Local governments in Indiana eagerly await the annual release of the so-called Assessed Value Growth Quotient (AVGQ), because it represents the maximum amount that most local property tax levies can increase to fund basic government services. Yesterday, the Indiana State Budget Agency (SBA) released the number for the 2020 budget: 3.5%, a slight increase from 3.4% in 2019, and overall a very healthy number for local governments.
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, 3.5% is the maximum that the following levies combined can be raised for 2015: General Fund, Health, Aviation, Elections, Reassessment, and Cumulative Bridge.
Is the AVGQ Really an AVGQ?
Although still named the Assessed Value Growth Quotient in the statute, the AVGQ is a bit of a historical artifact, and actually now has absolutely nothing 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. A more accurate term would be property tax levy growth quotient, a term already used widely at the state, but not yet actually officially incorporated into the statute.
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.
Calculations for the AVGQ
The following table shows the 6-year calculation for budget year 2020.
Note that a very low income growth number — change in the growth from 2011-2012 to 2012-2013 (0.08%) will drop off of the 6-year average next year, so look for 2021’s growth to be even larger.
How Does This Affect My Property Tax Bills?
So does a 3.5% increase in a local property tax levy mean that your particular property tax bill will go up 3.5%? Not necessarily, because there are so many other things going on. First of all, 3.5% is the amount that most local property tax levies can increase by. The levy is the total amount of taxes that can be collected by a local unit of government. But the tax rate is calculated by dividing the levy by the total assessed value in the unit of government — so if there is a lot of overall growth, the rate can go down even if the levy goes up. And further, your own assessed value can change, depending on the local real estate market, improvements of the property, etc. So there is no way to know what will happen to your own property tax bill without the full assessed value picture. The AVGQ is primarily of interest to local units of government, not taxpayers.
Last night, Monroe County received its 2019 Budget Order from the state, which includes:
The budgets for all taxing units (i.e., county, cities and towns, school districts, townships, public library, special units)
The property tax levies and tax rates for all taxing units
The property tax rates for each taxing district (i.e., the tax rates that actually affect each property owner)
The following table summarizes the total 2019 property tax rate (per $100 of net assessed value) for each taxing district in Monroe County, sorted from highest to lowest. I’ve also included the 2015-2018 tax rates for comparison.
I highlighted the taxing districts that are within incorporated municipalities in aqua.
The following are my brief observations about the 2018 tax rates:
Most tax rates remained about the same from 2018 to 2019 (decreased or increased less than $0.01), with two exceptions (which follow)
The rates for the taxing districts served by the Richland-Bean Blossom School Corporation (Ellettsville, Stinesville, and unincorporated Richland and Bean Blossom Townships). went down substantially, almost $0.25 (per $100 of assessed value). This is a result of the correction in 2019 of a bond-related tax rate error that caused rates in the areas served by R-BB to increase substantially
Indian Creek Township‘s rate went up almost $0.09, as a result of joining the Monroe Fire Protection District (formerly known as Perry-Clear Creek Fire Protection District)
Much has happened with this project over the last several months. An architect was hired (RQAW), the facilities were designed, and the County Commissioners have awarded a contract for construction of the new facility to Building Associates, pending funding approval by the County Council.
At tonight’s County Council meeting, the Council will consider the appropriation request for $2,261,000 to fund the construction. The actual bids came in quite a bit under the estimated $3M for the project. The Council will consider funding the project from three sources, all of which are earmarked specifically for funding for youth services:
Juvenile Per Diem Fund (which receives money from the state when youth are placed in the facility)
Juvenile Services Non-Reverting Fund (which received one-time money left over from the Child Welfare property tax levy when the state took over child welfare funding)
Juvenile Rainy Day Fund (which received certain special distributions of the Juvenile county option income tax)
None of these funds by themselves could support the entire $2.3M appropriation, but together they more than fund the project, which means that the County will not need to bond for (borrow) the money for this capital project.
When talking about youth services and our youth shelter here in Monroe County, I want to make it clear, because several constituents have asked me about it, that our youth facilities do not include any aspect of secure detention. Our Youth Services Bureau is entirely focused on supporting youth and families through advocacy, education, collaboration, and providing support to youth and families in crisis.
Monroe County’s proactive and positive approach to youth services has resulted in one of the lowest rates of youth placed in secure detention in the date, a rate radically lower than that of our peer counties.
