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AgendaAgenda
w w w . M e c k N C . g o v
• Primer: Overview of the relationship between property value & property taxes
• Overview of the revenue neutral calculation
• Property Tax Bill Scenarios
• Relationship of the value of a penny & financial policies
The relationship between property taxes & property value
How Property Taxes Are CalculatedHow Property Taxes Are Calculated
w w w . M e c k N C . g o v
Value = $100,000 Value = $120,000Value = $110,000
The total cost to provide all “County” services to the community is $1,000
Property Taxes are collected to pay for the “County” services
How Property Taxes Are CalculatedHow Property Taxes Are Calculated
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Step 1: Total Property value = $330,000 (value of all 3 homes)
Step 2: Cost to provide services = $1,000
Step 3: $1,000 ÷ 330,000 = .00303
30.30¢ = Property Tax Rate(per $100 of assessed value)
How Property Taxes Are CalculatedHow Property Taxes Are Calculated
w w w . M e c k N C . g o v
$100,000 (Value)X
30.30¢ (Tax Rate)$303 = Tax Bill
$120,000 (Value)X
30.30¢ (Tax Rate)$363 = Tax Bill
$110,000 (Value)X
30.30¢ (Tax Rate)$333 = Tax Bill
$1,000 approx.
Scenario #1: ReassessmentScenario #1: Reassessment
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$100,000 X
30.30¢ $303
$120,000 X
30.30¢$363
$110,000X
30.30¢ $333
$1,000 approx.
Scenario #1: ReassessmentScenario #1: Reassessment
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Step 1: Total Property value = $346,000 (value of all 3 homes)
Step 2: Cost to provide services = $1,000
Step 3: $1,000 ÷ 346,000 = 0.002890
28.90¢ = Property Tax Rate
Increase in Property Value & No Increase in Cost to Provide Services = Tax Rate Decrease
Scenario #1: ReassessmentScenario #1: Reassessment
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$105,000 (New Value)X
28.90¢ (Tax Rate)$303 = Tax Bill
$126,000 (New Value)X
28.90¢ (Tax Rate)$363 = Tax Bill
$115,500 (New Value)X
28.90¢ (Tax Rate)$333 = Tax Bill
All residents have no change in the tax bill
Recap #1Recap #1
w w w . M e c k N C . g o v
• Assessment places a market value on each property
• Property taxes are based on what a home is worth
• Total assessment value is used to calculate tax rates
• Taxes pay for the cost of County services
• If reassessments increase equally, then everyone pays the same taxes as before as long as the cost to provide services remain the same
Scenario #2: ReassessmentScenario #2: Reassessment
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$105,000 X
30.30¢ $303
$126,000 X
30.30¢$363
$115,500X
30.30¢ $333
Scenario #2: ReassessmentScenario #2: Reassessment
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Step 1: Total Property value = $370,000 (value of all 3 homes)
Step 2: Cost to provide services = $1,000
Step 3: $1,000 ÷ 370,000 = 0.002703
27.03¢ = Property Tax Rate
Scenario #2: ReassessmentScenario #2: Reassessment
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$110,250 (5% increase)X
27.03¢ (Tax Rate)$303 = Tax Bill$298 (less)
$138,600 (10% increase)X
27.03¢ (Tax Rate)$363 = Tax Bill$374 (more)
$121,275 (5% increase)X
27.03¢ (Tax Rate)$333 = Tax Bill$327 (less)
$1,000 approx.
Scenario #3: Reassessment Increase in Service Cost
Scenario #3: Reassessment Increase in Service Cost
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$110,250 X
27.03¢ (Tax Rate)$298
$138,600X
27.03¢ (Tax Rate)$374
$121,275X
27.03¢ (Tax Rate)$327
$1,000 approx.$1,200 approx.
Scenario #3:Reassessment Increase in Service Cost
Scenario #3:Reassessment Increase in Service Cost
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Step 1: Total Property value = $370,000 (value of all 3 homes)
Step 2: Cost to provide services = $1,200
Step 3: $1,200 ÷ $370,000 = 0.003243
32.43¢ = Property Tax Rate
Reassessment Scenario #3Increase in Service Cost
Reassessment Scenario #3Increase in Service Cost
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$110,250X
32.43¢ (Tax Rate)$298$353
$138,600 X
32.43¢ (Tax Rate) $374$444
$121,275 X
32.43¢ (Tax Rate) $327$388
$1,200 approx.
