Understanding Your Property Tax Statement

If you haven't already, in the next couple of days you'll receive a notice of proposed property tax in the mail from Black Hawk County. The purpose of this notice is to provide transparency to property owners as it relates to your property tax bill. Prior to enactment of this law, the requirement was simply to publish the rate per thousand with the notice of proposed budget. The trouble with that practice was, without providing any context the rate [alone] is virtually meaningless. This notice is meant to provide that context. But it doesn't quite close the loop because it a bit confusing and a little misleading. 

First, it's important to understand the question we are trying to answer. I think its pretty simple. As a property tax payer, I want to know if my taxes are going up or down; and why. The problem with the way we used to do it is that when it came time to pay property taxes, our only reference point was the rate. If the rate went down or stayed the same, our working presumption was that our taxes would either be the same as the previous year or go down. Except they usually don't. When the tax bill came we were surprised (and not very happy) to learn that it was in fact higher than it was the previous year. So you might call the taxing authority and ask why (in this case, perhaps a Superintendent of Schools, County Board of Supervisors, or City Manager). The answer that you probably would get was less than satisfying: "Our rate is the same as it was one year ago". That answer is disingenuous at best. At worst, it's misleading because it fails to properly provide the context as to how property tax is calculated. 

The formula for calculating property tax is really quite simple: Taxes Levied = Value x Rate (T=VxR). Rate is the only variable that is controlled by the taxing authority. Value on the other hand is not, and quite frankly is a bit more complicated to understand. That is because value is determined by the county assessor and subject to the 'rollback'. So for starters, if your property assessment is $100,000 in year one, is it assessed at $100,000 in year two? If the answer is no, and with all other variables remaining equal your property taxes will rise. The other consideration is the rollback. Simply stated, a rollback does just that. It rolls back the percentage of your property assessment that you actually are responsible to pay taxes on, which is known as the taxable value. Last year, your assessed value was rolled back to 46.34%. So on that $100,000 house, your property tax bill was calculated on $46,343. This year, your assessed value is rolled back to 47.43% in taxable value. On that $100,000 property, your property tax bill is now calculated on $47,432. This means that even if the rate is identical from one year to the next, your property tax bill will increase. It will compound even more if the assessed value of your property increases. Kind of like a 'double whammy'. In this example, you can see how the rollback alone impacts your property tax bill- independent of rate and property value: 

What the legislature is trying to do with the property tax payer statement is to help you understand what is going on in this formula, and see what your property tax bill is going to look like compared to the previous year. Valiant effort for sure. But no doubt confusing and somewhat misleading. Let's take a look. To begin, if you haven't seen the notice yet you can download a copy of it from our school website. You can go to the 'About Us' page and find it as item #3 under the 'Basic Financial Data' submenu. Or, click right here. For the purpose of this conversation, I want to focus your attention on the bottom third of the notice, which is captured here for your convenience. 

First, let's take a look at the top line of the graphic depicted above. The arrow to the left represents the property tax rate for the current school year. If you follow that column down vertically, you will see the property taxes that were levied for the current fiscal year assuming your property value was $100,000. On the right (see the top right arrow) is the proposed property tax rate for the next fiscal year. This is where the property tax statement gets confusing at best and misleading at worst. In the far right column, those two arrows seem to suggest that the property owner can expect to see a 12.81% and 14.22% property tax increase based on their property valuation and whether or not it is residential or commercial property. However, this instrument makes the huge leap that your property valuations have increased by 10% from one fiscal year to another. See the section circled to the left. Unless you have made some pretty substantial renovations to your property, that kind of increase seems unlikely.

So, what of the 'effective property tax rate'? Well, it's a meaningless measure that is set by Code, which is why I crossed it out in this example. This number is arrived at by taking the 2025 property taxes and dividing them by the 2026 valuations. Think about it this way. If you are a basketball player and took the number of field goals you made last year and divided it by the number of shots you made this year. While you can certainly calculate it, it's not an incredibly useful metric.

Now that you have a better idea of how your taxes are calculated, the operative question must be, why the change? Good question! If you refer to the graphic above, you'll notice a stated reason. The trouble is that the graphic above is limited to a 300 character maximum, so we can't provide a lot of detail. What is 'cash reserve levy' and why is it important? Well, specifically this refers to a financial metric known as the 'solvency ratio' and measures the percentage of reserve fund balance against the total revenue for a fiscal year. In recent years, our fund balance, and solvency ratio has been dropping. This is because of two primary reasons: enrollment growth and special education expenditures not funded by the state. It is important to be specific though when we talk about enrollment growth. The enrollment growth that is being referenced here is residential enrollment and NOT open enrollment. Students who attend Hudson under open enrollment are funded through 'on time' funding whereas residential enrollment gains are funded a year behind, thus the reason for the drop in fund balance. The mechanism with which to recover this fund balance is through the cash reserve levy. The target range for our solvency ratio then, is 5%. 