The Monroe County Council meetings tonight, January 8, 2019 at 5:30PM in the Nat U Hill Room of the Monroe County Courthouse. The meeting will be broadcast on CATS and is open to the public. Public comment will be taken on any item on the agenda (including this proposal to fund the YSB expansion) and on topics not on the agenda.
The official advertisement (“Notice to Taxpayers”) provides a total budget and tax levy (the amount of property taxes to be collected) for each fund. Not all funds receive property taxes. Note that the tax levies are frequently advertised higher than the level at which the County Council will actually adopt them, in order to give the Council flexibility (after advertisement, budgets and levies can only be decreased, not increased).
While the Notice to Taxpayers includes a summary of the proposed budget by fund, the following report provides line-by-line detail of the budget to be considered:
The following is a summary of the major changes to the budget from 2018 to 2019:
Addition of 5 corrections officers to the Monroe County Jail, in order to alleviate understaffing concerns (paid out of the Public Safety Local Income Tax/PS-LIT). More staff means a more humane environment for everyone – the existing staff, those incarcerated, and the families of those incarcerated. We’ll have to look closely and see if that is enough. I suspect we’ll have to revisit the jail staffing levels over the next year.
Addition of 1 audit coordinator position in the Auditor’s Office, to improve internal compliance, along with a move of an employee in the financial division of the office from 35 hours to 40 hours.
Addition of 1 tech services (IT) technician who will focus on jail and justice-related applications.
Move of 2 probation officer positions in Community Corrections, along with some hourly staff and electronic monitoring fees out of unsustainable user fee funds into tax-supported funds. This was my number one priority for this budget. We need to support alternatives to incarceration, and base funding for Community Corrections is one of those ways that the Council can demonstrate our commitment. One of the reasons why the user fee funds are no longer sustainable is because of the partial elimination of the use of cash bail, which is a very positive development.
Similarly, move of 1/2 a position in the Prosecutor’s Office to the General Fund, out of Pretrial Diversion fees. This represents the conclusion of almost a decade-long effort to move essential positions in the Prosecutor’s Office out of unsustainable user fee funds.
Increase in the costs of providing employee health care from $9800 to $10,200 per full-time employee.
Cost of living increase for county employees (including elected officials) of 1.7%. This number represents the change in Consumer Price Index (CPI) for the midwest region from December to the previous December. This is the benchmark that the County Council uses for cost of living. We have spent a lot of effort over the past two years increasing employee salaries in various ways, and it is important that we don’t let county employees’ salaries erode due to inflation.
Addition of 3 shift supervisor positions and funding of capital equipment projects in the Unified City/County Dispatch Center. The positions will actually be City of Bloomington employees.
Funding of the 2019 municipal election. Each year, the budget of the Election Board is different, depending on the specifics of each election year. In municipal election years, a substantial portion of the costs of the election will be reimbursed by the City of Bloomington and potentially the Town of Ellettsville.
Addition of a second K-9 unit in the Sheriff’s Department, funded by the PS-LIT.
If there is anything that attracts your interest that I didn’t cover in this summary, please let me know, and I’ll be happy to explain!
As I mentioned at the beginning of this post, a public hearing will be held on this proposed budget on Tuesday, October 2, 2018 at 5:30 PM in the Nat U Hill Room of the Monroe County Courthouse. The public is invited to read the above proposed budget, and make comment, either at the public hearing, or beforehand to any or all of their County Council representatives.
The Monroe County Correctional Center and the criminal justice system that feeds it has been on my mind a lot lately. Each day, the jail reports the number of people in custody, in several different categories (e.g., secure beds, program beds, detox, etc.). Because many people are in the jail for a very short period of time, the numbers vary widely over time. Today’s count of individuals in secure beds was a whopping 290, out of a rated capacity of 248. On the other hand, that count was “only” in the low 230s back in mid-March. Clearly some of that dramatic increase is due to the combination of the onset of good weather combined with IU’s Little 500.
