The Monroe County Auditor’s Office just released the 2014 Pay 2015 Certified Net Assessed Values for all taxing units in Monroe County, a key step in the annual budget cycle. Net assessed value (NAV) is what results after deductions, exemptions, and other adjustments are applied to the gross assessed value. Net assessed value is what is used to calculate property taxes paid in 2015 — both the overall tax rates and the individual property tax bill. Thanks to the staff of the Auditor’s Office for getting this information out to us!
Our 2014-Pay 2015 NAV is $6,459,490,036 (yes, that is almost $6.5 billion!), an increase of $89,317,707 over the 2013-Pay 2014 NAV of $6,370,172,329.
Remember that in general, an increase in NAV doesn’t mean that individuals pay more in taxes (although it does give the constitutional circuit breakers less effect) — it means that the existing property taxes are spread across a higher tax base. Increased assessed value is generally a good sign for both taxpayers and local units of government alike.
The following table I put together shows a quick history of our net assessed value from 2009-2015:
Matthew Tully wrote a very thoughtful column in last Thursday’s Indy Star (Tully: Commuter tax is fair, like it or not) on the idea of a commuter tax, and in particular the unfairness of Indiana’s current system of taxation, in which the residents of Marion County/Indianapolis provide and subsidize the jobs and infrastructure that benefit the residents of surrounding counties whose residents commute into Marion County to work.
This is a topic that comes up from time to time, and various proposals are periodically floated to make the system more fair to counties (like Marion) that are net employment counties — counties into which large numbers of residents of other counties commute for work. Indiana’s system of income taxation has all income tax collections going to the county in which an individual resides, regardless of where she or he works. There are fewer net employment counties (generally, but not always, urban counties) than suburban counties, and thus a more fair system of taxation has proved thus far to be politically unpalatable.
Tully makes the case (and I agree with him) that some sort of modification of this system — for example, in which a small percentage of the income tax collected from an employee would go to the county where the job is — would be more fair, and in fact, would benefit everyone by ensuring that the employing county would have the resources to maintain the infrastructure that benefits both the employer and the employee.
The data from Indiana tax returns for 2012 (the latest year for which data is available) shows that Monroe County is clearly a net importer of labor from other counties (and states). 15,613 workers live in other counties or states but work in Monroe County. Only 5,683 workers live in Monroe County but work outside of the county, meaning that almost 10,000 net workers commute into Monroe County for work.
The following chart illustrates the top five counties sending workers into Monroe County.
Another similar chart illustrates the top five counties receiving workers from Monroe County (“out of state” counts as a county, for this analysis).
So while Monroe County employers clearly provides jobs — and local government provides the infrastructure and services required to support these jobs — local government in Monroe County does not receive any revenue associated with these jobs filled by commuters from other counties. No property tax, no income tax.
Unfortunately this data set only includes the number employees commuting in or out of Monroe County, not their income. It would be useful to have this information to determine whether or not a revenue-sharing arrangement would be beneficial to Monroe County. For example, 1076 employees commute to Marion County from Monroe County. While this number is much smaller than the number of employees commuting overall into Monroe County, one might surmise that the incomes of employees commuting to Marion County from Monroe County would be substantially higher than average. We would have to know the incomes of the employees commuting into versus out of Monroe County to know whether a commuter tax or revenue sharing arrangement would be beneficial. However, regardless of how beneficial it is, it is clearly a fairer system to apportion the revenues in some way between the county in which an employee lives versus where she works.
I’ve been playing around with some sort of metric that would measure the commuting patterns as a percentage of the overall economy of a county — that is, a good measure of whether a county is a net employer-county — and would allow good comparisons between counties for analysis of tax fairness.
My first attempt is the following: net in- versus out-commuters as a percentage of the total number of residents of a county who work (known as the implied resident work force). The following chart shows what this calculation would look like for a couple of Indiana counties that Monroe County is frequently benchmarked against:
Clearly this metric does distinguish net employer counties like Marion — and Monroe and Tippecanoe and Vanderburgh– from suburban “bedroom” counties, like Hamilton and Hendricks and from rural counties like Greene. There are a couple of anomalies that show up. Despite including the second-largest municipality in Indiana, Allen County’s net in-commuting is a relatively small percentage of its work force. Martin County is also an anomaly, due to the large number of people who commute to the Crane Naval Surface Warfare Center from surrounding counties.
