Many Wells County homeowners’ are paying double — or more — in just four years
Part 1 of 2
By MARK MILLER
As Wells County homeowners began receiving their annual property tax bills in late March, calls to the courthouse increased as did social media conversations, asking why almost all homeowners were seeing double-digit-percentage increases. Many were in the 40 percent range and it was not unusual to see increases of 60 percent or more.
Gilbert “Skip” Ross wrote a letter to the News-Banner highlighting his 125 percent increase this year.
“I know I don’t pay a lot in taxes compared to others,” he said, “but it’s not the money. We’ll be able to pay — it’s the principle. I ask a lot of questions, but can’t seem to get any answers.”
As reported March 19, the primary culprit for the increases across the board was a decision by the Wells County Council to divert nearly a quarter of Property Tax Credits to fund improvements for the county jail. The larger increases were, for the most part, compounded by spiking sales of homes in individual neighborhoods.
Further investigation revealed an alarming trend: many homeowners have now seen their annual property tax bill more than double since 2018, and in the case of Skip and Mary Ross, a property tax bill that has increased by a whopping 335 percent in just those past four years.
In an effort to answer the questions of how this has happened and identify the specific causes, the News-Banner has continued to investigate the factors that come together to determine how Wells County homeowners and landlords are taxed to support local government services.
If you’d prefer to not read through the details, here’s a very brief summary: Property taxes have seen significant increases over the past four years due to three main factors, not necessarily in any order: 1) Government spending has obviously increased. In the largest taxing units — the county general, Bluffton, Ossian, and the three school systems — at a rate significantly higher than the rate of inflation. There will be examples. 2) There has been a huge shift towards more dependence on residential property tax payers, who have shouldered nearly three-fourths of those increases; 3) Inconsistencies in assessments and the application of property tax replacement credits have added to the wide variations that have caused many taxpayers, but not all, to see increases of double or more.
First, a quick review
Owner-occupied residential property tax bills begin with an assessment of the market value of the property. Homes occupied by the homeowner receive a standard Homestead Deduction and then a Supplemental Homestead Credit. There are other deductions, based on whether you have a mortgage or a geothermal heating and cooling system, for example. There are disability deductions and a few others that rarely apply. After applying those, the property has a Net Assessed Value which is multiplied by the Tax Rate for the Tax District in which you live, which results in your Gross Tax Liability. Then, Property Tax Credits are applied to homeowner-occupied residential properties which reduces your bill to the final amount due.
The peculiarities and details of how those aspects affected the increases in this year’s tax bills versus last year’s was covered in that March 19 article. A sampling of 150 residential properties across the county found an average 20.75 percent increase in property tax bills for this year versus last year. Of those, only nine had an increase of less than 12 percent and three experienced a decrease in their bill.
To get an idea of the four-year impact across the county, the News-Banner looked at 20 of those 150 properties, choosing one owner-occupied property from 20 different “neighborhoods” around the county. Of those, the average increase in their property tax bills from 2018 to 2022 is 73.85 percent. The changes range from a low of 18.68 percent to a high of the 335 percent experienced by the Ross family on West Central Avenue in Bluffton.
As in the analysis of what impacted the range of one-year changes, there are the three aspects — assessments, tax rates and property tax credits — to examine, all of which brings up a new term: tax shifting.
Assessments
The complicated nature of assessments was covered in the initial article. Further investigation and efforts to better understand the details yielded, frankly, mixed results. Again, the goal of the state’s tax assessment system is to have owner-occupied residential properties assessed at market value.
In looking at the changes in assessments over the four-year period, it can be summarized as such: While there is some consistency of assessed values within each designated “neighborhood” over the four-year period, there is not the same consistency in similar properties across the county. Of the 20 sampled properties, the average increase in assessed value computes to 18.19 percent. However, the range includes a reduction in value (1.73 percent) to an increase of 42.54 percent. Generally speaking, rental properties have seen minimal changes in assessed value since those values are based on rental income as opposed to market value.
The market value assessment of owner-occupied residential properties depends almost entirely on recent sales within that specific neighborhood. Note that a housing division, such as the Woodlands on Bluffton’s north edge, will often have at least two “neighborhoods,” while rural residential properties are often grouped into two categories within each township: those located on paved roads and those on gravel roads. Contrary to what we reported on March 19, if a neighborhood does not have any sales, there is no “trending” formula applied to those homes unless the local assessor’s office determines one is needed, but that appears to rarely happen.
Exceptions exist, but generally speaking, if your neighborhood had no or minimal sales in the past four years, you’ve seen no or minimal increase in your Assessed Value; or perhaps even a reduction in value. On the other end of that scale, if you live in a neighborhood which has seen development and growth, or where there have been numerous sales (almost all of which, you can almost be assured, were for higher than their assessed values) the increase in your home’s value has been significant, resulting in an exponential increase in your property tax bill.
Depreciation factors can cause a home’s assessment to drop and periodic adjustments by the state on “replacement costs” can increase the values, but those factors can be impacted by a list of variables, including construction materials, one-or two-story variables and whether basements are finished.
A few examples to demonstrate the range and variety of changes:
• A four bedroom home on 3.4 acres in Jackson Township in 2018 had an Assessed Value of $281,000 and paid $1,308. By 2022 the AV had increased by just 10.89 percent to $311,600 and the tax bill is $1,552, an increase of just 18.68 percent.
• A three-bedroom home in Bluffton (Lancaster Township) went from $217,800 in value to $289,300 (32.8 percent), and the tax bill nearly doubled, going from $1,176 to $2,323.