But even factoring out localizes spikes in jail population, it is clear that we are seeing a longer-term secular increase. Recently the County Council received the statutorily-mandated 2017 Monroe County Correctional Center Annual Jail Report. The report is definitely worth reading in its entirety — it provides a good overview both of the programs provided in the jail as well as the staffing challenges, which are of significant concern to the County Council. Unsurprisingly, though, what stands out most from the report is the average population count over time:
After a period of relative stability, we see a fairly dramatic overall increase, undoubtedly overlapping with the growth of the opioid epidemic. There have also been statutory changes in Indiana that have made local jails responsible for some people convicted of felonies who used to be the responsibility of the Department of Corrections. Clearly this growth rate is unsustainable. There are many stakeholders in Monroe County who are working on various initiatives, both present and future, to help keep the jail population down, including community corrections, treatment and recovery, pre-trial release, various diversion programs, etc. I want to highlight some of these initiatives in the near future, and grow and fund those that have been proven to be effective.
Tonight’s work session of the Monroe County Council will feature a presentation from Jail Commander Sam Crowe, who will highlight some of the initiatives and programs in the jail, and address questions from Councilmembers about the report. Of course the jail is only one component of a complex system including lawmakers, police, prosecutors, public defenders, the judiciary, and probation and community corrections, I encourage members of the public to read this report and watch the presentation tonight.
The County Council work session is at 5:30PM tonight, April 24, 2018, at the Nat U Hill Room in the Monroe County Courthouse. The meeting is open to the public, and will also be televised on CATS.
This past Tuesday, the Monroe County Council discussed a request for major capital improvements to Monroe County’s facilities for youth services, including the Binkley House Youth Shelter (located at 615 S Adams St).
Back in February of 2017, the County Commissioners GSD Contract in partnership with the architecture and design firm RQAW to review existing facilities and recommend a plan for renovation and expansion based on the analysis of current and future needs.
The report from the consultants was received in July 2017, and provides an extensive review of the needs of the programs, condition of existing facilities, and proposed combination of renovation and new facilities. Major recommendations include:
Demolition of an old house that is currently used for a few offices and storage, and whose maintenance costs have become unsustainable (I included a picture of the house above).
Additional parking along South Adams St, including improvements to allow delivery truck access, and a nature path and pavilion outside.
Upgrades to the Binkley House Shelter portion of the facility, including paint, carpet, restroom upgrades, better separation of recreational from study spaces, more storage for youth belongings, and a walk-in freezer to allow more bulk purchasing. The shelter currently serves up to 15 youth; there are no plans to increase this capacity.
New large multi-purpose space that can be used as a gym, classroom, group meeting room, space to take youth out of stressful situations, etc.
Upgrades to the Administrative wing of the facility, including creation of small conference/meeting rooms, better waiting areas, secure file storage, additional office space, and public restrooms.
Furnishings, including office furniture and furniture for the shelter.
Last week, the County Commissioners approved a follow-on contract with RQAW for approximately $190K to provide detailed architectural design documents for the project. These documents would then be used to solicit bids for the demolition and construction work. This contract is subject to appropriation of funds by the County Council; the Council will consider this request at our regular meeting on March 13th.
The total cost estimate for the recommended facilities range from $2.9M and $3.2M. As per our role in the process, the County Council spent most of our time discussing potential sources of funds for the project. Options include:
One-time funds (in the Juvenile Services Non-Revering Fund) of around $1.1M saved from excess property taxes collected for child welfare at the time the State took over child welfare funding. The County Council earmarked this money to be spent on juvenile-related services and initiatives.
$1.7M in the County Per Diems fund, which consists of money paid by the State to the County for court-ordered and Department of Child Services (DCS) placements.
One-time funds (in the Juvenile COIT Rainy Day fund) of $164K from past distributions of the juvenile county option income tax from the State.
Funds in the Location Income Tax Special Purpose (formerly known as the Juvenile COIT) could potentially be used for the furnishings (not bricks and mortar construction) component of the project.
Future general obligation bond (paid for by a property tax rate).
It appears that a large proportion of the project (if not all of it) could be paid for out of cash (in the above funds). However, there is also concern among some (including me, along with the director of Monroe County’s Youth Services department) that it would be prudent to hold back some cash reserves, particularly in light of the turmoil and chronic underfunding in the State Department of Child Services. One option would be to pay for a majority of the $3M out of cash savings, and the rest from bond issue.
The County Council will continue this discussion at our regular meeting on March 13, 2018, at 5:30PM.
Last Friday, Monroe County received its 2018 Budget Order from the state, which includes:
The budgets for all taxing units (i.e., county, cities and towns, school districts, townships, public library, special units)
The property tax levies and tax rates for all taxing units
The property tax rates for each taxing district (i.e., the tax rates that actually affect each property owner)
The following table summarizes the total 2018 property tax rate (per $100 of net assessed value) for each taxing district in Monroe County, sorted from highest to lowest. I’ve also included the 2015-2017 tax rates for comparison.
