State Releases Assessed Value Growth Quotient for Local Governments

Monroe County Courthouse Under Renovation
Monroe County Courthouse Under Renovation

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.

AVGQ Calculations for 2015
AVGQ Calculations for 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.

The announcement is available here: 140701 – State Budget Agency Memo – Assessed Valuation Growth Quotient and the supporting calculations here: 140701 – State Budget Agency Memo – 2015 State Assessed Value Growth Quotient Worksheet.






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