It is that time of year again when real property valuation notices are mailed to property owners in Weber County. The question is often asked, "How does my assessed value affect my property tax?" The answer is, not in the way most people think.
First a little background. Three elements determine what the property tax is for each property. These elements are budget, taxable value, and mill levy (tax rate). The main force behind the amount of property tax paid is the budget of each taxing entity in the property's tax district. Tax entities are guaranteed the prior year's revenue from property tax regardless of overall taxable value. Consequently, when there is change in assessed value within the boundary for the tax entity, there is neither a windfall nor a shortfall to their coffers.
This makes revenue collected from property tax a very stable source of income that serves as the foundation of many taxing entities' budgets. If a taxing entity, like a city or a school district requires a budget increase over last year, the entity must go through a truth in taxation hearing to allow public comment. The "Truth in Taxation" law imposed specific public notice and public hearing requirements that are triggered when a taxing entity proposes to increase its property tax revenues (not rates) above those collected in the previous year (tax revenues generated by "new growth" in an entity's tax base are exempt from the disclosure requirements).¬ The public hearings are required to allow elected officials to explain the reasons for the proposed increase and allow citizens to comment on any proposed increase.
By state law, Weber County, along with all the approximately 40 other taxing entities, is obligated to follow Truth in Taxation each year. In addition, each taxing entity is independent of all the others within the county. For example, Weber County does not control the budget for the Weber County School district, nor does Ogden City control the budget of the North Davis Sewer District.
The next element in the equation is taxable value. For the purpose of this article, taxable value is the sum of the total assessed value for each tax entity, subtracting any exemptions like the residential exemption or exempt properties, such as churches or other charitable organizations. The taxable value interacts with the budget to calculate the third element in the equation, tax rate. The equation to calculate the tax rate is budget/taxable value = tax rate. For instance, if an entity has a budget of $100,000 and a taxable value of $100,000,000, then the tax rate for that entity would be 0.1 percent ($100,000 / $100,000,000 = 0.1 percent). This rate can and will change from year to year. If the budget remains the same but the assessed value changes, the rate will change inversely in relation to the assessed value. Using the same hypothetical budget as above, the taxable value for this tax entity increased to $110,000,000 the rate then adjusts downward accordingly to .0909 percent ($100,000 / $110,000,000 = 0.0909 percent).
The real question is how do changes in assessed value affect each property owner, especially when the changes occur at different rates across the county? Most people believe as their value goes up and down so will their property tax. There is an interrelationship between assessed value and tax due. It is true that the greater the assessed value the greater the tax. However, here is where general perception and actual practice can take different paths. Overall changes in assessed value will create tax shifts. These tax shifts will affect different properties in different ways.
Hypothetically, if the overall value change across the county was a 10 percent increase in assessed value, a property with a 5 percent increase in assessed value would potentially see a decrease in tax. Conversely, if the overall value in the county decreased 10 percent and a parcel only decreased 5 percent, the tax on this property could increase.
This year in Weber County assessed values fell over $1.2 billion. Assessed values in different geographic regions and property types changed at a different percentage than elsewhere in the county. This created a tax shift away from these areas and property types to other areas in the county. As in the example above, there will inevitably be some property owners who receive a reduction in assessed value but see an increase in property tax. Remember that these are hypothetical examples. This may not apply to each and every individual property.
In conclusion, the concept of how the overall assessed value of each tax district is related to each individual parcel's tax liability is a complex concept.
If you have any questions feel free to call me at 801-399-8572 or visit our website at www.co.weber.ut.us/assessor.
Ulibarri is Weber County's chief deputy assessor.
Comments