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As local voters ponder tax questions, here's a look at what property taxes have done for the last 10 years
If the 2016 presidential elections didn’t give you enough to grit your teeth over, fear not — local politics in 2017 may give you more opportunities. But it won’t be Trump that is the main topic. Instead, it is the other five-letter ’t’ word that will get the attention — taxes.
Specifically, property taxes in Douglas County may get more discussion this year than they have in a long time.
Voters in the Lawrence school district already should have the topic on their minds. Ballots have been sent out as part of an $87 million bond issue for the Lawrence public school district. The ballots — which have a due date of May 2 — are asking voters to approve the issuance of new debt that would improve secondary schools in the district, among other items.
Likely, the big question voters will have on their minds is whether the improvements are worth the tax increase that will be required to pay for the new debt. The increase is estimated at 2.4 mills, which is about $55 a year on a $200,000 home or about $300 a year on a $500,000 commercial property.
But there are other potential tax increases out there. Douglas County officials continue to talk about the need for jail expansion and creation of a mental health crisis center. That could come at a price tag of $30 million or more, and either a property tax or sales tax increase likely would be required.
The city of Lawrence is once again talking about the need for a new police headquarters building. City officials have scaled the price tag of that project back to $17 million, and they now say it likely won’t be pursued until 2019. But officials are saying it would require a mill levy increase of about 1.25 mills.
But long before that, both city and county officials may find themselves raising the property tax mill levy just to take care of basic governmental operations. They’ll make those decision this summer. If history is a guide, an increase is likely. Since 2007, the city has increased its mill levy nine out of the 10 years and the county has increased its mill levy seven times in the decade.
Unlike past years, though, voters may have to approve any such tax increase by the city and the county. A new state-mandated property tax lid calls for a general election if city and county governments try to increase taxes beyond certain rates of inflation.
So, all this means it may be time to study up on taxes. Here are some facts and figures compiled from city, county and school district documents.
• Rising rates. A Lawrence property owner pays at least four significant property tax bills — the city, the county, the school district, and the state of Kansas. Some property owners pay some others, like drainage district taxes, but most don’t.
When you add those big four together, the total current property tax rate in Lawrence is 130.97 mills. What does that mean? Property taxes can be a little complicated because they involve the value of your home — or at least what the county tax man says your home’s value is— the mill levy and basically a discount rate that varies whether you own residential property or commercial property. If you own residential property, you pay taxes on 11.5 percent of the value of your home. If you own commercial property, you pay on 25 percent of the value of your property.
To keep it simple, under the current tax rate, homeowners pay about $1,500 for every $100,000 worth of residential property they own. Commercial property owners pay a little more than double that amount for every $100,000 worth of business property they own.
In 2007, the property tax rate was 115.84 mills. That’s an increase of about 13 percent.
• School facts. During this campaign season, if Lawrence school district officials get questioned about the last decade of rising property tax rates, they have a possible retort: Don’t look at us.
Indeed, the school district’s property tax rate is less today than it was in 2007 — 53.36 mills today versus 57.56 mills in 2007. The district’s property tax rate hit a decade high in 2010, but has been mostly on the way down since then. Here’s a look:
— 2010: 59.64 mills
— 2011: 59.43 mills
— 2012: 58 mills
— 2013: 57.78 mills
— 2014: 55.75 mills
— 2015: 56.90 mills
— 2016: 53.36 mills.
Note: 2016 is the current tax rate. The 2017 rates aren’t set until this summer.
The school district did have a $92.5 million bond issue in 2013 to improve elementary schools. But district officials promised that bond issue wouldn’t raise taxes. Instead, as the district retired old debt it replaced it with new debt and was able to keep the mill levy at or below previous levels. Granted, if the school district hadn’t done the 2013 bond issue, the tax rate would have dropped significantly. But as school district officials point out, elementary schools also wouldn’t be improved.
In case you are curious, the Lawrence public school district’s property tax rate is quite a bit lower than the two smaller Douglas County-based school districts. Baldwin has a tax rate of 68.66 mills, and Eudora has the highest rate in the county at 70.36 mills.
• City and county facts. If the increases of the past decade didn’t come from the school district, where did they? Look at both ends of Massachusetts Street to find the answer. In 2007, the city of Lawrence’s mill levy was 26.78 mills. Today it is 32.01 mills. In 2007, Douglas County’s mill levy was 29.99 mills. Today it is 44.09 mills.
Now, before city and county officials call me, let me say I’m not opining about the appropriateness of those higher tax rates. The city essentially has a new library, for example, which was built with a voter-approved property tax increase. And county officials could talk your ear off about what they believe are a host of costs that used to be covered by the state of Kansas that now fall to the county to cover.
I’m not trying to answer the “why” of these tax rate increases but rather the “where.” In terms of where the tax rates increased, they have come from the city of Lawrence and Douglas County. But the “why” is important, and before you complain about taxes, you should get familiar with the “why,” and think about what services or improvements you would have preferred to do without over the past 10 years.
In case you are wondering, the state of Kansas has a property tax rate of 1.5 mills. It hasn’t changed in decades.
