Larry: Hey look at this!
Do you know what this is?
Property tax rates
Indiana district property tax rates
the same rates that show up on your tax bills
How about that
Well you know, it doesn't really show how they're
calculated
That would be good to know
I bet we could figure it out
Tell you what?
You watch the titles, and I'll look into this
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Larry: Almost got it
Um I'm Larry DeBoer by the way
a professor in Agricultural Economics Department
and Extension Specialist with Purdue University
This is another one of our videos
about Indiana Local Government
This one about property tax rates
Okay here's the deal
Each local government sets its property tax rates
each year
The rate is multiplied by the taxable assessed value
of property to determine each property owner's tax bill
The sum of all of those tax bills is the levy
that provides much of the revenue that
local governments use to deliver services
So how are rates calculated?
One way to figure that out is
to look at the budget quarter
The State's Department of Local Government Finance
issues a budget order for
each local government each year certifying the budget,
assessed value, the tax levy, and the tax rate
for each government and each fund
We can look at a budget order to
see how a local government sets its property tax rates
Uh it's a good idea, let's just do that
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Let's take a look at how a tax rate is calculated
Turns out the Elkhart county government
has a clipboard tax rate
Let's use Elkhart County as an example
Here's the 2014 budget order for Elkhart county
this is the order that authorized
the county government's budget
It shows each of the county's funds
funds separate the spending of the government
into categories
dedicated to things like roads and bridges
health, parks and recreation,
repayment of debt and so forth
For most governments
The general fund is the biggest
It's dedicated to the operating costs of the government
a lot of it goes to wages and salaries of employees
so let's look at Elkhart's 2014 general funds
start with the budget
that's the total amount
that the departments and agencies
of the county figured they need to deliver services in 2014
Elkhart is a pretty big county
so the budget is a pretty big number
more than 33 million dollars
The levy is the amount to be raised from property taxes
But look, it's only about 2 thirds of the total budget
23.8 million dollars
to figure the levy, the county subtracted other revenues
from the budget amount
Like local income taxes
motor vechile excise taxes
charges and fees
state distributions
it's actually called miscellaneous revenue
Take the budget, subtract miscellaneous revenue
and what's leftover has to be raised
from the property tax
Now here's assessed value
In Elkhart for 2014 taxes
It was more than 7 billion dollars
That's taxable assessed value after all deductions
are subtracted
The rate is calculated by dividing the levy
by assessed value
The result is expressed in dollars/100 dollars
assessed value
there it is
That's about 31 cents/100 dollars assessed value
You can think of it as a percentage
about 3/10 of 1 percent
If all the property owners pay 3/10 of 1 percent
of their taxable assessed value to the county
there will be enough for the general fund levy
But the general fund is just 1 of many funds
that Elkhart uses
Let's look at the list
Here's the first page of Elkhart's 2014 Budget Order
Here's the general fund at the top
and the tax rate we just calculated
there's also an election and registration fund
with a rate
just under 1 penny/100 dollars assessed value
There's a reassessment fund
to pay the costs of property reassessment come 2015
and a highway fund
to pay for road construction and maintenance
but look, the property tax rate is 0 for those funds
some funds are not supported by property taxes
the county highway fund is paid for almost entirely
with a distribution of motor fuel taxes from the state
Elkhart uses property taxes for bridges though
so the county has a cumulative bridge fund
and a major bridge fund
On the second page of the budget order
It's got a health fund
and 4 other funds too
add them up
and the county property tax rate is just over
45 cents/100 dollars assessed value
this is a rate near the middle
of all county property tax rates in Indiana
a typical county rate
So to sum up
local governments set the budgets for each of their
funds to deliver the local services supported by that fund
they subtract miscellaneous revenue
and what's left will be raised by the property tax
the levy is divided by the assessed value to get the rate
and the sum of the rates for all the government funds
makes up the goverment's total rate
But wait
(loud noise)
The state's department of local finance must have its say
The DLGF is the state agency that oversees the property tax
1 of its functions is to
enforce the maximum levy limits
that have been in place since the early 1970's
If the fund's levy is higher than the maximum set by the state
The DLGF will order the local goverment to
reduce its budget and its rate
to bring the levy down to the maximum
Once that's done
The DLGF will certify the budget's
levies and raise and issue the budget order
the rates on the taxpayer's bill include the county's rate
and the rates of the school corporations,
cities or towns,
township and other local units
We add up all those different government unit rates
to get the rate that the tax payers actually pay
to undertstand those rates though
it helps to know the difference
between tax rates and tax districts
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Let's start with a county, a nice simple square county
now let's divide the county into 4 townships
most counties have 4, the average is about 11
but we'll keep it simple
Now we'll add a town, just 1
although the average county has about 6
it's mostly in township 1
but there's part in township 4
finally, let's add a few township corporations
1 east and 1 west
The average county has about 3,
4 if you count charter schools
Now, look at all the boundaries we've drawn
and think of the county as a big jigsaw puzzle
how many pieces does the puzzle have?
