City Has Six Cents When It Comes To Real Estate Tax


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After advising City Manager Jim Hartmann to propose a budget championing a static real estate property tax burden for the 2010 fiscal year (beginning July 1), the City Council examined a possible tax rate increase of up to six cents for the 2009 calendar year Saturday, citing the additional revenue it would provide for the city while riding out the recession.

The current tax rate on commercial and residential properties is 84.5 cents per $100 of assessed value, based on real estate assessments the city mails out each year. The rate in the proposed budget would rise to 88.7 cents, decreasing the average property owners tax bill by one dollar.

But officials said that despite guiding the budget toward keeping the tax burden about the same as last year, the economic climate warranted consideration of a six-cent increase to 90.5 cents.

When we gave [Hartmann] the guidance in November, no one in their wildest dreams wouldve thought wed be where we are today in terms of reduction impacts, Mayor Bill Euille said. Our revenues keep going down. It changes every day, every hour.

It is the city managers job to propose his budget each year, with guidelines from Council. After a vetting process among city staff and residents, the Councils responsibility is to adopt the budget as the citys fiscal plan.

This year, the mayor and Council members viewed maintaining a static real estate tax burden as an economic easing for residents and business owners but, critically, as a springboard for the city managers budget. They asked Hartmann to assume the same real estate tax rate as last year when beginning his budget so he could make the necessary cuts in other areas of the government a repercussion of the recession.

We asked the city manger as a result of these guidelines to hold the tax, forcing his hand to be able to come up with all these other cuts, Euille said. Its now our opportunity to make further cuts and reductions if necessary.

The 90.5-cent figure is not an approved tax; the city is required to advertise any potential tax-hike to the public in advance. City Hall could lower the figure but it cannot exceed the rate that, if raised by the full six cents, could bring in about $20 million in revenue for the city, compared with $13.9 million at the current proposed rate.

The average property owners tax bill would increase by $85, or 2 percent, if the rate is increased to its maximum, according to a memo from Hartmann to the mayor and members of City Council.

Real estate taxes constitute a disproportionate majority of the citys revenue sources, and it is one of the most dependable, according to city officials.

Though they are measured by calendar year and can unpredictably alter the fiscal years budget down the road, real estate assessments provide the city with a relatively stable number to project unlike sales taxes one of the reasons City Hall is exploring the possibility.

Real estate is a bit more certain [than other taxes] because you do the assessment once a year and you know then what your real estate tax payments will be for that calendar year, Budget Director Bruce Johnson said. Theres very little uncertainty once the assessments are out as to what your payment will be for the 12 month period.

Frankly, it is a more stable tax and it is probably less regressive as well, Hartmann said.

Because of the economys state, City Hall will not explore utilizing an optional add-on tax for commercial and industrial properties that would have adversely affected an already struggling business community.

Tax policy is built on several market aspects. Johnson said the staff looked at the capability to raise money, the certainty or volatility of the projected revenues, and equity what segments of the population would be affected and how before coming up with the possible tax rate hike.

Because a property owners income is correlated with their propertys value, and the citys low-income housing is falling more dramatically than its higher-valued homes, the tax would affect the citys wealthier property homeowners.

Real estate taxes are declining at a faster rate for a lower value program, Johnson said. Its actually somewhat of an aggressive impact in using real estate rates to raise some additional revenue because theyre tending to focus on the higher valued homes.

City officials have discussed diversifying its revenue sources and still have the prerogative to raise other taxes or fees for the impending budget. But after raising the business licensure, hotel and restaurant taxes last year, their options are more limited not to mention the economic stage on which the decisions are being made.

In our economy, unfortunately, everything is going down, Johnson said. All the different revenue sources are declining at the same time, so I dont know whether diversification could have protected us from this environment.

A public hearing where residents and business owners can voice their opinions to the City Council and other staff will be held on Saturday, April 18 at 9:30 a.m., at City Hall.