I highlighted the taxing districts that are within incorporated municipalities in aqua.
The rates for most taxing districts went up, at least partially because the maximum civil levy statewide increased by 4% (this is sort of like a cost-of-living increase for local government operating funds), and because the County established a new Major Bridge Fund for 2018 (with a tax rate of $0.0333).
The two exceptions, in which the rates went down for 2018, were Bloomington Township (unincorporated) and Washington Township. This is because of the Northern Monroe Fire Territory, which first began in 2017. The first year’s tax rates of a new fire territory are typically the highest, both because the territory needs to collect more than it needs for the year in order to create an operating reserve, and because the local income tax (LIT) associated with the new property taxes of the fire territory doesn’t come in until the next year. Bloomington and Washington Township residents thus saw a large increase in property taxes for 2017 over 2016.
Because during the second year of the fire territory (a) the territory doesn’t need to collect extra for reserves and (b) the township providing fire services (Bloomington Township) receives additional LIT, the property tax rates for the second year can be reduced, and thus both Washington Township and Bloomington Township saw overall reductions in their 2018 property tax rates over 2017.
The Monroe County Council will be adopting the 2018 budget for Monroe County this week and next. First reading of the budget, along with property tax rates and levies, will be Tuesday, October 24th, 2017 at 5:30PM in the Nat U Hill Room of the Monroe County Courthouse. Second reading and final vote will be Monday, October 30th, 2017, also at 5:30PM in the Nat U Hill Room. Public comment will be taken at both readings!
The Council will be voting on a $70.5M budget, spread across 51 different funds. Each fund has its own set of revenue sources associated with it, including property tax, income tax, public safety income tax, gas tax, fees for service, stormwater fees, etc.
The following table summarizes the total proposed budget to be voted on by fund. Note that for property tax funds, because of a quirk in the way that the state systems report on the property tax circuit breakers (“tax caps”), the revenue loss from the circuit breaker is actually represented as a budgetary expense.
If you have any questions or concerns about this budget, please contact me or any other member of the Monroe County Council. And again you can make public comment on this budget Tuesday evening (10/24) and Monday evening (10/30).
Amidst all of the discussion about public-private partnerships (P3s) as a means of financing infrastructure, and concern about the future of I-69 Section 5, I came across this presentation from S&P Global Ratings in 2016 to the National Conference of State Legislatures Legislative Summit: 2016_Prunty_Presentation,
The presentation presents a fascinating window into the narrow keyhole through which the credit ratings agencies see state governments (which is of course often very different from the way that the public sees the same state governments!) and also the bigger financial picture in which P3s are being promoted in order to close the infrastructure gap.
The first part of the presentation deals primarily with the relative state of fiscal health of the states from a debt perspective. As everyone is probably aware, Indiana joins 30% of the states at the top, with a AAA rating. Neighbor Illinois is an outlier at the bottom with a BBB+ rating. Indiana also joins the majority of states with a stable outlook. A handful of states have a negative outlook, meaning things are likely to get worse.
More interesting is S&P list of key credit risks that led to where the states were at the beginning of 2016: energy-producing states losing oil revenue, current year budget pressures from revenue shortfalls or political gridlock, future year budget pressures, and large unfunded liabilities (mostly pension debt or other employment-related liabilities).
S&P goes on further to identify key themes for 2016: 1. Slower Revenue Growth, 2. Tax Incentives (for economic development), 3. Spending Restraint, 4. Aid to Higher Education, and 5. Pension Pressures Persist. #3 and #4 in particular engage the tension between short-term and long-term success. In fact, later in the presentation, the author, while seeming to champion austerity as a way of managing their debt levels acknowledges that:
For states that have made these trade offs, the impact on credit quality is favorable in the near term (3-5 years). However, looking ahead, the reduced investment in productivity enhancing areas (infrastructure and higher education), paints a dimmer picture of their long term economic growth prospects
So — austerity may help in the short run, but balancing the budget on the backs of infrastructure and higher eduction ultimately harms in the long run.
