As we prepare for the bond issue vote on September 13, I wanted to spend just a few minutes discussing property tax rate calculations and how our capital improvement property tax levies compare with our conference peers in the North Iowa Cedar League.
First, it’s important to understand how we arrived at $11.65 million as the amount of the proposed bond. While that’s certainly not a small number, it did require us to narrow our focus to the projects that absolutely needed to be addressed within the constraints of our debt limit capacity.
As a reference point, when our original task force convened in 2018, we considered multiple facility projects that would address every conceivable “need” and “want,” now and in the future. The “all-in” cost for these infrastructure improvements was estimated to be more than $40 million. This amount is far too high and well beyond our capacity due to what’s known as our constitutional debt limit. The Iowa state constitution authorizes local governmental entities to incur indebtedness that is no more than 5% of all the assessed property valuation in that taxing authority. This means our debt limit capacity is roughly $17,171,889.
If you are wondering why we did not propose a referendum of $17,171,889, the answer is quite simple: the tax impact would have been too high on our community members. Proposing a bond in the full amount allowed would have led to a tax increase of $4.05 per $1,000 of assessed property value, rather than the currently proposed $2.70.
When comparing our proposed levy with other districts that have recently held a bond referendum, one must understand that assessed valuations differ. A district that has more valuable property will not only have a higher debt capacity, but will also be able to leverage more funding. Commercial property is very valuable, and the rollback for it is much smaller than the residential rollback. Because Hudson is not home to a lot of commercial or industrial property, our debt limit is smaller and our tax dollars do not go quite as far.
Residents do not pay property taxes on the total value of a property, but rather a percentage of the valuation—known as the rollback. In practical terms, the rollback is the statewide “discount” on your assessed property, or the percentage of valuation for which you pay property taxes. The rollback is currently 54.13%. So, if your home is valued at $100,000, your assessed value (or the amount you pay taxes on) is $54,130.
If you have received the Homestead tax credit of $4,850, you also subtract that—giving you an assessable taxed valuation of $49,280. The property tax implication for the referendum ($2.70) is then applied to every $1,000 of valuation: $49,850/$1,000 = $49.28. $49.28 X $2.70 = $133.06 per year.
This flyer does an excellent job of explaining the formula and providing you with the resources needed to calculate your personal property tax rate. If you would like help, I would be more than happy to assist! Feel free to reach out here.
We have discussed the constitutional debt limit and how that number is wholly dependent on the sum total of all the property valuations within that school district. Likewise, property valuations in an entity like Cedar Falls or Waterloo will be very different from those in Hudson, for the simple fact that their commercial footprint dwarfs that of Hudson. Indeed, every school district in Iowa is unique in this regard. The farm ground, residential property, and commercial blend are all different. So, too, is the capital outlay that each district commits to infrastructure. For this, I believe a useful illustration is a comparison of tax rates by conference district:
The total tax levy for the fiscal year 2023 budget in Hudson is $13.32. Of that, $1.67 is dedicated to capital levies. These levies include the voter-approved PPEL (which is $1.34 and is up for reauthorization on the September ballot) and $0.33, which is approved annually by the Board of School Directors.
What the table here indicates is the capital improvement levies in place at all the districts in our conference. The fact that some districts are moving forward with building projects and renovations is a direct result of the levies they have in place. The lighter-shaded gray represents general obligation bonds or debt service, which is a voter-approved referendum. This is what Hudson community members will consider on September 13.
The amount of revenue generated by a district is in direct relation to the value of the assessed property in that district. The math is really quite simple: the more value the property has, the more proceeds generated for the improvement projects.
For more information on the upcoming bond, voted PPEL, and Revenue Purpose Statement votes, please visit https://www.hudsonschoolbond.org.
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