well here's 1
In the county, township 1
School corporation, west
but outside the town
Here's another in township 1, school corporation, west
but inside the town
There's 1 in school corporation east
here's 4
5
6
7
8
then there's 9
A part of the town in
township 4 and school corporation west
and 10
that little piece of the town
in township 4 and school corporation east
there are 7 units
A county,
4 townships, a town, and 2 school corporations
but they overlap into 10 tax districts
In a real county, there would be more tax districts
because there will be more townships, towns,
and school corporations
but there will also be library districts,
solid waste management districts,
fire protection districts,
and more
there are about 2000
tax districts in all of Indiana
so that's about 22 in the average county
Marion county has the most with 61
and Ohio county has the fewest with only 5
let's take a look at 1 tax district
number 3 say
and let's look at it vertically
here's the county
township 1
the town
and school corporation east
which overlap to form tax district 3
each unit has a tax rate
they set their rates based on their levies
and the taxable assessed values within their boundaries
Suppose the county's rate is
50 cents/100 dollars assessed value
a little higher than the typical rate
the township rate is 10 cents
the town rate is a dollar
and the school corporation rate is also 1 dollar
If you own property in tax district 3
You'd owe property taxes to all 4 units
at these tax rates
the county treasurer will send a bill for the total
at the district tax rate of $2.60
That's the sum of the tax rates
so the units in which your property is located
Property tax rates are measured in
dollars/100 dollars assessed value
which means you pay a percent
of your taxable assessed value in taxes each year
but are your tax rates high, are they low,
are they somewhere in the middle?
let's take a look at some charts and numbers
to see how high, how low,
property tax rates are in Indiana
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Here's a chart for the 2000 or so districts in Indiana
It shows percentiles so you can see what's typical
what's high and what's low
the median district tax rate is just under 2 dollars
that means half the districts have higher rates
and half have lower than that
Now here are the 25 and 75 percentiles
25 percentile rate is about a $1.50
and the 75 percentile rate is near $2.50
that's a good rule of thumb
Half of all tax districts have rates between
a $1.50 and $2.50
A quarter of the districts have rates below $1.50
and a quarter have rates above $2.50
That's a bit misleading though
because almost all the highest rates are
in districts that include cities or towns
where there's that extra city/town tax rate to pay
So let's divide the districts into city and town
and rural districts
A little less than half of all the districts
have cities and towns
a little more than half are rural
without cities or towns
But about 2 thirds of assessed value is
in city or town districts
That's a lot of tax payers
take a look
sure enough the median rate for
districts with cities and towns is about $2.50
well the median rate in rural districts
is about $1.50
More than a quarter of city/town rates
are above 3 dollars
well hardly any rural rates are that high
almost a quarter of rural rates are less than a $1.25
but hardly any city or town rates are that low
You could use this chart to compare the tax rates
in your tax district to the rest of Indiana
Once you've made the comparison though
then the work begins or the fun
why are your rates high or low?
Remember that rates are the tax levy
divided by assessed value
are your rates high because the levy is big?
Did 1 of your local governments
borrow to add infrastructure?
which added the new debt service levy
did a school corporation pass a tax referendum
or is the general fund levy high?
which would indicate high operating costs
If your rate is low,
maybe the local governments are providing fewer services
Or maybe services are being paid for
with local income taxes instead
If your rates are high
it might be because assessed value is low
Did some businesses close?
Did home values drop?
Or is it simply the places with lower valued property
let's charge higher rates to provide even basic services
If your rates are low, maybe your jurisdiction has a lot of
high value property to support its levy
The rates by themselves won't answer these questions
If you understand rates, and levies, and assessed value
you can start to ask...
That's our video on Indiana property tax rates
Thanks for watching, I'm Larry DeBoer
(ding)
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