It's budget season and taxing authorities all around the state are in the process of considering priorities and the needs of the corporation. Staffing decisions are being deliberated, replacement of equipment is being discussed, and in some places budget reductions are part of the conversation. At the same time, these varying governing bodies are considering the interests of property owners as they contemplate tax rates.
In the coming weeks we will be publishing our budget proposal for fiscal year 2020, which is the year that runs from July 1, 2019 to June 30, 2020. Most people will scan right to the bottom of the proposed budget and look to see the tax rate, then compare that to what they are paying this year and either be happy or not so much. Unfortunately, individual entity rate comparison will tell you very little in terms of overall tax impact. The fact of the matter is, it is a bit more complicated than comparing the rate you pay this year with the rate you paid last year. If viewed in isolation the rate will not tell tell you at all whether or not your property tax bill will be higher or lower than it was the previous year.
First things first. A typical resident of Hudson will pay an overall tax rate of about $34 for every $1,000 of valuation for the budget year we are currently executing. Of that, $14.33 is the portion of property taxes for the school district. The school district is but one of 7 taxing authorities in our geographic area. So then, reason number one you won't be able to tell if your property tax bill is higher or lower is that while one taxing authority may lower their tax rate, another may raise their tax rate. Granted you can look at the sum of the rate structure for the other 6 taxing authorities, and while that will tell you the total rate, it still doesn't answer the question about whether or not your tax bill will be higher or lower than it is this year. The chart to the right illustrates the breakdown of taxing authorities in Hudson and percentage of overall rate they contribute. The largest portion of the total property tax bill for this year is the school at 42.2% followed by the city at 34.2%. The county rounds out the top 3 at 19.7%.
But even if all taxing entities had a stable tax rate year after year, it is unlikely that you would see an overall property tax bill that stayed the same. Think about this for a second. Since 2010, the school property tax rate has fallen $2.56. Over that same time period, the average property tax bill has gone down $114.98. Admittedly though, while the rate has consistently been declining for the last decade some years your total tax bill may go up a bit in spite of a lower tax rate. Even in a scenario where your property valuation hasn't changed! Here is how that can happen.
It's because the percentage of property valuation that you are paying taxes on changes annually. The average home in Hudson is valued at $157,686. So in fiscal year 2019, that homeowners property tax would be based on 55.62% of the property value, or $87,706.37. With a tax rate of $14.39, that would be a tax bill of $1,262.32. In fiscal year 2020, that same property owner will pay taxes on 56.98% of the property value, or on $89,851. Even if the value of the home remains the same. Let's say then we lower the tax rate to $14.22. Under this scenario your tax bill would be $1,278.24, a roughly $15 increase from the last year. There is no doubt property tax rate is important! But as we can clearly see, it doesn't tell the whole picture. Of equal, or even greater importance is the residential rollback. In 2010, the residential rollback was 45.48%. Ten years later, homeowners are paying taxes on almost 57% of their property value. With the recent addition of a rollback feature for commercial and industrial property, this will have the natural effect of shifting the property tax burden from one class of property to another.
One final item to keep in mind as we enter this budgeting season, at least when it comes to property tax rates for the school district. The school board works very hard to keep your property tax bill as low as they can while still maintaining the level of programming for the school district to which we are accustomed. Yet as we indicated above, they can only control so much. After all, valuation and rollback are completely out of their control. Even so, when it comes to the actual property tax rate for the school, over 81% of the rate is determined by the school foundation formula. The school board only has control of about 8% of the property tax rate of the school district, with the other 11% being determined by you, the voters!
In the coming weeks we will be publishing our budget proposal for fiscal year 2020, which is the year that runs from July 1, 2019 to June 30, 2020. Most people will scan right to the bottom of the proposed budget and look to see the tax rate, then compare that to what they are paying this year and either be happy or not so much. Unfortunately, individual entity rate comparison will tell you very little in terms of overall tax impact. The fact of the matter is, it is a bit more complicated than comparing the rate you pay this year with the rate you paid last year. If viewed in isolation the rate will not tell tell you at all whether or not your property tax bill will be higher or lower than it was the previous year.
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| There are 7 taxing authorities in the Hudson Community School District |
But even if all taxing entities had a stable tax rate year after year, it is unlikely that you would see an overall property tax bill that stayed the same. Think about this for a second. Since 2010, the school property tax rate has fallen $2.56. Over that same time period, the average property tax bill has gone down $114.98. Admittedly though, while the rate has consistently been declining for the last decade some years your total tax bill may go up a bit in spite of a lower tax rate. Even in a scenario where your property valuation hasn't changed! Here is how that can happen.
It's because the percentage of property valuation that you are paying taxes on changes annually. The average home in Hudson is valued at $157,686. So in fiscal year 2019, that homeowners property tax would be based on 55.62% of the property value, or $87,706.37. With a tax rate of $14.39, that would be a tax bill of $1,262.32. In fiscal year 2020, that same property owner will pay taxes on 56.98% of the property value, or on $89,851. Even if the value of the home remains the same. Let's say then we lower the tax rate to $14.22. Under this scenario your tax bill would be $1,278.24, a roughly $15 increase from the last year. There is no doubt property tax rate is important! But as we can clearly see, it doesn't tell the whole picture. Of equal, or even greater importance is the residential rollback. In 2010, the residential rollback was 45.48%. Ten years later, homeowners are paying taxes on almost 57% of their property value. With the recent addition of a rollback feature for commercial and industrial property, this will have the natural effect of shifting the property tax burden from one class of property to another.
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