The other levy rate that may tend to fluctuate from one year to another is the management fund levy. You should notice that the amount of levy has decreased from $546,065 to $347,560 for next year. This is done primarily to offset the increase needed in the cash reserve levy, and to deliberately lower the carry forward balance in the management fund. Don't worry, there is an overarching strategy here as well. The management fund, you may recall from previous posts, is used primarily to fund retiree benefits and property/casualty insurance for the district. In recent years, deductibles for catastrophic property loss have increased substantially: to 1%. This may not seem like a lot, but with close to $50 million in assets, 1% is $500,000. The strategy here is to maintain a balance of $500,000 in the management fund after meeting our other fiscal obligations and encumbrances so as to cover the deductible in the event of a catastrophic loss. 

While not incredibly intuitive, the purpose behind these taxpayer statements is noble. It is also meant to provide accountability from the taxing authority. For too many years, the focus was rate driven where instead it should have been revenue focused. Most people probably aren't all that interested in what the rate is. You are not writing a check for the rate. However, you are interested in how much you are writing the check for; and deserve to know the reason why it is different from what it was the previous year. 

Hiring for Our Future

This is shaping up to be one of the busiest hiring seasons for licensed staff we have had in more than a decade. As of the writing of this article, we've hired six licensed staff positions and have three openings remaining. Granted, of these nine, three represent new staff due to increasing enrollment. Even so, six of them (representing approximately 8% of our teaching staff) are positions that are being vacated for a variety of reasons. Whenever we have turnover it is imperative that we look inward and ask hard questions. Attracting teachers is one thing. Retaining them for the long run is entirely different. Naively, when we hire teachers I believe they are going to stay in Hudson for their entire career! Yet when I look back at our employment census over the last decade, I run across those who were here for a year or two before departing for other opportunities. In some of those earlier hires it is becoming somewhat difficult to put a name with a face!

We have worked very hard over the last handful of years to create climate and culture where our educators feel valued and respected. A place where they can earn a salary that recognizes their unique talents, educational level, and skill set. Hopefully they see in Hudson not only a great place to work, but a safe place to raise a family. But it is a bit discouraging when I see the number of vacancies that have piled up so far this spring. I suppose the bright spot is that, for the most part these vacancies have more to do with personal decisions than they do with an overall dissatisfaction with our district as an employer. It is my firm belief this hiring season is merely a confluence of coincidences.

While we may be able to take a bit of comfort in that regard, it doesn't erase the monumental task that has been placed on our hiring agents to fill these incredibly important vacancies. That is in part one of the reasons why we try to get a jump-start on hiring. The great candidates won't be around for very long! Furthermore, our hiring practices include making both tactical and strategic decisions. We are lucky insofar as our stronger financial position enables us to hedge a bit when making tactical hiring decisions. Keep in mind our financial position is directly linked to outperforming our enrollment projections. Because of this growth, hiring decisions are critically linked to maintaining educational quality and student-teacher ratios. It becomes much more difficult when enrollment is static or declining. With static or declining enrollment, tactical decisions are oftentimes not possible because the SSA growth factor isn't even enough to meet current employment contract obligations. The byproduct of which is delayed hiring decisions and larger class sizes. 

Increased student numbers necessitate additional staff, from teachers and support personnel to administrative roles. Case in point: we have 200 more students in our district today than we did in 2010, which was the last time we employed a middle level principal. At the same time, our incoming kindergarten class currently projects 68 students. One that could be staffed with 3 teachers, but tactically it makes sense to staff it with 4 teachers because we simply don't know how many 'move ins' we'll have over the next 6 months and financially we can afford it. You can be assured though, that if that particular grade level maintains an enrollment in the mid to upper 60s it will be converted to a 3 section grade level at some point in their continuum of education. 

Our hiring practice isn't simply about filling immediate vacancies; it requires strategic forecasting to anticipate future enrollment trends. This is one of the reasons why we have contracted with an outside firm to help us understand our enrollment patterns and develop sound projections. By analyzing historical patterns juxtaposed with statistically accurate projections, it provides for a proactive approach that ensures we can accommodate a growing student population without putting undo financial stress on the system or compromising the learning environment. For the last handful of years, we have budgeted for another English teacher at the high school without filling that position. The need has just 'not quite' been there yet. This year, because of some internal requests for transfer based on credentials we had available, we were able to move forward with adding this position. However, the reality was/is that we could probably get by staffing it as a half-time position. But to be honest, in this labor market there is very little interest in part-time employment. So we needed to think strategically. In order to be able to recruit (and hopefully retain) quality staff, we've added a course to the English department and created an additional section of another. While not yet a full time position, this strategy will ensure that our school not only meets its present day obligations but also builds a strong foundation for future success.