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NTF
Issue Paper: Property19.
1-04. BACKGROUND.
State and local politicians continually lie to us
that they have alleviated our property tax burden. Truthfully, property taxes constitute less in proportion to
our total tax load but have increased significantly in dollar amounts.
The growth in the NE economy in the 1990s meant that income and sales tax
receipts grew faster than other tax sources, making these taxes a larger share
of the total tax system by 1999. Property
tax rates decreased but not sufficiently to neutralize higher residential,
commercial, and agricultural revaluations.
State aid to local government subdivisions rose in the 1990s, thanks to
our heftier state income and sales tax revenues, aid ladled out to encourage
local governments to lower property taxes.
However, local property taxes likewise have risen precipitously to fund
increased local government services. Shrinkage in state aid accelerated the rate
of local property tax hikes. THE
BURDEN. Property
tax levy limits set by the Legislature have not reduced the level or amount of
property taxation. The rise in
property valuations has neutralized levy limits for most. 2003 property valuations statewide grew by 6.15%.
Hardest hit were Loup County (16.67%) and Lancaster County (14.42%).
Valuation growth increased at twice the rate of inflation. The average valuation increase in Douglas County from
1997-2003 was 59.62%. Other county
residents suffering during this 6 yr. period included Sarpy County (91.46%),
Lancaster County (69%), Johnson County (63.39%), and Dixon County (62.33%).
Statewide, real property taxes have increased 9.13% from 2002 to 2003,
the largest hike since 10.9% in 1989. Property
taxes in 1 county increased by 18.08%. 2003 property taxes totaled $2.04
billion, compared with $1.64 billion in 2000.
$25.6 million of this total came from voter-approved bonds!
Seeing the highest cumulative hike in property taxes from 1997 to 2003
were Sarpy County (71.70%), Dixon County (54.74%), and Washington County
(44.42%). Highest average tax
rates hit Douglas County (2.21%), Sarpy County (2.16%), and Hall County (2.05%) 1
Increases in property taxes from 2002-2003 on residential, commercial,
and industrial properties outpaced the rate of inflation.
Many Douglas County homeowners saw an 8.58+% hike, a $160 boost on a
$100,000 home. Sarpy County
residents found a 12.9+% raise; Lancaster Co. householders a 14.29+% gouging.2
Almost 25% of homeowners in both these counties saw a 15% hike.
BLAME
YOURSELVES. Look
in the mirror to discover one major reason for local property tax hikes.
Much of this total increase came from school bonds approved by voters
since 1996 and municipal bonds approved by voters since 1998.
Surprisingly, many voters do not realize that property taxes pay
the principle and interest on bond issues.
TAX
HOGS. Taxes
on a $100,000 house rose 14.1% in the Omaha Public School District, 11.1% for La
Vistans living in the Papillion-La Vista School District, 10.9% for folks living
in the Ralston School District, and 10.4% for taxpayers living in the Westside
School District. The primary
recipients of local property taxes are school districts, which consume from
55-60+% of such revenues. Nebraska
public schools bore levy limits on general fund operations from the 1870s to the
1950s, when legislators repealed the limits.
The levy limits enacted by LB 1114 (1996) were Swiss Cheese lids.
School boards can vote for an additional 1% growth annually, and 75% of
school boards voted for that 1% in 1996 and 1997.
68% of public school boards voted to use the additional 1% growth in
budget authority allowed under the Swiss Cheese lid in the FY 2000-2001 school
year.3
In 2003, legislators lifted this lid on property tax rates for schools,
which increased taxes more than necessary to substitute for state aid cuts.
School districts lost $21 million in aid but increased property taxes
$104 million!4
In 1995, public schools enrolled 288,692 students; in 2003, the figure
was 283,908, yet school district budgets continue to rise.5
Despite the declining number of students and school districts, public
schools added teachers, from 19,869 in 1995 to 20,651 in 2000.
The aim was to lower the student-teacher ratio, from 14.5 in 1995 to 13.8
in 2000, one of the lowest in the nation. The greatest reduction was in
metropolitan areas. NE public
schools saw an increase of 22% in total receipts for general fund operations
1995-2000, a 4.4% annual growth in resources.
School property taxes used for operations rose 14.6% from 1995-2000, a
yearly increase of 2.9%. It cost
$5,450 to educate a student in 1995-1996 but $7,126 in 2001-2002, a hike of 31%. This increase averages 5 % per year in resources per pupil,
compared to inflation of 2.6% during this period. Use of property taxes for
school bonds and building funds inflated the use of school property taxes for
general fund operations. From
1995-2000, school bond property taxes rose from $54 million per year to almost
$88 million annually, a hike of 62%, or about 12% yearly.