• The owners of a three-bedroom home on Elm Grove Road (Harrison Township) saw their home’s value increase by more than 42 percent — valued at $170,000 in 2018 and is now assessed at $242,600. As a result of that and other factors, their tax bill has more than doubled, going from $968 to a few pennies over $2,000. This particular couple began a social media thread when they posted that their property tax bill had jumped over 60 percent since just last year. One of the first responses came from an elected official, asking whether they were likewise pleased to see their home’s value had increased so much. The question would be: How does that value help pay this higher bill?
Tax rates
An examination of how the tax rates have changed the past four years will not reveal anything on their own. The tax rate is determined by dividing the budget total by the Total Assessed Value in that taxing district. If the budget remains the same, for example, but the Total Assessed Value increases by 10 percent, then the tax rate would go down 10 percent.
One example: The City of Bluffton’s tax rate in 2018 was $0.5432 per $100 in AV. For 2022, that rate is $0.5190, a decrease of 4.3 percent. However, The TAV • Total Assessed Value of all properties within Bluffton’s taxing district • increased during the same time period from $448.7 million to $556 million, an impressive 23.1 percent. This resulted in a Maximum Levy (what the city could bill all property tax owners before property tax credits are applied) going from about $2.4 million in 2018 to $2.9 million this year, an 18.6 percent hike.
Trying to examine and explain how tax rates, assessed values and certified budgets relate would take a PhD in mathematics and economics; chances are, we wouldn’t understand her/him anyway.
So, let’s rephrase “tax rates” into “certified budgets.” The questions being: Have increases in government budgets outpaced inflation? How much has this impacted residential property taxes?
Some examples:
• The county’s General Fund certified budget for 2018 was $14.7 million; the 2022 budget is $17.4 mil, an 18.38 percent increase over the four-year period. As a result, the county tax rate increased 7.29 percent while Total AV increased 15.87 percent, hence the county general fund maximum levy increased 24.32 percent
• Northern Wells schools’ certified budget for 2018 was $23.8 million, now it is $28.8 million, a 20.8 percent increase. What the school district collected from Northern Wells property owners increased by almost 30 percent from ’18 to ’22: $6 million to $7.7 million.
• Southern Wells’ tax rate increased almost 19 percent but that is a good example of a misleading statistic. Their budget has increased less than 2 percent over the four-year period because Southern Wells’ Total Assessed Value had a much more modest increase.
• Lancaster Township displays a certified budget that went down from ’18 to ’22, albeit just 1.5 percent. However, the township’s levy grew from $35,868 to $41,416, a 15.5 percent increase. (Township numbers vary widely in both increases and decreases. A brief examination of budgets and bank balances raise other questions for another day.)
• Overall, the Total Property Tax Levies for the entire county • the money collected from all categories of property taxes (residential, mobile homes, agriculture, business, commercial real estate and industrial) increased by 24.2 percent between 2018 and 2022. Meanwhile, “Core” inflation, as defined by the federal government, averaged 2.81 percent per year between 2018 and 2022, for an inflation total of 11.73 percent.
To be fair, it must be recognized that inflation numbers do not always reflect reality in how it impacts people and government, but in a macro sense, it seems a fair standard by which to hold government accountable.
It was also learned during this exercise that “Certified Budget” does not necessarily mean those dollars are all being billed to taxpayers in one form or another. For example, Bluffton has historically “under-spent” their budgets by about 10 percent, according to one city councilman, and those dollars get “rolled-over” into the next budget.
It can also be argued, as seen on at least one social media thread and as pointed out by Wells County Council president Steve Huggins in the March 19 article, that the county in particular has had to deal with some issues that had been put off: the county highway garage and renovations at the county jail. Those two factors have had a definite and measurable impact on the increases in 2022 versus 2021. However, the decision to reduce the Property Tax Credits from 30 percent to 23 percent in order to raise about $490,000 for jail improvements, placed the total burden of that project onto the tax bills of owner-occupied residential properties. This was part of a significant “tax shifting” which will be addressed in Part 2.
Tax Abatements
and TIFs
Without getting into the details of tax abatements and Tax Increment Financing, they are part of every county’s and city/town’s economic development tool box. These are incentives for companies to locate, expand and invest in new equipment, thus creating or retaining jobs. The programs basically reduce their real estate or business personal property tax bills for a given period of time. They are not permanent.
While there is some degree of debate even among government officials, there is a general acceptance that these programs are necessary and must be allowed, even when officials are convinced the business would make these investments anyway. For new businesses looking to locate somewhere in northeast Indiana, if Wells County or Bluffton or Ossian doesn’t allow abatements or TIFs, someone else will and we will not see that growth.
Abatements and TIFs do not reduce the amount of money raised by the government. They certainly impact tax rates because they remove or reduce Total Assessed Values available to be taxed.
From 2018 to 2022, the total amount of Assessed Value (equipment and real estate) under abatements has increased from $51.6 million to $74.1 million, a 43.5 percent increase. While that sounds like a lot, it represents only about four percent of the county’s Total Assessed Value of about $1.8 billion. The good news, however, is that these companies are investing in the community which increases or retains jobs, which drives our economy.
Abatements and TIFs have an impact on what all property owners pay • residential, farmers, and business. The general consensus from numerous conversations is that the impact is not significant, and that overall, particularly with abatements, the community experiences a net gain.
Saturday: Deductions, Tax Credits and Tax Shifting
miller@news-banner.com
