Big Increases In Taxable Value Yield Few Tax Rate Reductions

By Sam Ward

A comparison of the adopted city budgets that will go into effect July 1st, 2013 shows a variety of responses to generally high growth in taxable values.  It’s important to look at tax rates and taxable value together because it’s the combination that yields property tax revenue.  Even if there is no change in a city’s tax rate, growth in the underlying taxable value still means growth in revenue.  This year 13 of the 14 compared cities show an increase in taxable valuation compared to the last fiscal year, some of them sizeable.  With such large increases in taxable value, one might have expected more decreases in the tax rate.

Of the 13 cities with an increase in their taxable valuation, five responded with a decrease in tax rates; seven remained virtually unchanged; and two actually increased. Of the six cities that decreased their rates, Johnston, Urbandale and Bondurant had notable reductions.

Pleasant Hill, Waukee, and Grimes all had large increases in their taxable valuation (11.5, 8.5, and 8.5 percent respectively), yet made no changes in their tax rates.  In effect, their property tax revenue grew at 11.5, 8.5 and 8.5 percent respectively.  In contrast, Johnston also had a large increase in its taxable valuation (6.7 percent), but the city’s tax rate also had the highest overall decrease from the fiscal year 2013 to 2014 of 14 cents per thousand dollars of taxable value.  Windsor Heights increased its tax rate by 58 cents even while seeing an increase in its taxable valuation.

Windsor Heights continues to be significant when examining city tax rates without debt service. The removal of debt service allows a clearer picture of operating tax rates for central Iowa cities.  Windsor Heights jumps from fourth overall on tax rate to first when debt service is removed.  Windsor Heights also ranked first among cities last year, and shows no signs of improvement with the second highest increase in its tax rate without debt service of 23 cents per thousand dollars of taxable value.  Only Norwalk exceeds Windsor Heights with a 51-cent increase in its operating tax rate, but it was also the only city analyzed that had a decrease in its taxable valuation.

Looking at the overall picture shows there is a great disparity in tax rates among central Iowa cities, with Des Moines being nearly $17 per thousand and Clive, Urbandale and Altoona all remaining around $9.  While comparing Des Moines to those three may be apples to oranges, the story remains true even when considering communities like Norwalk or Bondurant, at $15.69 and $14.03 respectively.  The removal of debt service levies also shows this disparity, with Windsor Heights leading at $13.55 and the lowest ranked Urbandale at $7.42.

A further increase in taxable value should be expected next year given both a recovery in the market as well as an increasing portion of residential assessed value that can be taxed.  Rates will need to be carefully monitored as budgets are put together this coming year, with justification for even constant rates to be expected in cases with sizeable growth in taxable valuation.CityRates

 

One Response to Big Increases In Taxable Value Yield Few Tax Rate Reductions

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