A flurry in the use of school building fund property taxes occurred from
1995-98, in anticipation of LB 1114 limiting building fund property taxes,
though much of the building fund property tax lies outside levy limits.
The Legislature in 1996, 1997, and 1998 passed additional budget and levy
limit exceptions, such as for leases of school equipment, buses, and early
retirement bailouts for teachers. See
addenda charts contrasting public school district and county levies of property
taxes. CITIES.
In FY 2000-2001, only 9 of 510 incorporated NE
municipalities levying property taxes voted to exceed legislative levy limits.
However, over 50% of municipal city councils voted to use the additional
1% budget authority permitted in that fiscal year.
In 1996, before the legislative property tax lids, 70 cities used the
local option sales tax. By 2002,
109 cities used this tax. Of the
municipalities using this tax in 1996, 10 have raised the rate, most from 1% to
1.5%. Cities have not used this alternative tax to lower their
property taxes, probably because of the budget lid exception for capital
improvements. Thus, increased
revenues from all sources have paid for infrastructure projects, like
convention centers and arenas. The
local sales tax has not brought a corresponding decrease in city property
taxes. Moreover, much of the urban
property tax growth stems from extensive use of property taxes for bonded debt
projects. From FY 1997-98 to FY
2000-2001, property tax funding for bonded debt increased 50.2% in NE
municipalities. NATURAL
RESOURCE DISTRICTS. Natural
Resource Districts increased their property tax levies despite infusions of
state aid that replaced vehicle taxes. Districts
have fueled themselves from property taxes rising from $21.5 million in 1995 to
$27.7 million in 2000, a 28.6% hike, or 5.7% annually.
OVERALL.
From 1995-2000, total property taxes on agricultural,
commercial, industrial, and residential property rose from $1,389 million to
$1,553 million, or 14.1%. Examining property tax rates in the largest city in
every state, Omaha assesses the 13th highest rate of 50 cities.1
Property taxes still take a greater % of our personal income in relation
to sales, income, and gas taxes.2
The FY 2001-2002 increase in local spending with property taxes rose
7.5%, the largest yearly increase since 1992.
Notwithstanding a $67 million net increase in state aid to local
government subdivisions, property taxes increased by $120 million in 2001.3 WHO
GETS HIT WORST. Farm
and ranch property lies under an 80% of market value property valuation, and
farm income has dropped by 19% since 1995.
Ag real estate property taxes have risen .84% from 1995-2000, residential
taxes have risen 18.56%, and commercial taxes 20.92%.
As a sector, residential and commercial property pays a larger share of
property taxes. Examining several
past years, the residential statewide average change in property tax was +6% in
1996, +10% in 1997, +5.9% in 2000,
and +31.82% in cumulative change from 1997-2003.4
POSSIBLE
SOLUTIONS. Tax
watchdogs in Washington State in November, 2001 passed an initiative to limit
property taxes. 34 of 39 counties
passed it overwhelmingly. I-747
limits yearly property tax growth to 1% or less.
Only a majority vote of the people can allow local taxing authorities to
exceed this percentage. Taxers must
convince taxpayers that officials have exhausted all other options before
raising taxes. Average tax savings
on a Washington home is $126 yearly. Endorsing
this measure was the state Republican Party and Washington Association of
Realtors. Opposition included
unions, chambers of commerce, and current and past officeholders.
Or, set a limit on property tax charged homes within various price
ranges, with a cutoff point at a particular valuation.
For example, a specific dollar amount for homes valued between
$50,000-$75,000. Or, change the
valuation process (see NTF issue paper “Property Valuation Relief”). WHAT
TO DO. The
only means to stop the spiraling rise in property taxes is to individually
become active as a taxpayer watchdog in a grass-roots groundswell.
Use our NTF materials to learn how to become a watchdog over a local
taxing authority and then work with someone already involved as you gain
experience. Secondly, join
campaigns of candidates who you believe sincerely dedicated to property
tax relief, or run for a local office yourself! Research,
documentation, and analysis for this issue paper done by Doug Kagan and Ed
Signer, with express prior permission granted for its use by Taxwatchers,
Inc., Citizens for Local Control, Cherry County Taxpayers, Dawes County
Taxpayers, and other groups in the Tax Freedom Network.
1-04. C |