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As the new year begins, local governments are busy putting their budgets together for the year that begins next July 1.  That budget year is referred to as fiscal year (FY) 2014.

From a revenue standpoint, local governments are in much better shape than they were last year.  There was some growth (1.2 percent overall in Polk County) in assessed value this year.  Compounding the growth in assessed value is the effect of the residential rollback, which is subjecting an increasing share of residential assessed value to the property tax.  The result is a 3.3 percent overall growth in taxable value in Polk County, and 5.0 percent in Dallas County.  This means that for a constant rate, property tax revenue will grow by 3.3 percent and 5.0 percent, respectively.  With inflation expected to be around 2 percent, there should be room for decreases in property tax rates in many local budgets.

From the standpoint of the local property taxpayer, the outlook is grim.  If rates stay constant, residential property taxpayers will see nearly a 4 percent increase in their tax bills just due to the change in the rollback percentage.  Any growth in assessed value will be on top of the four percent.  This means that residential taxpayers in Dallas County and the eastern suburbs could see 7 to 8 percent increases if rates are held constant.

While there are factors at play in the largest communities that will drive spending far above the rate of inflation (specifically police and fire pensions in Ankeny, Clive, Des Moines, Urbandale, and West Des Moines), other communities should be in a position to consider a reduction in property tax rates and should be challenged to do so before budgets are finalized.  Click here to see what the picture looks like for individual local governments.

For more information about the residential rollback and how it works, see “Demystifying the Rollback in the Local Analysis section of our website.

 

Picture of Assessed and Taxable Property Values Emerging, January 10, 2013

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