The presentation then goes on to define debt and debt sustainability, from a ratings agency perspective, and comes to the conclusion that the state and local government sector debt trends are by and large sustainable — and in particular there has been a noticeable pullback on debt issuance after the Great Recession. Most states have seen increases in economic productivity in excess of increases in debt issuance (again with a few exceptions). S&P concludes:
During the recession: states had fiscal crises, not debt crises
However, they do warn that only looking at bonded debt gives a relatively rosy picture of overall state debt — and that to get a more realistic picture, other obligations such as pension and other post-employment-related benefits need to be taken into account.
So where does infrastructure and P3 come in?
S&P attempts to make the case that while the US has a significant infrastructure gap (structurally deficient bridges, maintenance backlog on transit, construction backlog, water and sewer deficiencies, traffic congestion, and delayed freight), that states will not be able to close this gap through debt-related financing alone, without compromising their credit ratings, especially if the operations and maintenance (O&M) costs of infrastructure are included. P3s are suggested as a potential solution, and in particular:
P3s offer states a way to fold O&M expenses into the overall cost of financing a project,
This is of course the Design-Build-Finance-Operate-Maintain model used (at this point, unsuccessfully) for I-69 Section 5. And the author does acknowledge that:
… the P3 model can be complex and in certain cases, states attempting P3 projects have encountered political opposition.
I suspect that political opposition will only increase at this point.
Earlier this week I attended the meeting of the Executive Committee of the Northern Monroe Fire Territory. I am a non-voting taxpayer member of the Executive Committee. At the meeting we heard concerns from some residents both that the tax rate increase in creating the territory was too high and that they could not understand where that high tax rate came from. While the former is a values question that each taxpayer has to come to answer to on their own, I thought I would take a bit of time here explaining where that tax rate actually comes from and where that money goes.
Again, the purpose of this post is not to persuade anyone; it is just to educate the public about how their tax rates are determined. Hopefully with a little bit of shared knowledge and shared understanding, we can all engage in productive dialog about the services needed by our community and their costs.
Governance of the Territory
First, though, let me take a moment to explain the governance of the territory. The territory was established through specific processes set out by state law. The authority to create the territory is held by the township boards coming together to form the territory. The Bloomington Township Board and the Washington Township Board passed identical resolutions that established the territory, and both boards also passed the Northern Monroe County Fire Protection Territory Agreement, which is essentially the by-laws that govern the territory.
Note that in a fire territory, by law one of the units (townships) has to be designated the “provider unit”. The budget for the territory then sits in the provider unit, and the provider unit’s board has annual budget authority over the territory. So in the case of Northern Monroe, because Bloomington Township is designated as the “provider unit”, the Bloomington Township Board ultimately has authority over the territory budget.
That agreement established the 6-member Executive Committee, which consists of: both township trustees and one township board member from each township (4 voting members total) and one non-voting citizen representative from each township (I am the non-voting citizen representative from Bloomington Township and Mike Baker is the representative from Washington Township). The Executive Committee’s duties are as follows:
Recommend annual budget;
Recommend major purchases in excess of $50,000;
Contribute to the planning and development of possible future capital
Receive and review annual reports from the Provider Unit and Fire Chief;
Recommend staffing and equipment allocations;
Appoint the Fire Chief;
Act as liaison with the township s/he represents, enhancing communication between the township board, the community, and the Executive Committee.
So now onto the discussion of how to get from the budget to the tax rates. The best source for budgets for ALL taxing units in the state of Indiana is the state’s web site Gateway Report Builder. From there, you can download budgets, tax rate information, and just about any other financial information you want about any local unit in the state. To get the budgets for the territory, go to Budgets -> Line Item Budget Estimate, and choose Monroe County and Bloomington Township. There are two separate funds that make up the fire territory: Special Fire Protection Territory General and Special Fire Protection Territory Equipment Replacement. General is the annual budget for operating the fire territory and Equipment Replacement is for accumulating funds to replace apparatus (fire trucks, etc.).
I’ve included copies of the 2017 budget reports here:
So from the perspective of calculating the tax rates, the most important thing about the budget is the bottom line. Here is the bottom line from the General Fund budget:
The annual budget, as passed by the Bloomington Township (provider unit) Board for 2017 for the general fund (which, again, funds the operations of the fire department, including salaries, lease payments on a fire station, and pretty much any other expenses of the fire department except equipment replacement) is $2,776,423.
