The Property Tax Rate

The Property Tax Rate


Larry: Hey look at this! Do you know what this is? Property tax rates Indiana district property tax rates the same rates that show up on your tax bills How about that Well you know, it doesn’t really show how they’re calculated That would be good to know I bet we could figure it out Tell you what? You watch the titles, and I’ll look into this ♪ (music) ♪ Larry: Almost got it Um I’m Larry DeBoer by the way a professor in Agricultural Economics Department and Extension Specialist with Purdue University This is another one of our videos about Indiana Local Government This one about property tax rates Okay here’s the deal Each local government sets its property tax rates each year The rate is multiplied by the taxable assessed value of property to determine each property owner’s tax bill The sum of all of those tax bills is the levy that provides much of the revenue that local governments use to deliver services So how are rates calculated? One way to figure that out is to look at the budget quarter The State’s Department of Local Government Finance issues a budget order for each local government each year certifying the budget, assessed value, the tax levy, and the tax rate for each government and each fund We can look at a budget order to see how a local government sets its property tax rates Uh it’s a good idea, let’s just do that ♪ (music) ♪ Let’s take a look at how a tax rate is calculated Turns out the Elkhart county government has a clipboard tax rate Let’s use Elkhart County as an example Here’s the 2014 budget order for Elkhart county this is the order that authorized the county government’s budget It shows each of the county’s funds funds separate the spending of the government into categories dedicated to things like roads and bridges health, parks and recreation, repayment of debt and so forth For most governments The general fund is the biggest It’s dedicated to the operating costs of the government a lot of it goes to wages and salaries of employees so let’s look at Elkhart’s 2014 general funds start with the budget that’s the total amount that the departments and agencies of the county figured they need to deliver services in 2014 Elkhart is a pretty big county so the budget is a pretty big number more than 33 million dollars The levy is the amount to be raised from property taxes But look, it’s only about 2 thirds of the total budget 23.8 million dollars to figure the levy, the county subtracted other revenues from the budget amount Like local income taxes motor vechile excise taxes charges and fees state distributions it’s actually called miscellaneous revenue Take the budget, subtract miscellaneous revenue and what’s leftover has to be raised from the property tax Now here’s assessed value In Elkhart for 2014 taxes It was more than 7 billion dollars That’s taxable assessed value after all deductions are subtracted The rate is calculated by dividing the levy by assessed value The result is expressed in dollars/100 dollars assessed value there it is That’s about 31 cents/100 dollars assessed value You can think of it as a percentage about 3/10 of 1 percent If all the property owners pay 3/10 of 1 percent of their taxable assessed value to the county there will be enough for the general fund levy But the general fund is just 1 of many funds that Elkhart uses Let’s look at the list Here’s the first page of Elkhart’s 2014 Budget Order Here’s the general fund at the top and the tax rate we just calculated there’s also an election and registration fund with a rate just under 1 penny/100 dollars assessed value There’s a reassessment fund to pay the costs of property reassessment come 2015 and a highway fund to pay for road construction and maintenance but look, the property tax rate is 0 for those funds some funds are not supported by property taxes the county highway fund is paid for almost entirely with a distribution of motor fuel taxes from the state Elkhart uses property taxes for bridges though so the county has a cumulative bridge fund and a major bridge fund On the second page of the budget order It’s got a health fund and 4 other funds too add them up and the county property tax rate is just over 45 cents/100 dollars assessed value this is a rate near the middle of all county property tax rates in Indiana a typical county rate So to sum up local governments set the budgets for each of their funds to deliver the local services supported by that fund they subtract miscellaneous revenue and what’s left will be raised by the property tax the levy is divided by the assessed value to get the rate and the sum of the rates for all the government funds makes up the goverment’s total rate But wait (loud noise) The state’s department of local finance must have its say The DLGF is the state agency that oversees the property tax 1 of its functions is to enforce the maximum levy limits that have been in place since the early 1970’s If the fund’s levy is higher than the maximum set by the state The DLGF will order the local goverment to reduce its budget and its rate to bring the levy down to the maximum Once that’s done The DLGF will certify the budget’s levies and raise and issue the budget order the rates on the taxpayer’s bill include the county’s rate and the rates of the school corporations, cities or towns, township and other local units We add up all those