New Hampshire Municipal Tax Rates: How Are They Calculated? And How Do They Change? March 27, 2017

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1 New Hampshire Municipal Tax Rates: How Are They Calculated? And How Do They Change? March 27, 2017 Stephan W. Hamilton, Director Municipal & Property Division NH Department of Revenue Administration John T. Beardmore, Commissioner Lindsey M. Stepp, Assistant Commissioner 109 Pleasant Street, Concord, NH

2 Rick Evans, Timber Tax Appraiser, Municipal and Property Division New Hampshire Municipal Tax Rates This presentation is intended for informational purposes only, and is not a substitute for seeking professional advice or for reviewing the applicable laws and rules. This presentation represents some positions of the Department on the limited issues discussed herein, based on the law in effect at the time of the presentation and Department interpretation thereof, as well as the opinions and conclusions of its presenter. For the current status of any tax law, practitioners and taxpayers should consult the source documents (i.e., Revised Statutes Annotated, Rules, Case Law, Session Laws, etc.) for independent verification. Page 2

3 Presentation Goals Demonstrate the calculation which determines local tax rates calculated for each community. Understand basic formula of statewide tax rate calculation. Review the source of information for each calculation. Identify the elements that compose a local tax rate for a city or town, including: Local municipal tax rate County tax rate Local school tax rate State education tax rate Review how changes in total tax commitments and assessed value can affect the calculation of the rate. Page 3

4 Setting of Tax Rates by Commissioner RSA 21-J:3, XV Establish and approve tax rates as required by law. RSA 21-J:35 I The commissioner of revenue administration shall compute and establish the tax rate of each town, city, or unincorporated place. Page 4

5 Establish 1,150 Property Tax Rates 259 Local municipal tax rates 259 School tax rates 259 State education tax rates 259 County tax rates 114 Village districts tax rates Total of 1,150 individual tax rates Accuracy rate: 99.91% Review 6,500 tax rate documents Page 5

6 Basic Process The tax rate for each community is constructed from locally derived financial data. Each city or town s rate is composed of a minimum of four components: Local municipal tax rate County tax rate Local school tax rate Statewide education tax rate Page 6

7 Basic Process (Continued) Depending on the complexity of the city or town, there may be more components: Cooperative school districts Village districts Three basic elements for each component: Total gross appropriation Estimated revenues Total locally assessed values Page 7

8 Simple Formula! MS-2 MINUS MS-4 (Appropriations Estimated Revenues) Total Locally Assessed Values MS-1 Page 8

9 Page 9 Stephan W. Hamilton, Director, Municipal & Property Division

10 Page 10 Stephan W. Hamilton, Director, Municipal & Property Division

11 Calculating Municipal Tax Rate per $1,000/value Gross Appropriations less Revenues (not including fund balance) less Fund Balance Voted less Fund Balance to Reduce Taxes plus War Service Credits plus Overlay divided by Locally Assessed Property Valuation (per line 21 of MS-1) x 1,000 = Municipal Tax Rate per 1,000 Page 11

12 Municipal Tax Rate Page 12

13 County Rate County Net Appropriation x town s previous year equalized value as % of total county = Town s County Assessment divided by Locally Assessed Property Valuation (per line 21 of the MS-1) x 1,000 = County Tax Rate per 1,000 Page 13

14 County Apportionment Page 14

15 County Tax Rate Page 15

16 Local Education Tax Rate per $1,000/value Net School Appropriations less State Grants and Statewide Education Tax AND/ divided by Locally Assessed Property Valuation (per line 21 of MS-1) x 1,000 OR = Local Education Tax Rate per 1,000 Page 16

17 Locally Apportioned Education Tax Rate per $1,000/value Regional School Apportionment less State Grants and Statewide Education Tax divided by Locally Assessed Property Valuation (per line 21 of MS-1) x 1,000 = Local Education Tax Rate per 1,000 Page 17

18 Page 18 Stephan W. Hamilton, Director, Municipal & Property Division Local Education Tax Rate

19 Statewide Education Tax Rate Statewide Education Amount rate producing $363 million = $2.420 $2.420 x Town s previous year Equalized Value w/out Utilities (Prior Year) Divided by Locally Assessed Property Valuation Without utilities (Current Year) (Per line 23 of MS-1) x 1,000 = Statewide Education Tax Rate per 1,000 Page 19

20 Statewide Education Tax Rate Page 20

21 Statewide Education Tax Rate Page 21

22 Page 22 Stephan W. Hamilton, Director, Municipal & Property Division Statewide Education Tax Rate

23 Statewide Education Tax Rate Important facts to remember about Statewide Education Tax: The money is raised locally The money is retained locally to offset education costs It becomes revenue to local education effort Page 23