Recap #2Recap #2
w w w . M e c k N C . g o v
• Assessment places a market value on each property
• Property taxes are based on what a home is worth
• Total assessment value is used to calculate tax rates
• Taxes pay for the cost of County services
• If reassessments increase equally, then everyone pays the same taxes as before as long as the cost to provide services remain the same
• When homes are assessed at different values, each homeowner will pay a different amount proportionally based on how much their home increased in value
• When the County’s cost to provide services increases, than there is a property tax increases and everyone pays their share proportionally across the board.
Scenario #4New Construction
Scenario #4New Construction
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$110,250$138,600 $121,275 $150,000
Scenario #4 New Construction
Scenario #4 New Construction
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Step 1: Total Property value = $520,125 (value of all 4 homes)
Step 2: Cost to provide services = $1,200
Step 3: $1,200 ÷ 520,125 = 0.002307
23.07¢ = Property Tax Rate
Scenario #4New Construction
Scenario #4New Construction
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$110,250X
23.07¢ $298$254
$138,600 X
23.07¢$374$319
$121,275 X
23.07¢ $327$280
$1,200 approx.
$150,000 X
23.07¢ $346
Recap #3Recap #3
w w w . M e c k N C . g o v
• Assessment places a market value on each property
• Property taxes are based on what a home is worth
• Total assessment value is used to calculate tax rates
• Taxes pay for the cost of County services
• If reassessments increase equally, then everyone pays the same taxes as before as long as the cost to provide services remain the same
• When homes are assessed at different values, each homeowner will pay a different amount proportionally based on how much their home increased in value
• When the County’s cost to provide services increases, than there is a property tax increases and everyone pays their share proportionally across the board.
• Taxes are based on the cost of providing services that residents want and need
• New Construction helps support overall new tax growth
Revenue Neutral
NC Property TaxNC Property Tax
w w w . M e c k N C . g o v
• Levied based on pennies on every $100 of valuation on real and personal property• Tax rate must be a uniformed rate for the entire County (N.C. Const. Art. V, Sect. 2(5))• Exemptions and classifications must apply on a statewide basis (N.C. Const. Art. V, Sect. 2(2) &2(3))
o Homestead Exclusion for elderly or disabled low incomeo Present use value for agriculture or forestry use
$ Total Taxable Value$100 Tax Rate $Tax Levy
$Tax Levy %Estimated Collection Rate $ Estimated Tax Revenue
$ Total Taxable Value$100 . 01 %Estimated Collection Rate Value of 1₵
What is Revenue Neutral?What is Revenue Neutral?
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Revenue Neutral Is…• Calculation of tax rate that would generate the same revenue accounting for growth• Provides comparison of tax rate before and after revaluation• Published with the Budget per the General Statute• Calculated only after total values are know• Single value
Revenue Neutral Is Not…• Required to be adopted• A value that varies by different property types or locations• Impacted by rates of cities or towns• A calculation that factors
o Changes in collection rateo One‐time revenue from the prior year, such as carryforward or fund balanceo Annualized expenses
Revenue Neutral CalculationRevenue Neutral Calculation
w w w . M e c k N C . g o v
NC GS 159‐11(e)
…To calculate the revenue‐neutral tax rate, the budget officer shall first determine a rate that would produce revenues equal to those produced for the current fiscal year and then increase the rate by a growth factor equal to the average annual percentage increase in the tax base due to improvements since the last general reappraisal.…
Calculating Revenue NeutralExample
Calculating Revenue NeutralExample
w w w . M e c k N C . g o v
FY2020 Value $182,180,000,000
(example only)
Revenue Neutral Rate60.00
(example only)
FY2019 Value $129,723,000,000
FY2019 Rate82.32
FY2019 Tax Levy$1,067,879,736
Rate Required to Generate FY2019 Levy
58.62
Average Annual % Increase Due to Improvements
2.36%
Tax Bill Scenarios
QuartilesQuartiles
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13
22Lower 37
48
60Median 65
78
88Upper 90
100
101
25% of the records →
25% of the records →
25% of the records →
25% of the records →
Quartiles are the values that divide a list of numbers into quarters: Put the list of numbers in order; Then cut the list into four equal parts.
