The Millage Rate Process Georgia Clerks Education Institute - PDF document

7/29/2018 The Millage Rate Process Georgia Clerks Education Institute September 10, 2018 John Culpepper jwculp3@outlook.com Learning Objectives At the end of this session, you will be able to • Calculate a property tax bill • Discuss three different views of property taxes • Recall the components of the Tax Digest and how it is developed each year • Obtain information from a Consolidation Report Continued on next slide 2

7/29/2018 Learning Objectives At the end of this session, you will be able to • Improve your government’s estimate of property tax revenue • Calculate required Rollbacks, Reductions and Other Provisions • Review other sources of information related to property taxes in Georgia • Explain how property tax revenue impacts cash flow Continued on next slide 3 Learning Objectives At the end of this session, you will be able to • Review various property tax forms used in Georgia • Recall the public notice and meeting requirements related to property taxes in Georgia • Discuss presentation tips for presenting property tax Information in public meetings 4

7/29/2018 Overview • Property Tax Math 101 • Building the Property Tax Digest • The Consolidation Report • Rollbacks, Reductions, and Other Provisions • Finding More Information about Property Taxes Continued on next slide 5 Overview • Property Tax Forms • Meeting the Property Tax Requirements-Are We Legal? • A Recent Change in Penalty and Interest Charges for Delinquent Property Taxes • Estimating Property Tax Revenue-Tricks and Traps • Presenting Property Tax Information in Public Meetings 6

7/29/2018 Notes about Class Materials • Appendices included with the class materials provide examples of calculations and forms used in the Property Tax process. Appendices will be reviewed during the class. • Supplemental materials are also provided as background materials for in depth review if needed after the class session. The exam at the end of class does not include information from the supplemental materials. 7 Importance of Property Taxes • For Georgia Counties: – 44% of General Revenue – $367 per capita – $3.4 billion collected in 2013 • For Georgia Cities: – 27% of General Revenue – $287 per capita – $1.0 billion million collected in 2013 Source: 2014 DCA Fiscal Planning Guide 8

7/29/2018 PROPERTY TAX 101 9 Key Terms for Property Taxes Millage Rate - A tax rate that when multiplied against the assessed value of taxable property calculates the amount of property tax to be paid. It is a “numerical multiplier”. The Millage Rate is usually stated as “dollars per thousand”. For example, a millage rate of 5 mills is $5.00 per thousand of assessed value. When doing calculations, the millage rate is stated as .005. The Millage Rate is established by the “levying authority” each year. 10

7/29/2018 Key Terms for Property Taxes Market Value/Assessed Value - Market value is the current estimated amount that property can be bought or sold. Assessed value is 40% of market value and is used as the basis for calculating the property tax levy (bill) in Georgia. Example: If the market value of a parcel of real property is $150,000; then its corresponding assessed value is $60,000. If the assessed value of a second parcel is $50,000; then its market value is …….$125,000. 11 Property Tax Calculations Let’s look at the calculation of property tax for a single parcel of Real Property….. Market Value $150,000 Assessed Value $60,000 or 40% of Market Value Millage Rate 0.008 or 8 mills Annual Property Tax Levy $480 Tax Amount 12

7/29/2018 Class Exercise 1 • The market value of property for the average homeowner in Vinson County is $120,000. The current millage rate for Vinson County is 6.50 mills. • How much does the average homeowner currently pay in property taxes each year? • The Vinson County Commission is considering increasing the millage rate from 6.50 mills to 7.00 mills to provide added funds for road maintenance. What will the impact of this increase be for the average homeowner in Vinson County? 13 Three Different Views of Property Taxes Providing the Right Information, to the Right Audience, at the Right Time is one of the Biggest Challenges to working with the Property Tax Let’s look at three different views of Property Taxes for Georgia Local Governments 14

7/29/2018 Three Different Views of Property Taxes • Total Digest (“Macro” View) -Looks at the Property Taxpayers as a single group • The Average Homeowner/Taxpayer (“Micro” View) - Looks at the individual property taxpayer • The Budget View- Looks at the impact of Property Taxes in the financial plan for the upcoming year 15 Concept of Equivalent Units • These are short cuts or building blocks that help decision makers to understand the impact of adding to and subtracting to the current millage rate. • The revenue from a one mill increase or decrease in the upcoming budget • The impact of a one mill increase or decrease on the Average Homeowner/Taxpayer 16

