Wednesday, November 2, 2011

Hudson School Tax Rates and the Rollback

We have spent a little time the past few weeks discussing the financial health of the school district, how enrollment impacts the budget, and a little bit about school foundation aid.  I think that it is important also, to discuss property tax rates for the school district, what they are used for, and how much money is generated by them.  There has been quite a bit of press lately about the Governor's plan to reform property tax during the next legislative session.  He tried to get some of this done last session but fell short of his goal. 

To understand the context of the discussion, you need to understand a little bit about the rollback.  When the school tax rate was set by the Board of Director's last spring, the rate remained virtually unchanged.  However, when most of you received your tax bill in the mail, you probably noticed that your taxes had indeed increased.  Why was this?  Well, the simple answer is that you only pay tax on a portion of assessed value for your residential property.  Last year the percentage of property valuation you pay taxes on increased.  This year it is scheduled to increase again.  Currently you pay taxes on 48.53% of your residential property value.  Next year that is scheduled to increase to 50.75% of assessed property value.  This means that even if tax rates stay the same, tax bills will increase.

While residential properties are subject to the rollback, agricultural property taxes are based on productivity, while commercial and industrial property taxes are taxed on 100% of the valuation.  The Governor believes this is precisely the reason why businesses don't want to come to Iowa, commercial property taxes are too high.  He hopes that a reform to the state's property tax system can pass during the 2012 session that will focus on creating jobs and improving Iowa's business climate.

The other side of the argument is that as a rollback is placed on commerical property owners, it shifts the tax burden to residential property owners.  This brings me back to my original point:  during the 2010-2011 school year, the tax rate for the Hudson Community School District was $16.89800.  This year, the tax rate for the Hudson Community School District is $16.89198.  Although the rates are nearly identical, you still experienced a higher tax bill because of the change to the rollback formula. 

Below is a breakdown of the tax rate and how those revenues are dispersed:

 Tax Rate  Revenue Generated Purpose
General Fund  $    14.27238  $             2,224,360.00 Operational Expenses
Management Fund  $    0.949600  $                 147,996.00 Property insurance, claims against the district, unemployment benefits, retirement benefits
Voted PPEL  $    1.340000  $                 219,936.00 Repair of equipment, buildings and grounds
Regular PPEL  $      0.33000  $                   54,163.00 Repair of equipment, buildings and grounds

The revenue illustrated above is what is generated from property taxes.  The balance of the revenue that supports the budget is generated through a combination of state foundation aid, sales tax revenue, and from other sources that are classified as miscellaneous income.  If you have any questions about tax rates or how categorical funding works within the confines of operational expenses you are encouraged to contact my office at

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