If all records are set in order• Median is the record in the middle• Lower quartile is halfway between middle and bottom• Upper quartile is halfway between middle and top
Interquartile• Between lower quartile and upper quartile• Middle 50% of all records
Following examples use• The quartiles of FY2019 value &• The quartiles in terms of % change using preliminary data
Scenario #1 – Median HomeScenario #1 – Median Home
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Median Home FY2019
Home Value $154,100
Value of Vehicles $23,944
County Tax Bill $1,466
FY2020 Low Mid High
Home Value $198,542 $216,372 $241,660
Change in Value 28.84% 40.41% 56.82%
Value of Vehicles $23,944 $23,944 $23,944
County Tax Bill $1,335 $1,442 $1,594
Change in Tax Bill ($131) or (8.9%) ($24) or (2.2%) $128 or 8.7%
Example with 60 cent tax rate
FY201982.32 cent tax rate
• Average vehicle value in FY19 was $11,827 (vehicles and personal property are not increased by assessment)• Potential Assessment Outcomes: Low, Mid and High possibilities represent interquartile of percentage change for residential property (Q1, median, Q3)
Potential assessment outcome
Scenario #2 – What about higher value property?(upper quartile)
Scenario #2 – What about higher value property?(upper quartile)
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3rd Quartile FY2019
Home Value $242,200
Value of Vehicles $23,944
County Tax Bill $2,191
FY2020 Low Mid High
Home Value $312,050 $340,073 $379,818
Change in Value 28.84% 40.41% 56.82%
Value of Vehicles $23,944 $23,944 $23,944
County Tax Bill $2,016 $2,184 $2,434
Change in Tax Bill ($175) or (8%) ($7) or (0.6%) $232 or 10.6%
• Average vehicle value in FY19 was $11,827 (vehicles and personal property are not increased by assessment)• Potential assessment outcomes ‐ Low, Mid and High possibilities represent interquartile of percentage change for residential property (Q1, median, Q3)
Example with 60 cent tax rate
FY201982.32 cent tax rate
Potential assessment outcome
Scenario #3 – What about a really high value property?(500K home)
Scenario #3 – What about a really high value property?(500K home)
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$500K
Home Value $500,000
Value of Vehicles $23,944
County Tax Bill $4,313
FY2020 Low Mid High
Home Value $644,200 $702,050 $784,100
Change in Value 28.84% 40.41% 56.82%
Value of Vehicles $23,944 $23,944 $23,944
County Tax Bill $4,009 $4,356 $4,848
Change in Tax Bill ($304) or (7.1%) $43 or (1%) $535 or 12.4%
• Average vehicle value in FY19 was $11,827 (vehicles and personal property are not increased by assessment)• Potential assessment outcomes ‐ Low, Mid and High possibilities represent interquartile of percentage change for residential property (Q1, median, Q3)
Example with 60 cent tax rate
FY201982.32 cent tax rate
Potential assessment outcome
Scenario #4 – What about lower value property?(lower quartile)
Scenario #4 – What about lower value property?(lower quartile)
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1st Quartile FY2019
Home Value $104,400
Value of Vehicles $23,944
County Tax Bill $1,057
FY2020 Low Mid High
Home Value $134,509 $146,588 $163,720
Change in Value 28.84% 40.41% 56.82%
Value of Vehicles $23,944 $23,944 $23,944
County Tax Bill $951 $1,023 $1,126
Change in Tax Bill ($106) or (10%) ($33) or (3.2%) $69 or 6.6%
• Average vehicle value in FY19 was $11,827 (vehicles and personal property are not increased by assessment)• Potential assessment outcomes ‐ Low, Mid and High possibilities represent interquartile of percentage change for residential property (Q1, median, Q3)
Example with60 cent tax rate
FY201982.32 cent tax rate
Potential assessment outcome
Commercial Scenario #5 – Median CommercialCommercial Scenario #5 – Median Commercial
w w w . M e c k N C . g o v
Median Commercial FY2019
Real Property Value $337,700
Personal Property Value $14,707
County Tax Bill $2,901
FY2020 Low Mid High
Real Property Value $434,215 $557,982 $766,647
Change in Value 28.58% 65.23% 127.02%