7/29/2018 Property Tax Math 101-The Total Digest View Fair Market Assessed Value(FMV) 100% Value(AV) 40% Total Property $3,750,000,000 $1,500,000,000 Less Exempt Property ($500,000,000) ($200,000,000) Taxable Property $3,250,000,000 $1,300,000,000 Less Exemptions ($250,000,000) ($100,000,000) Net Taxable Property $3,000,000,000 $1,200,000,000 Millage Rate - 0.0085 or 8.50 mills Tax Levy - $10,200,000 Property Tax Collection Rate - 0.95 or 95% Net Property Tax Collections - $9,690,000 Equivalent Units: 1 Mill ($1 per thousand) $1,140,000 (Net Taxable Property/1000)*Collection Rate ($1,200,000,000/1000)*.95 0.50 of a Mill ($.50 per thousand) $570,000 0.1 of a Mill ($0.10 per thousand) $114,000 17 Property Tax Math 101- The Average Homeowner/Taxpayer View Fair Market Assessed Value(FMV) Value(AV) 100% 40% Average Property Value $150,000 $60,000 Less Exemptions ($25,000) ($10,000) Taxable Value $125,000 $50,000 Millage Rate 0.0085 or 8.50 mills Tax Levy $425.00 Equivalent Units: 1 Mill ($1 per thousand) $50.00 Taxable Value/1000 0.50 of a Mill ($.50 per thousand) $25.00 0.1 of a Mill ($0.10 per thousand) $5.00 18

7/29/2018 Property Tax Math 101-The Budget View (A Balanced Budget) Current Year Property Tax Revenue $9,690,000 Total Revenue not Including Property Taxes $9,810,000 Use of Fund Balance $500,000 Total Sources $20,000,000 Total Operating Budget $19,000,000 Total Capital Budget $1,000,000 Total Uses $20,000,000 Difference $0 19 Property Tax Math in Action Situation: The Chief Tax Appraiser reports that the assessed value(AV) of property in the County will decline by $25,000,000. 1. How much will property tax revenue decline? Using the Total Digest View the answer is $201,875. 20

7/29/2018 Property Tax Math 101-The Total Digest View Before Decline Impact of $25M Decline Difference Fair Market Assessed Value(FMV) 100% Value(AV) 40% Assessed Value(AV) 40% Total Property $3,750,000,000 $1,500,000,000 $1,475,000,000 ($25,000,000) Less Exempt Property ($500,000,000) ($200,000,000) ($200,000,000) Taxable Property $3,250,000,000 $1,300,000,000 $1,275,000,000 ($25,000,000) Less Exemptions ($250,000,000) ($100,000,000) ($100,000,000) Net Taxable Property $3,000,000,000 $1,200,000,000 $1,175,000,000 ($25,000,000) Millage Rate - 0.0085 0.0085 Tax Levy - $10,200,000 $9,987,500 ($212,500) Property Tax Collection Rate - 0.95 0.95 Net Property Tax Collections - $9,690,000 $9,488,125 ($201,875) Equivalent Units: 1 Mill ($1 per thousand) $1,140,000 $1,116,250 ($23,750) 0.50 of a Mill ($.50 per thousand) $570,000 $558,125 ($11,875) 0.1 of a Mill ($0.10 per thousand) $114,000 $111,625 ($2,375) 21 Property Tax Math 101-The Budget View (A Balanced Budget) Before Decline After Decline Difference Current Year Property Tax Revenue $9,690,000 $9,488,125 ($201,875) Total Revenue not Including Property Taxes $9,810,000 $9,810,000 $0 Use of Fund Balance $500,000 $500,000 $0 Total Sources $20,000,000 $19,798,125 ($201,875) Total Operating Budget $19,000,000 $19,000,000 $0 Total Capital Budget $1,000,000 $1,000,000 $0 Total Uses $20,000,000 $20,000,000 $0 Difference $0 ($201,875) ($201,875) 22

7/29/2018 BU BUIL ILDING THE HE PROPERTY TAX DIG DIGEST 23 Building the Property Tax Digest “Piece by Piece” • Each year the values and exemptions included in the Property Tax Digest are built based on deadlines set in state law or Georgia Department of Revenue regulations • The challenge for a financial official is: • To monitor the process • To gain important information that will impact the Government’s Budget • To meet all of the deadlines 24

7/29/2018 Components of the Digest • Real and Personal Property • Public Utility Property • Motor Vehicles • Mobile Homes • Timber • Exemptions 25 Components of the Digest-In the Order as they are Completed Each Year • Motor Vehicles January • Timber Sales Date • Real and Personal Property -New Construction February • Mobile Homes March • Exemptions May • Real and Personal Property -Existing Property June • Public Utility Property November 26