• The rest of the story. Property tax rates are a lot like my teenage son: They are both lousy at telling a complete story. Property tax rates could remain steady but property owners may still pay a lot more in taxes. That’s because if the value of your property increases, your tax bill will increase if the tax rate stays the same.
But the tax rate did not stay the same in Douglas County. It increased by about 13 percent, which is actually less than the rate of inflation for the decade. The consumer price index since 2007 increased by 20 percent, according to Bureau of Labor Statistics figures.
But Douglas County home values also increased during the decade. Not only that, there is more property to tax than there was in 2007. People have built new structures, and those new structures have added to the tax base.
In Lawrence, the taxable value of property has grown from $853.5 million in 2007 to $928.9 million in 2016. That’s an increase of 8.8 percent. That’s on top of the 13 percent increase in the actual tax rate.
• Real dollars. Most of you, though, only care about any of this because once a year the bank that has your mortgage sends you a letter saying it needs to increase your monthly payment by “X” amount because your home’s taxes have increased.
The fact is, some of you get that letter and some of you don’t because property taxes don’t believe in being equal. They are based on a home’s value, and some of you own homes that have increased in value, and others have not.
That makes it difficult to make a broad statement about how property taxes impact everybody. Instead, we have to look at some hypotheticals.
— Scenario 1: You own a $200,000 Lawrence home. It has increased in value by a modest 1 percent each year. In 2007 you paid taxes of $2,664. Your current taxes are $3,012. Your taxes have increased by 13 percent. That’s less than the rate of inflation for the time period. You are paying about $29 more per month on your mortgage payment to cover taxes than you did in 2007.
— Scenario 2: Your home may increase more than 1 percent a year. Consider this: When the county appraiser recently set tax values for residential property, the largest number of homes received an increase in value of between 2 percent and 5 percent. The second largest group were people who received an increase in value of more than 5 percent. Your home probably is not going to increase in value by 50 percent in a decade, but it could easily increase by 30 percent. Here’s how that would look if you own a $200,000 home in Lawrence. In 2007, you paid $2,664 in taxes. Your current taxes are $4,048. That is an increase of 51 percent in taxes, and is well above the rate of inflation. You are paying about $115 more per month on your mortgage payment to cover the taxes than you did in 2007.
Granted, the homeowner in Scenario 2 has theoretically gained some wealth. The home is worth about $70,000 more than it was in 2007. But unless the homeowner is willing to sell it at that moment, it is mainly just paper wealth rather than the type that adds money to your bank account.
• Real houses. To further prove the point that property taxes don’t impact everybody equally, I picked seven properties at random from the phone book and tracked what their property taxes were over the 10-year period. Here’s a look:
— A $160,000 home in the 900 block of West 25th Street. It pays $2,470 in taxes, up just 11 percent from what it paid in 2007. The home actually had a higher value — $166,000 — in 2007.
— A $141,000 home in the 800 block of West 22nd Street. It pays $2,126 in taxes, up 38 percent from 2007.
— A $196,000 home in the 2500 block of Via Linda Drive. It pays $2,964 in taxes, up 30 percent from 2007.
— A $248,000 home in the 1000 block of Wildwood Drive. It pays $3,747 in taxes, up 11 percent from 2007. The home had a higher value — $253,000 — in 2007.
— A $231,000 home in the 2100 block of Carolina Street. It pays $3,480 in taxes, up 23 percent from 2007. This is an example of a home that increased pretty close to the rate of inflation.
— A $162,000 home in the 600 block of Bently Drive. It pays $2,450 in taxes, up 15 percent from 2007.
As you know, Lawrence has lots of apartments, so it is not surprising that my random methods produced one address that was located in an apartment complex. The landlords there pay the property taxes, but they certainly try to pass along any property tax increase to the tenants, if the market allows it.
— A $5.5 million apartment complex in the 2400 block of Louisiana Street. It pays $83,195 in taxes, up 43 percent from what it paid in 2007.
Don’t read too much into the above numbers. The sample size is too small to draw broad conclusions. But it is a reminder of why property taxes raise the ire of some but not others.
• The other number. Most people don’t spend any time thinking about a property tax mill levy. But they do spend time thinking about how much money they make. That’s the other number in this whole equation. How much money do you have to pay your tax bill?
The federal government’s Department of Housing and Urban Development publishes a median family income for each county in the country. It is not a perfect statistic, but it does provide an indication of how much incomes have grown in the county over the years. In 2007, the median family income in Douglas County was $63,700. In 2017, it had grown to $68,500. That’s an increase of just 7.5 percent, well below the approximately 20 percent rate of inflation during the same time period. Some other income figures from the Census would put the growth rate closer to 10 percent to 15 percent for the time period.
Either way, it is likely many families are paying a greater percentage of their incomes in property taxes than they used to.
• What’s next? Those are the numbers from the past. And, of course, they are just numbers. They don’t do a good job of measuring the value of an improved school, a better library, or the necessity of services like police and fire protection.
Voters have to decide what type of value to place on those factors, and they have to decide what is a fair amount to pay in taxes.
It appears they will have plenty of figuring to do in 2017.