24 Changing Tax Rates There are many factors that contribute to the calculation of local tax rates. Many factors change from year to year and may have an impact on rates. One factor causing an impact is the locally assessed valuation of property. Page 24

25 3 Year Statewide Tax Rate 2015 Municipal $ 7.70 County $ 1.70 Local Education $ State Education $ 2.42 Total $ Page 25

26 3 Year Statewide Tax Rate Municipal $ 7.70 $ 5.02 County $ 1.70 $ 1.52 Local Education $ $ State Education $ 2.42 $ 2.48 Total $ $ Page 26

27 3 Year Statewide Tax Rate Municipal $ 7.70 $ 5.02 $ 4.17 County $ 1.70 $ 1.52 $ 1.62 Local Education $ $ $ State Education $ 2.42 $ 2.48 $ 2.28 Total $ $ $ Page 27

28 Page 28 Stephan W. Hamilton, Director, Municipal & Property Division 3 Year Statewide Tax Rate Municipal $ 7.70 $ 5.02 $ 4.17 County $ 1.70 $ 1.52 $ 1.62 Local Education $ $ $ State Education $ 2.42 $ 2.48 $ 2.28 Total $ $ $ Full Value Rate - $ $ 27.92

29 Page 29 Stephan W. Hamilton, Director, Municipal & Property Division

30 Changing Tax Rates Changes in cooperative school apportionment and net appropriation may drive tax rate changes. Some apportionment formulae rely on valuation (in part or in whole), while others are more sensitive to student population. Education expenses typically make up most of local property taxes. In Orford, over the last three years 75% of the local tax rate is for education. Page 30

31 Orford Share of Rivendell Apportionment 45.00% 40.00% 35.00% 30.00% 25.00% Page 31

32 Orford Total Education Tax Effort $3,200,000 $3,000,000 $2,800,000 $2,600,000 $2,400,000 $2,200,000 $2,000, Page 32

33 Changing Tax Rates Reductions in revenue also impact tax effort and resulting tax rates. Use of Unassigned Fund Balance (UFB) to reduce the tax rate is revenue. Recent changes in the amount of UFB used in the tax rate calculation has an impact on rate calculation. Page 33

34 Page 34 Stephan W. Hamilton, Director, Municipal & Property Division Orford Unassigned Fund Balance Used in Tax Rate Calculations $400,000 $300,000 $200,000 $100,000 $

35 Orford Total Municipal Tax Effort $1,200,000 $1,000,000 $800,000 $600,000 $400, Page 35

36 Orford Total Municipal Tax Effort Without Use of UFB $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $ Page 36

37 Changing Tax Rates Increasing expenditures usually lead to increased net appropriations. The net tax effort is divided by locally assessed value. If there is an increase in the amount of money to be raised, tax rates will rise if all other factors remain the same. In Orford, the amount of money to be raised increased by about 12%. Total local assessments dropped by 7.5%. Page 37

38 Page 38 Stephan W. Hamilton, Director, Municipal & Property Division 2014 Statewide Tax Effort, Valuation and Tax Rate 2014 As Calculated Tax Effort Valuation Tax Rate Municipal $ 734,250 $ 146,232,874 $ 5.02 County $ 222,640 $ 146,232,874 $ 1.52 Local Education $ 2,553,315 $ 146,232,874 $ State Education $ 355,459 $ 143,578,774 $ 2.48 Total $ 3,865,664 $ 26.48

39 2015 Statewide Tax Effort, Valuation and Tax Rate 2015 As Calculated Tax Effort Valuation Tax Rate Municipal $ 1,039,895 $ 135,087,611 $ 7.70 County $ 229,690 $ 135,087,611 $ 1.70 Local Education $ 2,774,901 $ 135,087,611 $ State Education $ 321,651 $ 132,897,911 $ 2.42 Total $ 4,366,137 $ Page 39

40 Page 40 Stephan W. Hamilton, Director, Municipal & Property Division Changes in 2015 Tax Effort 2015 Tax Effort 2014 Tax Effort Increase (Decrease) Municipal $ 1,039,895 $ 734,250 $ 305,645 County $ 229,690 $ 222,640 $ 7,050 Local Education $ 2,774,901 $ 2,553,315 $ 221,586 State Education $ 321,651 $ 355,459 $ (33,808) Total $ 4,366,137 $ 3,865,664 $ 500,473

41 Questions? Page 41