I will write another posting that will discuss this budget further — while the above budget reports give you some detail, the categories are sometimes broader than would be useful. For example, under administration salaries and firefighter salaries, most people would like to see how that actually breaks down in terms of the number of firefighters at what ranks, and how much they are paid. I’ll provide that information, but in a separate posting.
Financial Statement and Property Tax Levy
Now that we have the budget, though, how does this translate into a tax levy? That involves another state form known as the 4B (also known as the “16-line statement”) that each unit files during the annual budgeting process for each fund (i.e., for the Fire Territory, the general fund and the equipment replacement fund). The 4B is essentially an 18-month financial statement, covering from July 1 of the current year to December 31 of the year being budgeted for. It basically allows the unit to identify all of its planned expenditures, its available revenues from existing sources, and any property taxes it needs to levy for the budget year to be able to fund the expenditures.
Because the Fire Territory was only created in 2017, the 4B statements for the two fire funds are simpler than they usually are. To generate the 4B reports, go to Gateway Report Builder and run a Budgets -> Budget Estimate – Financial Statement – Tax Rate report for Bloomington Township for 2017. You’ll have to page down until you find the report for the fund we are looking at — Special Fire Protection Territory General. I’m including a copy of this report below. While we could spend all day discussing this form, I just want to focus on the reason I’ve written this posting — going from the budget to the tax rates. You only want to pay attention to the right-most column, labeled “Certified Amount” — these are the numbers that are actually used to calculate the final tax rate.
The top part of the statement relates to planned expenses of the territory. Note the line #1 — total budget estimate for incoming year. This is the $2,776,423 that I referred to above — the estimated amount required to run the fire territory for the year. The second section refers to revenue, including cash on hand. Because the territory is new for 2017, there isn’t any cash on hand. Line 8b states that the Fire Territory expects to receive $575,484 in miscellaneous revenue. Miscellaneous revenue is basically all revenue except property tax. You can actually see a breakdown of this number again through Gateway Report Builder and run a Budgets -> Miscellaneous Revenue Report for 2017 for Bloomington Township, Special Fire Protection Territory General.
I’ll include that report here, since it is short:
As you can see, there are only a few sources of miscellaneous revenue for the fire territory. Vehicle and Commercial Vehicle excise taxes are distributed to every fund that receives property tax. Bloomington Township is also budgeting $363,837 of its share of local income tax (LIT) towards the territory. Because of the increased property taxes, the township will receive a significant increase in its share of income taxes as well, and the Township is able to use that additional income tax to lower the property tax rate. The other miscellaneous revenue line of interest is $130,000 for Fire Protection Contracts and Service Fees, which comes from providing fire protection to Benton Township.
Let’s go back to the 4B above. So we know the territory needs $2,776,423 in budget to run the territory (general fund), and expects $575,484 in miscellaneous revenues. Therefore, it needs at least $2,776,423 – $575,484 in property taxes to fund that budget. That number, $2,200,939 is found on line #10.
Finally, the fund needs what is known as an operating balance, which is essentially a cash balance that is needed in the fund to be able to make payroll each year before the first property tax settlement of the year comes in June. I won’t get into details on what that number should be, but in this case, it is set to be $366,818, and is included on line #11. Another way of interpreting the operating balance is that it is what the fund will have at the end of 2017, to begin 2018 (and make payroll, etc. before the first 2018 property tax settlement comes in June).
So to recap:
Territory needs $2,776,423 in 2017 for operations
Territory will get $575,484 in miscellaneous revenue
Territory needs to end 2017 with $366,818 left
So working backwards from these numbers, you can tell how much needs to be raised in property taxes:
The total amount of property tax required to fund the budget for the General fund of the territory is $2,567,755. This number is also provided in line #14 on the 4B statement, and is known as the levy. This is the amount of property taxes that will be raised from taxpayers.
Calculating the Tax Rate
Finally, we need to divvy that levy ($2,567,755) among all of the taxpayers in the Fire Territory. To do that, we calculate a tax rate by dividing that levy by the total net assessed value (net means after deductions and exemptions) of all property in the territory — both Washington Township and the unincorporated Bloomington township.
To get that total net assessed value, I’m going to send you to yet another report. Unfortunately the 4B statement above is created in the budget process before the total net assessed value is known — so the assessed value on that form is always an underestimate of the actual assessed value.