I hope that the discussion will continue during the upcoming General Assembly session, and I would expect this topic to receive some significant discussion by the newly-created blue ribbon commission on taxation. It is in everyone’s interest to promote economic development by ensuring that local governments can continue to provide the infrastructure and services to create and sustain good jobs.
Yesterday, the Herald Times published the story Monroe County’s jobless rate jumps 1.1% in June [subscription required]. The HT typically publishes a short story of this type monthly, after the unemployment numbers by county are released by the Indiana Department of Workforce Development. In particular, the (unsigned) story states that:
“Monroe County’s unemployment rate rose in June by more than a full percentage point to 6.3 percent, moving it into the bottom half of Indiana’s 92 counties in terms of employment. That is as far down the list as the county has fallen in recent memory. Monroe’s employment fluctuates with Indiana University’s calendar, but to fall to more than 6 percent unemployed during the summer months is highly unusual.” [emphasis mine]
This paragraph lends the story a bit of an ominous tone, as though our local economy is somehow teetering on the brink of another recession…that we are in uncharted territory with such a drop in June employment. In fact, the data shows that not only do we always have a drop in employment in June (as businesses cut back due to large numbers of students leaving for the summer), but that we have a drop of similar magnitude.
I created a chart of Monroe County’s unemployment rate from 2010 to the present (June 2014), and as you can see below, the exact same phenomenon happens every year — that April is an annual trough for unemployment, that unemployment peaks by about 2 percentage points by June, and then starts to fall again. In fact, even the Herald Times’ own article for the same period last year —Monroe County unemployment jumps with the season — shows our June (2013) unemployment rate at 8.5%! So how can they now claim that “to fall to more than 6 percent unemployed during the summer months is highly unusual”?
Monroe County Unemployment Rate 2010-2014 (June)
In fact, what is unusual about 2014, as shown from the graph, is how low the overall unemployment rate is! Even our peak June employment rate in 2014 is fairly close to the low point for the previous four years.
The data that I used for this chart can be found all the way back to 2000, from the STATSIndiana site.
Today, the Indiana State Budget Agency (SBA) released the Assessed Value Growth Quotient (AVGQ) for 2015: 2.70%, a slight increase from 2.6% in 2014.
The AVGQ is essentially the “cost of living adjustment” for property taxes for all local units of government — the maximum amount by which local units of government are allowed to increase their controlled property tax levies by. For Monroe County Government, 2.7% is the maximum that the following levies combined can be raised for 2015: General Fund, Health, Aviation, County Fair, Reassessment, and Cumulative Bridge.
Although named the Assessed Value Growth Quotient in the statute, the AVGQ actually no longer has anything to do with assessed value. It is calculated as the 6-year moving average of nonfarm personal income growth. The theory behind it is that the costs of government should not be increasing at a greater rate than the taxpayers’ incomes are going up.
Also note that the AVGQ is independent of the circuit breakers or so-called “tax caps” (see here and here for more background). The circuit breakers can kick in and prevent a local unit of government from actually receiving the full growth in property tax levies specified by the AVGQ. In addition, the AVGQ doesn’t affect property taxes collected to service debt for capital projects (although the circuit breakers do affect these property taxes).
The AVGQ is calculated uniformly statewide — so that the limit on levy growth is the same for every local unit of government, whether the local economy is booming or busting, and regardless of the demands (or willingness of the taxpayers to pay) for services. There are, however, procedures for appeal for what is called an “excess levy” for specific cases, including: annexation, excessive growth over a 3-year period, shortfalls due to certain errors, and emergencies.
The following table shows the 6-year calculation for budget year 2015.
Note that the change from 2008-2009 is -2.91% — that means that during that year, personal incomes actually shrank. After two more years, that -2.91% will drop out of the 6-year calculation, and so unless we have another recession, we should see the AVGQ go back up to more historically normal levels.