Thanks to rising home values, Douglas County, area cities set to collect $14M in additional property taxes if tax rates aren’t cut
photo by: Thad Allender/Journal-World File Photo
It is no secret that home values are soaring in Douglas County. What may be less understood is how property taxes across the county may rise as a result of those higher home values.
Well, we now have an estimate we can share. If Douglas County and the four cities in the county simply leave their tax rates unchanged from a year ago, those governments will collect more than $14 million in new property taxes this year.
A big reason why is that the value of nearly everyone’s home in Douglas County has increased a lot in the last year. These tax implications are why the number of people displeased with rising home prices surely outnumber those who are pleased.
One reason that is true is because homeowners who have no intention of selling their homes, which are the majority of homeowners, are set to pay higher taxes nonetheless.
You can thank our property tax system for that. Property taxes are one of the few taxes that make you pay tax on a benefit you haven’t yet received. As unpopular as sales taxes are on groceries, at least you have a bag full of groceries to take home when you pay that sales tax.
That’s not the case when your property tax bill increases simply because the appraiser says the value of your home has gone up. Unless you are selling your home that day, you aren’t really reaping a financial reward from that higher home value.
Nonetheless, the tax consequences of these higher home prices are real. The county appraiser uses selling prices of homes as part of his formula in determining the tax value of all the homes in the county.
We now have a new batch of specific numbers from the county appraiser that show us just how much the property tax base for the county and each city in the county has increased over the last year. Everybody posted historic increases. The county as a whole saw its tax base increase by 12.4%. That’s the largest increase for Douglas County in recent memory. In the past, a 6% or 7% increase would have been considered a strong increase.
But that doesn’t mean your property tax bill this year — they arrive in the fall — necessarily will soar. Local governments like the county and the city of Lawrence still have to set the property tax rates before we will know what our property tax bills will look like in 2022. Local governments will set those property tax rates — called mill levies — this summer as they budget how much they plan to spend in 2023.
Those discussions will start in the coming days and be in high gear next month. Last week, all the local governments got specific data from the County Clerk’s office showing how much their tax bases have increased in the last year. It is with those numbers that I calculated property tax collections will increase by more than $14 million, unless local governments decide to cut property tax rates.
Let me walk you through the numbers. First, here’s a summary of the tax base of Douglas County as a whole and each city in the county.
• Douglas County: $1.76 billion, up $194.7 million or 12.4%
• Lawrence: $1.3 billion, up $141.7 million or 12.1%
• Eudora: $62.3 million, up $8.02 million or 14.7%
• Baldwin City: $44.9 million, up $6.25 million or 16.1%
• Lecompton: $4.72 million, up $664,000 or 16.3%
Those numbers have a big impact on your future property taxes because of the way property tax rates work. The property tax rate is measured in mills, and a mill is $1 in property tax for every $1,000 in assessed valuation. Thus, you can figure how much more valuable a mill is to each government entity by looking at how much its tax base increased, and simply divide by 1,000. For example, Douglas County’s tax base increased by $194.7 million, so each mill generates $194,700 more in property taxes for the county than it did a year ago. That’s how property taxes go up, even though the property tax rate stays the same from one year to the next.
The next set of numbers looks at how much more a mill generates in property taxes and simply multiplies that amount by the existing mill levy for each government. The resulting number is how much more in property taxes each government will collect, if commissioners decide to simply leave their mill levies unchanged.
• Douglas County: $9.23 million in additional property taxes
• Lawrence: $4.71 million in additional property taxes
• Eudora: $317,000 in additional property taxes
• Baldwin City: $280,000 in additional property taxes
• Lecompton: $17,000 in additional property taxes
Add all those together, and that is the more than $14 million in additional property taxes that I noted at the beginning of this article. Of course, even $14 million is relative. Combined, Douglas County and the four cities collected just less than $117 million in property taxes this year, with Douglas County accounting for nearly $75 million of the total. The county relies more heavily on property tax collections because counties don’t collect sales taxes in the same way that cities do.
The next set of numbers shows how much the local governments would have to reduce their property tax rate in order to simply collect the same amount of property taxes as they did last year. A state law now requires each government to do this calculation, and the Douglas County Clerk’s office did that math for me. The numbers below show the amount the mill levy would have to decline by, and the next number shows what that mill levy equates to in terms of taxes on a $200,000 home.
• Douglas County: 5.23 mill reduction, equal to $120.31 in property taxes
• Lawrence: 3.59 mill reduction, equal to $82.46 in property taxes
• Eudora: 5.12 mill reduction, equal to $117.76 in property taxes
• Baldwin City: 6.33 mill reduction, equal to $145.57 in property taxes
• Lecompton 3.7 mill reduction, equal to $85.12 in property taxes.
Remember, everybody pays the Douglas County property tax, plus the property tax for the city they live in. That means in Lawrence, for example, the total tax implications of cutting back to a revenue-neutral rate is $202.77 ($120.31 plus $82.46) on a $200,000 home.
I couldn’t tell you the last time any of those governments cut their mill levies anywhere close to the amounts above, but it certainly hasn’t been in the last decade. I have data since 2011, and the largest mill levy decrease Douglas County, for example, has instituted in that time period was a 0.003 decline in 2018. In other words, it didn’t come close to cutting even a full mill from the tax rate in the last decade. None of the other governments came close to cutting an actual mill from their tax rates, either.
What happens this year? That’s what summer budget hearings are for. But I wouldn’t expect to see any of these governments cut their property tax rates by the amounts listed above. After all, local governments are impacted by inflation too. The cost to provide government services has increased as inflation has taken hold.
Has it increased enough that Douglas County would be justified in collecting $9 million in additional property taxes? Or enough for Lawrence to collect nearly $5 million in new property taxes?
Again, that is what this summer’s budget hearings are for, and it seems certain that commissioners will be tasked with answering at least one large question: How much should rising home values increase the taxes of everyone?