To get the assessed values, again go to Gateway Report Builder and run an Assessed Value -> Certification of Net Assessed Values by District for Monroe County for 2017. Here is what you will see:
Because this report is very busy, I highlighted the two relevant numbers here — the net assessed value for Bloomington Township (the unincorporated part) and Washington Township. Those numbers are:
So now that we have the levy (the property tax that needs to be raised) and the assessed value (the assessed value over which the levy is distributed), we can calculate the tax rate:
So for the Northern Monroe Fire Territory General Fund, the tax rate for 2017 is $0.5972 per $100 of net assessed value. Note that this rate for the General Fund is spread across both Washington Township and Bloomington Township, and, crucially, is uniform across both townships.
Note that this rate is particularly high for the first year of the territory, for several reasons: first, the additional income tax that Bloomington Township receives because of the territory doesn’t come in until the second year of the territory; this additional income tax can be used to reduce the property tax rate in 2018 and subsequent years; and second, as you can see in the above calculations, the territory had to request property tax levy above what was actually required for the first year in order to create an operating balance. This will only need to be done for the first year.
Equipment Replacement Fund
So we’ve talked about the General Fund for the Fire Territory, and how its tax rate was calculated. The Equipment Replacement Fund is much easier. The General Fund is what’s known as a levy-controlled fund; as you could see through these calculations, you start with the levy, and then calculate the rate by dividing the levy by the assessed value. The Equipment Replacement Fund is called a rate-controlled fund; the unit of government simply sets a fixed tax rate, which is limited by statute. In the case of the Fire Territory Equipment Replacement Fund, it is $0.0333 per $100 of assessed value.
Total Fire Territory Tax Rate
Finally we are in a position to calculate the entire tax rate of the Northern Monroe Fire Territory for 2017, simply by adding together the tax rates of the General Fund and the Equipment Replacement Funds:
So for 2017, taxpayers in the fire territory will pay $0.6305 per $100 of net assessed value of their property (i.e., assessed value after any deductions and exemptions) for the fire territory.
How Does This Compare to Previous Fire Rates?
There is no doubt that this tax rate is high, and represents a substantial increase over 2016 tax rates for fire service. Professional firefighting and EMT services are expensive! And neither Washington nor Bloomingon Township have been adequately able to fund their firefighting needs in the past, because of state limits dating back to the 1973 Otis “Doc” Bowen property tax restrictions.
But the statutes governing the creation of a fire territory unfortunately also create a particularly high first-year expense for the territory, for several reasons, including the need to establish an operating balance (cash reserves) for the first year, and the fact that the additional income tax doesn’t get allocated to the township until the second year of the territory.
The following table shows the 2016 fire rates vs. the 2017 fire rates for both townships:
How Does This Fit in to the Overall Tax Rates for a Taxpayer?
Finally, these tax rates for the Northern Monroe Fire Territory need to be pub into context to see their overall effect on the taxpayer.
First, the fire territory tax rates are combined with other township-level tax rates. The following chart shows the overall change of township tax rates:
But of course the township tax rate is only part of the overall property tax rate that a taxpayer pays in a particular district (Washington Township is one taxing district and unincorporated Bloomington Township is another). Taxpayers also pay a tax rate associated with Monroe County, the Monroe County Community School Corporation, the Monroe County Public Library, and the Monroe County Solid Waste Management District.
The following chart shows the overall change in property tax rates for residents in Bloomington and Washington Townships from 2016-2017:
As you can see, the overall tax rates went up 48.5% in Washington Township and 23.7% in Bloomington Township. You can also see that this increase is almost entirely due to the increased costs of the fire territory; rates for other taxing units went up minimally (or even decreased).
What this means is that, all other things being equal, a taxpayer in Washington Township could expect to see a 48.5% increase in their tax bill over 2016, and a taxpayer in Bloomington Township could expect a 23.7% increase. Of course, all things aren’t always equal — the assessment of the property could have changed, the use of the land could have changed (making it, for example, no longer eligible for the homestead deduction), and assessment methods may have changed (for example, acreage that is not being farmed may no longer be assessed as agricultural land).
I hope this was at least slightly informative. Again, my intent here was not to persuade anyone about the territory — it was purely to inform taxpayers where the tax rates that they just saw on their new tax bills came from. It may be more detail than most of you want, but I wanted to make sure I went through the math in enough detail that you can see how your rates are calculated. I plan to make a few more postings providing more explanation in several areas; the next posting will focus on the budget, and how staffing levels for firefighters drive the budget numbers.