City Government

Cities Likely To Raise Tax Levy Rate

Faced with a projected $3.6 billion decline in assessed property values in Ada County, local governments will be hard pressed to balance budgets without raising the tax rates they levy.

The median decline in property values will come to about 10%–bad news if you want to sell a house and possibly a little good news if you are calculating taxes. GUARDIAN sources tell us the areas along the foothills and in Boise’s north end will see the least amount of change. Property “further out” will see more dramatic reductions in value. Experience tells us some of those “McMansions” in the Eagle area could go down 30% or more.

Boise’s Team Dave plans a public meeting Wednesday, April 29 at 6 p.m. in the Council Chambers on the third floor of City Hall. City leaders are now building the budget for Fiscal Years 2010-11, which will run from October 1, 2009, through September 30, 2011.

In a nutshell, none of this will make a huge difference in anyone’s property tax bill. Cities have the authority to increase budgets by up to 3% annually. In the past “boom cycle” the increase was funded by growth and the RATE we paid was modest, putting Boise on various lists of “best places to live, do business, or pay taxes.” Those days are probably gone and the levy RATE will have to increase unless the politicos actually cut their spending.

Comments & Discussion

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  1. Please observe that when the McMansion’s values drops by 30%, but the other, typically older, homes values only drop by 10%, the shift in property taxes moves from the new homes to the older homes.

    To put it more simply, the owners of the older, existing homes will be the ones paying for growth.

    EDITOR NOTE–Bingo! Tax Wonk, you got it.

  2. Guardian: Cities? What about counties, school districts, fire districts and all the other entities that add their needs onto our property tax bills?
    Won’t they all be raising their rates also?
    So the impact on property owners might be rather more significant than you indicate.

    EDITOR NOTE–Impact shouldn’t be much different in DOLLARS. As a percentage of value it will be higher. For example, if a any levy authority (like those you mention) needs $100 and they have $1,000 worth of property to tax, then the RATE is 10%. If the property value goes down to only $500, the RATE increases to 20% to yield the same $100. No real dollar impact to the taxpayer, but they are paying a higher percentage.

  3. I live in the Northend, so my taxes have the highest probability for an increase(no change in assessment and higher levy). Now not only do I get to pay for my neighbor’s mortgage, I get to pay more for their roads, schools etc…

    I only hope there are more champions in government pinching pennies- thanks Sharon(county cellphones). Or maybe we could talk of CCDC into donating some of their “tax” collections back in to the general coffers.

  4. I have to disagree with Tax Wonk on the tax shift to the older homes. The “McMansion’s values drops by 30%” but the Mcmansion’s always more than paid their own way. A house on an acre of land has the same equivalent demands on city services as a house on .19 acres like mine.

    The little houses that sprang up under builders like Hubble Homes were a much greater burden on services than the Mcmansion’s since a home on one acre has one sewer hook up and 10 road trips per day while a subdivision of 5 to an acre has 5 sewer hook ups and 50 road trips per day, a factor of 20 to 1. Even if the Mcmansion’s taxable value went down by 30% they are still carrying their weight.

    The real problem occurs when a house is foreclosed on and disappears from the tax roles for up to a year to “quiet” the title, and only the lender benefits.

  5. Hey Clancy! I would be happy if the CCDC just paid the City the money they already owe them!!
    We are now going on two years without the audit of CCDC that was called for during the last mayorial campaign! You think maybe they have something to hide??

  6. I would just like to know where is Ada county going to allow a tent city? Will they also try to tax them?

  7. ericn hit the crux of the problem. Property tax likely does not accurately reflect the cost of providing services to a particular piece of property. I am not sure where the disparities lie, but it’s time we found out.

  8. Does anyone know when the new valuations will be promulgated…the city had my home at $208K last year. Since then 3 identical homes on my street sold for $169K.

    EDITOR NOTE–We forgot to put that in! Assessment notices come out typically at the end of May, usually over the Memorial Day weekend.

  9. erico49/ericn1300- Most studies on “smart growth” principles suggest moderate and well placed densities have the lowest cost to build and maintain while providing higher property tax revenues. Ranchettes/McMansions-components of sprawl generally have higher cost in the long run. Hubble Rubble(5-6 homes per acre) even have higher assesments/acre than Ranchette/McMansions.

    The following numbers for assessment/acre:
    Eagle Ranchettes- $474,369
    Northend Boise- $2,242,184
    Kuna- $950,730

    Here is a copy of the spreadsheet I created.

