TUF - Property Taxes 2009

Why did my taxes go down?
8/18/09

According to our last tax assessor some 80% of home owners realized a decrease in their taxes this year. Many think it's because their assessment went down. That is only partially true.

To explain we need to review how property taxes are determined. The tax is made up of County, Municipal, School, Library, Open Space, and Fire District taxes. The last three total less than 5% of the total so we will not discuss them. The bulk of our taxes are from school taxes making up about 62% with the remaining portion splits almost equally between county and Municipal taxes (roughly %15 each).

The process starts with each jurisdiction determining its budget. This is the main driving factor that determines the total tax that is then paid by the entire public. Then comes the assessments. The purpose of assessments is to determine how much each property owner will pay. It does not determine how much money the government gets. Government (County, Municipal and Schools) get their money no matter what. That is 100% independent of the assessment.

The tax rate is determined by taking the total budget and subtracting out other forms of income such as grants. That amount is then divided by the total of everybody's assessments. That is the tax rate. The tax rate is then combined with your assessment to determine how much you pay.

One of the most common misconceptions is that if the town wants more money they raise the assessments. From the above formula you can see that if the town wants more money they will get it because the more they spend the higher the tax rate. It happens automatically. There is no need to increase assessments.

Ok back to why your taxes went down (if they did). About 16,000 homes had their property taxes decrease. The reason starts about 3 years ago when Council was not happy with the Tax assessor Mr. Hobbs. This resulted in him resigning. The new assessor, Mr. Belenky, then began a reassessment of the township. It was his opinion that businesses had been under-assessed.

To some degree we know he was right because Mr. Hobbs had stated that he taxes business a little lower because they are more likely to appeal their taxes. Mr. Belenky's assessment however found significantly different numbers. In many cases assessments doubled or tripled. In one case it increased by 700%.

As you would expect business owners believe that his assessments were wrong and indeed many assessments have been readjusted. Mr. Belenky argued that business had been under-assessed for years. Business owners say that even if that was true his current assessments are significantly out of line. The purpose of this article is not to take a side but to explain what happened.

Tuf has always argued that spending drives taxes and not assessments. This year however we saw a case where assessments of a whole class of properties changed their assessments. The huge increase in assessments of business and the mild decrease in homes lead to huge tax increases for business and a modest decrease for most homes.

Some homes however did not see a decrease but instead an increase. Most of those were in our active senior communities where assessments increased.

The timing of this, while good for home owners, was unfortunate for business. Many saw their taxes double in a year that incomes significantly decreased.

Phillip Kramer
Taxpayers United in Franklin