different government unit rates to get the rate that the tax payers actually pay to undertstand those rates though it helps to know the difference between tax rates and tax districts ♪ (music) ♪ Let’s start with a county, a nice simple square county now let’s divide the county into 4 townships most counties have 4, the average is about 11 but we’ll keep it simple Now we’ll add a town, just 1 although the average county has about 6 it’s mostly in township 1 but there’s part in township 4 finally, let’s add a few township corporations 1 east and 1 west The average county has about 3, 4 if you count charter schools Now, look at all the boundaries we’ve drawn and think of the county as a big jigsaw puzzle how many pieces does the puzzle have? well here’s 1 In the county, township 1 School corporation, west but outside the town Here’s another in township 1, school corporation, west but inside the town There’s 1 in school corporation east here’s 4 5 6 7 8 then there’s 9 A part of the town in township 4 and school corporation west and 10 that little piece of the town in township 4 and school corporation east there are 7 units A county, 4 townships, a town, and 2 school corporations but they overlap into 10 tax districts In a real county, there would be more tax districts because there will be more townships, towns, and school corporations but there will also be library districts, solid waste management districts, fire protection districts, and more there are about 2000 tax districts in all of Indiana so that’s about 22 in the average county Marion county has the most with 61 and Ohio county has the fewest with only 5 let’s take a look at 1 tax district number 3 say and let’s look at it vertically here’s the county township 1 the town and school corporation east which overlap to form tax district 3 each unit has a tax rate they set their rates based on their levies and the taxable assessed values within their boundaries Suppose the county’s rate is 50 cents/100 dollars assessed value a little higher than the typical rate the township rate is 10 cents the town rate is a dollar and the school corporation rate is also 1 dollar If you own property in tax district 3 You’d owe property taxes to all 4 units at these tax rates the county treasurer will send a bill for the total at the district tax rate of $2.60 That’s the sum of the tax rates so the units in which your property is located Property tax rates are measured in dollars/100 dollars assessed value which means you pay a percent of your taxable assessed value in taxes each year but are your tax rates high, are they low, are they somewhere in the middle? let’s take a look at some charts and numbers to see how high, how low, property tax rates are in Indiana ♪ (music) ♪ Here’s a chart for the 2000 or so districts in Indiana It shows percentiles so you can see what’s typical what’s high and what’s low the median district tax rate is just under 2 dollars that means half the districts have higher rates and half have lower than that Now here are the 25 and 75 percentiles 25 percentile rate is about a $1.50 and the 75 percentile rate is near $2.50 that’s a good rule of thumb Half of all tax districts have rates between a $1.50 and $2.50 A quarter of the districts have rates below $1.50 and a quarter have rates above $2.50 That’s a bit misleading though because almost all the highest rates are in districts that include cities or towns where there’s that extra city/town tax rate to pay So let’s divide the districts into city and town and rural districts A little less than half of all the districts have cities and towns a little more than half are rural without cities or towns But about 2 thirds of assessed value is in city or town districts That’s a lot of tax payers take a look sure enough the median rate for districts with cities and towns is about $2.50 well the median rate in rural districts is about $1.50 More than a quarter of city/town rates are above 3 dollars well hardly any rural rates are that high almost a quarter of rural rates are less than a $1.25 but hardly any city or town rates are that low You could use this chart to compare the tax rates in your tax district to the rest of Indiana Once you’ve made the comparison though then the work begins or the fun why are your rates high or low? Remember that rates are the tax levy divided by assessed value are your rates high because the levy is big? Did 1 of your local governments borrow to add infrastructure? which added the new debt service levy did a school corporation pass a tax referendum or is the general fund levy high? which would indicate high operating costs If your rate is low, maybe the local governments are providing fewer services Or maybe services are being paid for with local income taxes instead If your rates are high it might be because assessed value is low Did some businesses close? Did home values drop? Or is it simply the places with lower valued property let’s charge higher rates to provide even basic services If your rates are low, maybe your jurisdiction has a lot of high value property to support its levy The rates by themselves won’t answer these questions If you understand rates, and levies, and assessed value you can start to ask… That’s our video on Indiana property tax rates Thanks for watching, I’m Larry DeBoer (ding) ♪ (music) ♪

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