NTF worksheet: property9.doc.  4-06.
NEBRASKA TAXPAYERS FOR FREEDOM WORKSHEET:
PROPERTY TAX RELIEF IN LOCAL GOVERNMENT. 

BACKGROUND.  Property valuation statements reach property owners in late spring, and property tax statements offer a Grinch-like Christmas present in December.  Perhaps the lag time between the two statements is the cause of confusion and misdirected anger and frustration.  The state legislature is the legal authority that makes the property valuation laws, and the state tax commissioner and property tax administrator interpret them.  Local government subdivisions use these valuation statutes when setting property tax rates. Local government officials sometimes set their tax rates at the same level or lower than the previous year rate and boast to constituents that they did not raise or in fact lowered our property taxes.  However, the steady and steep rise in residential, commercial, industrial, and rural valuations actually results in higher annual property taxes.  Many taxpayers, upon receipt and viewing of their tax statements, consider local officials liars for having pronounced no tax hikes or lower taxes.  Actually, some of these public officials are liars, because they fully understand that their local governments will accrue millions more in property revenues annually, as the static or lower tax rate levied does not neutralize the dollar affect of higher valuations.  NTF offers the following property taxing formulas that will limit how much a local government could increase our property taxes each year for its general fund budget.  These calculations do not include other revenues accrued, such as sales taxes, state aid, or federal funding. 

FORMULA  #1.  This formula would limit a property taxing authority to the amount received from property taxes the previous fiscal year plus a percentage increase because of inflation, according to the Consumer Price Index or comparable index, and additional percentage increase because of new construction.  The three elements in this formula are 1) property taxes received for the previous fiscal year; 2) growth in new property valuation base; and 3) consumer price index increase up to a specific percentage.  

FIRST EXAMPLE: CITY OF OMAHA.

In FY 2005-06: Property taxes received: $93,234,870.
                        Growth in county new property valuation base: 2.78%
                        Consumer Price Index increase (3.4%) but not more than 3%: 3%
Property taxes the city may collect in FY 2006-2007: $93,234,870 + $2,591,929 + $2,797,046 = $98,623,845.
The City of Omaha could set its budget about 5.7% higher than the previous year.
In FY 2005-06, the City of Omaha tax levy was .43387c per $100 of valuation.  In FY 2006-07, the mayor and city council could raise the tax levy to a number of cents per $100 of valuation that would give them $98,623,845 in general fund property tax revenue.  

SECOND EXAMPLE: OMAHA PUBLIC $CHOOL DISTRICT.
In FY 2005-06: Property taxes received: $151,750,851.
                        Growth in county new property valuation base: 2.78%.
                    Consumer Price Index increase (3.4%) but not more than 3%: 3%.
                    Property taxes the school district may collect in FY 2006-2007: $151,750,851 + $4,218,673 + $4,552,525= $160,522,049.
The Omaha Public School District could set its budget about 5.7% higher than the previous year.
In FY 2005-2006, the OPS tax levy was $1.21849 per $100 of valuation.  In FY 2006-2007, the school board could raise the tax levy to a number of cents per $100 of valuation that would give it $160,522,049 in general fund property tax revenue. 

FORMULA #2.  This formula would limit a property taxing authority to the amount received from property taxes the previous year plus the previous year percentage increase in Nebraska per capita income.   

FIRST EXAMPLE: CITY OF OMAHA.  
In FY 2005-06: Property taxes received: $93,234,870. 
                        Per capita income percentage increase from 2004 to 2005: 3.9%  
                    Property taxes the city may collect in FY 2006-2007: $93,234,870 + $3,636,159 = $96,871,029. 

The City of Omaha could set its budget about 3.9% higher than the previous year.
In FY 2005-06, the City of Omaha tax levy was .43387c per $100 of valuation.  In FY 2006-07, the mayor and city council could raise the tax levy to a number of cents per $100 of valuation that would give them $96,871,029 in general fund property tax revenue.  

SECOND EXAMPLE: OMAHA PUBLIC $CHOOL DISTRICT.  
In FY 2005-06: Property taxes received: $151,750,851.
                        Per capita income percentage increase from 2004 to 2005: 3.9%  
                    Property taxes the school district may collect in FY 2006-2007: $151,750,851 + $5,918,283 =                         $157,669,134.  

The Omaha Public School District could set its budget about 3.9% higher than the previous year.

In FY 2005-2006, the OPS tax levy was $1.21849 per $100 of valuation.  In FY 2006-2007, the school board could raise the tax levy to a number of cents per $100 of valuation that would give it $157,669,134 in general fund property tax revenue. 

ROLLBACK FORMULA.  If the valuation increase for property within a taxing authority area rose “x”% one year, the property tax levy for the next fiscal year would drop by the same percentage. 

 For example, if the valuation increase for property within the City of Omaha rose 7% as calculated in May, 2006, the FY 2006-2007 property tax levy for the city would drop from .43387c per $100 valuation to .40350c per $100 valuation. (.43387 x .93 = .40350).  Then, add the 3.4% increase in the Consumer Price Index, $2,797,046, to the total property tax revenues calculated for the budget and recalculate the property tax levy for the total amount.  

For example, if the valuation increase for property within the Omaha Public School District rose 8 % in May 2006, the FY 2006-2007 property tax levy for the district would drop from $1.21849 per $100 valuation to $1.12101 per $100 valuation ($1.21849 x .92 = $1.12101).  Then, add the 3.4% increase in the Consumer Price Index, $5,159,528, to the total property tax revenues calculated for the budget and recalculate the property tax levy for the total amount.  

Research and analysis for this worksheet done by Nebraska Taxpayers for Freedom.  This material copyrighted by Nebraska Taxpayers for Freedom, with express prior permission for its use by Citizens for Local Control, Cherry County Taxpayers, Dawes County Taxpayers, and other groups in the Tax Freedom Network.  4-06   C