  10. To the erics – You are right when you say that some houses impact services at different rates than do others. However, when you say that, “A house on an acre of land has the same equivalent demands on city services as a house on .19 acres like mine”, you are generally wrong.

    The inhabitants of larger homes may only require the same amount of sewage plant as the people in smaller homes. However, the homes on bigger lots require longer street, sewer, and water lines per home than homes in denser areas. They also require more fire, EMS, and police investment in order to comply with minimum response times. Also, to the extent that many of the larger, upscale homes tend to be placed in the foothills, it is more expensive to place and maintain lift stations, steep roads, and other features associated with these areas. Thus, the cost to serve bigger homes is typically higher than it is for smaller, older, conventional homes.

    I will yield the point that taxes on these larger homes may, or may not, have been enough to cover those costs. That can only be determined on a case by case basis.

    However, the point of my original post remains intact: To the extent that the appraised values of the larger, often newer, homes is dropping by 30%, but the other, typically smaller and older, home values only drop by 10%, the shift in property taxes moves from the newer homes to the older homes.

    And, again, the owners of the older, existing homes will be forced to pick up a greater share of the cost of recent growth.

  11. If you are unhappy with your assessment – because from that flows your share of the property tax and higher assessments mean higher property taxes under any scenario – then you should appeal.

    There is no downside. The county cannot raise your assessment at your appeal hearing, the most they can do is say no.

    Use the assessor’s own figures to argue against them. Look at your neighbor’s or a neighboring sub land values. If they are similarly sized, but differently priced, then someone is getting screwed.

    Just remember, your argument needs to be predicated on what happened to your property from Jan 2008 to Dec 2008 and not after.

    Assessments don’t come out until after the May primary date. That’s a crime in my opinion, but it was ever thus and another topic.

  12. I stick by my thought… taxing property on its value rather than the cost of providing services to that property makes little sense.

  13. Wonk, when you say “the homes on bigger lots require longer street, sewer, and water lines per home than homes in denser areas” you forget that the developer pays for those costs up front and passes them along to the home builder in land cost. There is no costs to the taxpayers for those items.

  14. Actually taxing property each and every year is an archaic carryover from the days when 90% of the population derived income from their property as they were farms. What should be taxed is any increase in the homes value, and that only once. As it is we do not own property but, like in the UK, we have a leasehold while the state owns the property and we pay rent in the form of tax each and every year.

  15. In regards to the comment left by the editor concerning rates going up to raise the same $100 to match the corresponding devaluation and/or decreasing tax base. What about when the tax base or valuation returns to its original level–when have we seen our rates thus decrease or the balance sway in favor of a tax decrease? I would venture to say very seldom.

    With EVERY tax increase, expenditures also increase by which any return of surpluses is almost never returned to the taxpayer in equal proportion. Also, margins needed for a sufficient bond rating between expenditures and revenue have increased, which also contribute to the demand of higher taxes.
    A high reserve in capital is ALWAYS more costly than conservative operation ratios that meet actual cash outlays as opposed to ever growing debt projection “needs.”

    EDITOR NOTE–Rates actually have gone down a few times in the recent past because the BUDGET is capped at 3% per year and there was so much growth and increased value, they literally couldn’t spend it all. Cities do indeed tend to “preserve their ability to tax” by increasing the budget each year. If they didn’t increase for a year or two, they would be hamstrung with a three year old budget amount that had a 3% cap on increases.

  16. Ericn: You forget that the developer does perform the maintenance on the longer street, sewer, and water lines etc. Hence the higher costs.

  17. What a scam!…I just spoke to the gent who assessed my home. The little dears have a scheme going where only SOME home sales are counted in assessing ones home for tax purposes. They define ‘market value’ to exclude ‘distressed sales’, which includes homes sold in foreclosure or homes sold by a desperate seller not in foreclosure below what would be the normal market (defined by God knows who) so…the fact that 3 homes identical to mine sold for 20% less than my assessment on my street last November, making my actual resale value far lower than the assessment, is discounted as though the sales did not occur and my resale value is set at an imaginary value, for TAX purposes only, A HIGHER IMAGINARY VALUE, as it has no real relationship to the market.

    You have to give it to the government…they get to remove all the low end sales from their valuations…sort of guarantees a nice tax from the folk with imaginary and made up values…

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