount o public land or other tax-exempt land have very little eect on property tax rates and the taxes o local property owners. The explanation lies in the combined eect o several components o the property tax system all o which are designed to stabilize the tax rate in the ace o tax base changes. These components are: a. State school aids increase i a school distirct loses valuation. n eect the state assumes the school tax or the property removed rom the tax rolls. Since the school tax accounts or a large proportion o total property taxes the school aids ormula has a major eect in stabilizing the property tax rate. b. Payments to the municipal government in lieu o property taxes are made or several classes o tax-exempt land. These payments are intended to compensate the local government or the property tax receipts it otherwise might realize rom tax-exempt lands. c. the tax rate increases shared taxes per unit value o property also increase. The increased shared taxes partially oset the increased tax burden and drive the tax rate down again thereby stabilizing it. d. General property tax relie acts in a similar ashion. Municipalities with higher tax burdens as relected in the tax rate receive larger tax credits per unit value o property thus tending to stabilize the tax rate. e. The beneit or burden o tax base change is shared equally by all other taxpayers in a taxation district. a municipality loses property valuation its share o the levy o overlying taxing districts (school district county) declines in order to preserve the equality o the tax rate across all property owners within the taxing district. This sharing process applies to the levy or county elementary and secondary school district and vocational technical and adult education district. A second conclusion o this research is that there is very little dierence in property tax impact among any o the programs or public land or other tax-exempt land. The only exception to this is that the impact o DNR land is signiicant during the years immediately ater DNR acquisition. For most towns the tax rate was noticeably reduced by DNR acquisition although this impact alls o rapidly as the DNR payment declines. n the long run the eect o DNR programs is similar to other public or tax-exempt programs-very little eect on property tax rates. Finally the slight tax rate impact o public or tax-exempt lands is concentrated in the tax rate or town purposes-school district or county tax rates hardly changed at all. Town oicials might be concerned about these tax rate eects even though the actual tax rate changes are quite small and even though town tax rates are already quite low regardless o the amount o public or tax-exempt land. (n general town taxes represent only 6 percent o total property taxes). Public or tax-exempt land has little or no eect on those tax rates (county school VTAE) which comprise 94 percent o the total tax rate and only a slight impact on town tax rates. Nevertheless town oicials may be concerned about even these extremely slight changes. Many people in Wisconsin believe that there is a ixed relationship between tax base and tax rate. The belie is that a certain percent decrease in tax base means an increase in the tax rate o approximately the same percenlhis belie is based on a limited concept o the property tax structure which assumes that the tax levy does not change with changes in tax base. the levy is assumed to be ixed changes in the tax base do mean proportional changes in the tax rate. n act however the levy is not ixed but responds to tax base changes since school aids shared taxes tax credits and inlieu payments are sensitive to tax base changes. As tax base decreases these payments increase. So an increase in public or tax-exempt land'means that both the tax base and the tax levy decline. The payments cushion the impact o tax base changes on tax rates. The low level o sensitivity o the total tax rate to changes in tax base is the desired result o several years' modiications o the property tax structure by the legislature in order to provide property tax relie. n the process o providing such relie dependence o the tax rate upon the tax base was considerably reduced. Because o this reduced dependence local governments are not compelled to promote developments or land ownership changes which increase the tax base in order to control or reduce property taxes. A larger tax base does not guarantee a lower tax rate. Unortunately the nature o the response o tax rates to changes in tax base is not well understood. n part the lack o understanding results rom the extremely complex structure o local governmental inance and its interaction with state aids and shared taxes. One major purpose o this study has been to analyze how the property tax rate responds to changes in the tax base. The results suggest that the link between tax base and tax rate is not nearly as strong as many people believe and that public land or tax-exempt land does not mean higher property tax rates. n consequence local government oicials in their capacity as decision makers may want to attach more importance to the way public land and other tax-exempt land aects their economy and their environment rather than the way it aects their property taxes since the impact on property taxes will be quite insigniicant. ~ 18