The facts about the 2009 property tax rate change

The following is from the alderman information packet for the August special meeting described in candidate Robbie Tubb’s press release.

Click HERE to  see the full packet.

The bottom line is that when home values rise, the Hancock Amendment requires cities to lower the tax rate so that the tax amount remains the same. The Hancock Amendment also allows cities to increase the rate when home values fall, so that the tax amount remains the same.

We had an increase in the tax rate, but not an increase in actual taxes.

Date: August 05, 2009
To: Finance Committee
From: Jeremy Willmoth, Finance Director
Re: Projected Tax levy

In accordance with State Statute 67.110, the City must establish a property tax levy no later than September 1, 2009.

The way property taxes work, based on the Hancock Amendment is that no city can increase itsrevenue based upon increases in valuations above the Consumer Price Index (CPI) or 5% which ever is lower. Additionally, no city can loose revenue based upon drops in value up to its maximized authorized levy, which for the City of Raytown is $1.00. Because our levy has been rolled back as the property values have increased, then we are allowed to increase our levy as
the property values decrease so long as we do not increase the amount of revenue collected beyond the Hancock limitations.

Based upon the assessed valuation figures provided by Jackson County, the City of Raytown has lost 12.87% of its assessed value from 2008. This reduction is only based upon preliminary Assessed values. We will not know the true assessed value for the City until late September or early October. Based upon current State law, we must set our levy based upon the projected assessed value, keeping in mind the actual value may be less and will more than likely actually reduce the amount of revenue we can collect in 2009.

Given this reduction, the projected tax levy for the General Fund is $0.3668 and for the Park Fund is $0.1832 for a total of $0.5500. The 2008 levy rates were $0.3189 for the General Fund and $0.1593 for the Park Fund for a total of $0.4782. While this is an increase of $0.07180, please keep in mind that values have dropped.

For purposes of this analysis we are only focused on the City’s General Fund and not the Park Fund. Our 2008 calculation of the General Fund was as follows:
Our adjusted Assessed Valuation was $347,794,460 and our property tax revenue
allowed was $1,109,117 which made our levy $0.3189 for the General Fund.

Our 2009 projected calculation of the General Fund is as follows:

Our preliminary adjusted Assessed Valuation is $303,030,923 and our property tax
revenue allowed is $1,111,517 which made our levy $0.3668 for the General Fund.

The increase in revenue from 2008 to 2009 for the General Fund is $2,400 or 0.022%, which covers the inflationary factor of the CPI.

Here is an example to illustrate the impact of this change:

Assuming a home was valued at $120,000 in 2008, they would have paid $72.71 in General Fund City taxes. If that same home’s value had dropped 12.87% in 2009 it would pay $72.87 in General Fund City taxes. If that home’s value had stayed the same, the home owner would pay $83.63 in General Fund City taxes for 2009. This would be a $10.92 or 15.02% increase. The likelihood of a homeowner’s value not dropping based upon the information provided by the County is very small.

The City may elect to voluntarily roll its levy back but if the City does that, we would not be able to bring in the same amount of revenue as we did in 2008 and we could lose up to $142,751 based upon how severe we roll the levy back.

Please keep in mind that all of the figures presented are solely for the purposes of establishing a projected tax levy and all of them are subject to change once the actual certified assessed valuation is established by the Clerk of Jackson County sometime in late September or early October – but after the levy must be set which means we cannot wait.