Property tax payments must be paid by September 30 and March 30 of each year. If you’re like most people, you will not write a check for the payment on September 30th. Instead, it’s folded into your monthly mortgage payment along with your property casualty and liability insurance. You may have little idea what you are really paying for local services, or where the money is going.
But it’s worth taking a look at your tax statement. If you live in Polk County it can be found on the Polk County Treasurer’s website. As a homeowner, your property tax bill for the year (of which you’ll be paying only half each six months) is probably as large or larger than your state income tax. Your statement will show you how much of the property tax payment is going to your school district, city, county, county hospital (if you have one), community college and public transit.
Let’s consider an example of a roughly median value home in Polk County, assessed at $152,600.
If this home is located in Des Moines, here’s the breakdown of its $3,200 property tax bill, for this year (2015):
Typically in Iowa, the school district will consume the largest share of a given property tax bill, in this case 39 percent followed by the City, at 36 percent. The county share is next, at 15 percent, and if there’s a public hospital – which there is in Polk County (Broadlawns) – it will be next, in this case seven percent. Albeit a small share of the total, many people do not realize they are also paying for regional transit (two percent) and the local community college, Des Moines Area Community College (one percent).
In general, the state legislature determines the amount that can be spent per pupil by each school district across the state, and total amount is the same in each district. However, the mix of funding between locally generated property tax funds and state funds will vary depending on the wealth of the district. In districts with low property tax values per capita, the State will contribute more to the mix. In wealthy districts, the State contributes less. This achieves “equity” across districts in terms of spending per student, for a given property tax rate, no matter whether a given district is property rich or property poor. It also means that with the exception of capital expenditures, the local school board typically has less to do with property taxes than does the state legislature.
In the 2013-2014 school year, a total of nearly $10,000 was spent per student in Iowa. Although the local district may have as great an influence as one might think on the overall amount that is spent, they do have everything to do with how the money is spent.
City councils have greater control over the level of property taxes than do their school board counterparts. While limited overall on the base rate at $8.10 per $1,000 of taxable value, there is discretion on whether or not to use a variety of other optional local rates.
Many homeowners this year may wonder why their property taxes are higher than last year. Unless the city reduced its tax rate (which only two cities did), and with no change in assessed value, residential bills would still be higher because the proportion of residential assessed value that can be taxed went up by about three percent (from 52.8 percent to 54.4 percent). In the above example, the corresponding increase in property taxes was in fact about three percent, going from $3,100 to $3,200. The 2013 property tax reform passed at the state level had the effect of moderating this increase. Without the legislation, the portion of residential assessed value that could be taxed would have gone up by four percent.
Commercial property is also benefitting from the 2013 property tax reform. This year, the share of commercial assessed value that can be taxed is 95 percent, down from 100 percent last year (and for many years prior). It will go to 90 percent next year. The $3.4 million building in which our association is housed (400 E. Court Ave.) will be paying $155,160 in property taxes this year, which is down five percent from last year’s $163,350. All of this savings will be passed on to tenants through “triple net” lease terms, which is a common business arrangement. The building will also receive a small tax credit. However, the credit is the same for buildings large and small, so tenants in large buildings won’t see much difference by the time it is shared among all the tenants in the building.
It’s worth looking at your property tax bill. While everyone’s interpretation of “value” may differ, Step 1 is to at least know and understand what your bill is, and where your money is going. This is a good time to do so.
For more information about property taxes in central Iowa, go to http://cdn.taxpayersassociationofcentraliowa.org/wp-content/uploads/2015-Rate-Comparison-ChartsCitySchoolTaxes2014-15.pdf.