Personal Property Value $14,707 $14,707 $14,707
County Tax Bill $2,694 $3,436 $4,688
Change in Tax Bill ($207) or (7.2%) $535or 18.4% $1,787 or 61.6%
Example with 60 cent tax rate
FY201982.32 cent tax rate
• Median commercial personal property in FY19 was $14,707 (vehicles and personal property are not increased by assessment)• Low, Mid and High possibilities represent interquartile of percentage change for residential property (Q1, median, Q3)
Potential assessment outcome
Commercial property value has increased at a greater rate than residential
Values for commercial vary greater than residential
Commercial Scenario #6– What about higher value property? (upper quartile)
Commercial Scenario #6– What about higher value property? (upper quartile)
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3rd Quartile
Real Property Value $965,650
Personal Property Value $87,695
County Tax Bill $8,671
FY2020 Low Mid High
Real Property Value $1,241,633 $1,595,543 $2,192,219
Change in Value 28.58% 65.23% 127.02%
Personal Property Value $87,695 $87,695 $87,695
County Tax Bill $7,976 $10,099 $13,679
Change in Tax Bill ($695) or (8%) $1,428 or 16.5% $5,008 or 57.8%
Example with 60 cent tax rate
FY201982.32 cent tax rate
• Upper quartile commercial personal property in FY19 was $87,695• Low, Mid and High possibilities represent interquartile of percentage change for residential property (Q1, median, Q3)
Potential assessment outcome
Commercial Scenario #7 – What about lower value property?(lower quartile)
Commercial Scenario #7 – What about lower value property?(lower quartile)
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1st Quartile
Real Property Value $149,500
Personal Property Value $3,013
County Tax Bill $1,255
FY2020 Low Mid High
Real Property Value $192,227 $247,019 $339,395
Change in Value 28.58% 65.23% 127.02%
Personal Property Value $3,013 $3,013 $3,013
County Tax Bill $1,171 $1,500 $2,054
Change in Tax Bill ($84) or (6.7%) $245 or 19.5% $799 or 63.6%
Example with 60 cent tax rate
FY201982.32 cent tax rate
• Lower quartile commercial personal property in FY19 was $3,013 (vehicles and personal property are not increased by assessment)• Low, Mid and High possibilities represent interquartile of percentage change for residential property (Q1, median, Q3)
Potential assessment outcome
Key PointsKey Points
w w w . M e c k N C . g o v
• New construction helps support overall new tax growth
• Revenue neutral will be calculated for comparison to the Manager’s Recommended Budget
• Revenue neutral tax rate does not equate to having no change to the individual tax bill
• Values for commercial property have grown faster than values for residential propertyo Commercial property will make up a greater share of the property base for FY2020
Relationship of the value of a penny & financial policies
Value of a Penny and Policies for Funding CapitalValue of a Penny and Policies for Funding Capital
w w w . M e c k N C . g o v
FY2019 Adopted Budget 1₵ in taxes = $12.8MillionTax Rate = $82.32 Cents
Example1₵ in taxes = $18 MillionTax Rate = $60 Cents
Debt Service Pay‐go EnterpriseReserves Operating
Pennies: 19.5¢Yield: $250M
Pennies: 3¢Yield: $38.5M
Pennies: 1.75¢Yield: $22M
Pennies: 58.07¢Yield: $745.8M
Debt Service Pay‐go Enterprise Reserves Operating
Pennies: 19.5¢Yield: $352M
Change: $102M
Pennies: 3¢Yield: $54M
Change: $15.5M
Pennies: 1.75¢Yield: $32M
Change: $10M
Pennies: 35.75¢Yield: $645
Change: ($100.8M)
Debt Service Pay‐go EnterpriseReserves Operating
Pennies: 14.21¢Yield: $256M Change:$6M
Pennies: 2.19¢Yield: $39M
Change: $0.5M
Pennies: 1.28¢Yield: $23M Change: $1M
Pennies: 42.33¢Yield: $763M
Change: $17.2M
Debt Service Pay‐go Enterprise Reserves Operating
Pennies: 13.89¢Yield: $250M Change: $0
Pennies: 2.14¢Yield: $38.5M Change: $0
Pennies: 1.25¢Yield : $22M Change: $0
Pennies: 42.73¢Yield: $771M
Change: $25.2M
Without Adjusting Policy →
Adjusting Policy ProportionalTo Exis ng Alloca on →
Adjust to Hold Funding Flat For Capital →