Homeowners, all residential properties paying an increasing share of property taxes
By MARK MILLER
In reviewing the 2024 property tax data that was released in late February, it is clear that a trend identified in a News-Banner analysis in 2022 has not only continued, but accelerated.
That trend is called “tax shifting,” as the burden of property taxes has been and continues to shift from one group of entities to another. That shift is illustrated in the pie charts at right.
In 2018, the share of what can be called the “property tax pie” that residential properties (to include owner-occupied homes, residential rental homes, apartments and mobile homes) were paying was just shy of 30% — 29.96% to be exact. Non-residential properties — business and industrial real estate and personal property to include long term care facilities and agricultural land — were paying 70.04% of the total property tax bill of about $18,876,000. Homeowners — single-family owner-occupied homes — were paying about 19% of the total.
The 2024 data reveals that the residential-properties’ share of the tax bill has grown to essentially one-half — 49.19% to be exact. The total tax levied on all Wells County properties this year is about $32,612,000, a growth of almost 73% in just six years. Homeowners are now footing almost exactly one-third (33.09%) of the bill.
Just one year ago, the share of the property tax pie that residential-property-categories were funding was about 43%. The increase in that percent to nearly one-half results in a 32% increase in the actual dollars collected from residential properties (from about $12.1 million to just over $16 million) while non-residential tax dollars increased only 3.9% (from about $16 million to about $16.5 million).
The result: property tax bills increasing for most homeowners in the double-digits. Additionally, due to changes in how residential rental properties were assessed last year, property tax bills for those properties doubled — or nearly doubled — more often than not.
The numbers and statistics can be overwhelming. Digging into the hows and whys is time consuming and often confusing. There are numerous factors and issues that come into play, many which raise additional questions.
The two key factors that go into the property tax formula are assessed values and taxing unit budgets. These result in a tax rate that is then applied to each property.
A list of other factors that have impacted 2024 property tax bills includes but is not limited to:
• Assessed Values: Residential properties have, as documented over the past several years, been the biggest driver in the proportion of property taxes that residential properties pay. Home prices, although cooling off the past year, have seen the highest rate of increases in perhaps decades. As noted in earlier analyses, those increases are inconsistently applied due to proscribed assessment procedures. For example, one “neighborhood” — a technical assessment term — can experience higher sales than an adjacent “neighborhood” resulting in broad differences in AVs among nearly adjacent properties. The Bell Brook addition on Bluffton’s northeast side consists of three “neighborhoods” and have resulted in inconsistent increases in AVs, and thus property tax bills.
The Oak Forest subdivision on Bluffton’s north side had consisted of four neighborhoods but this was consolidated into two in order to address that very issue. That change, however, resulted in some inconsistent changes this year which should even out in the coming years.
Meanwhile, business and commercial real estate values have been relatively stable over the past several years although recent sales may impact that in the coming years. Agricultural AVs, as also noted in previous articles, are not based on land values or recent sales but on a complicated formula monitored by Purdue University economists. Ag Land values went up about 26% across the board in 2024, as predicted by Purdue economist Dr. Larry DeBoer. This change resulted in the Ag Land category’s piece of the pie increasing in 2024 for the first time since 2018.
• Residential/rental AV changes: This category, which includes single-family residences and some multi-family structures but does not include the larger apartment complexes, saw the highest percentage of growth in AV, and thus in property tax bills, of any other category. This is primarily the result of a change in the assessment formula.
Wells County Assessor Laura Roberts explains that her office had been using what is referred to as a “straight cap rate” based on the rent income. A change was made for the 2023-Pay-2024 cycle to utilize what is called the “gross rent multiplier” process that also factors in sales of the properties. While the state’s Department of Local Government Finance has long preferred this method, Roberts says that Wells County had not had enough “valid” sales of rental properties to have “good comps,” meaning comparable sales to apply to other properties.
“Rentals are often sold from one family member to another,” she explains, which essentially disqualifies such a sale as a “valid” market-based comparison.
The result was a 71% increase in the total tax dollars levied in this category, growing from about $2.5 million in 2023 to about $4.25 million in 2024.
One landlord’s approximately 50 properties’ assessed values — as a group — increased about 25% and tax bills increasing by 36%. But the increases were by no means consistent among properties with no major modifications, which experienced increases from 2.8% to more than 50%.
• Bluffton Fire Territory: This new taxing entity is a result of numerous meetings and public hearings last year among the elected leaders from the city and Lancaster and Harrison townships to solve fire protection issues. Financial analyses by professionals predicted increases of at least 6% in these areas. Preliminary analysis appears to show that these predictions were fairly accurate if not a bit high. Exactly how much this impacted taxpayers in the city and the two townships is still being reviewed.
• Change in LIT Property Tax Credits: Wells County Council voted last year to change the formula of how the county’s Local Income Tax revenue is utilized. 23% of that revenue had been designated to be used as a property tax credit for homeowners, residential rentals, long term care and agricultural property. Homeowners received the lion’s share of those credits (85%) with the remainder divided among the other categories. Funds designated to those tax credits was reduced to 14% of the LIT revenue.
The impact of this change is fairly easy to compute for homeowners and comes out to about 3 to 3.5 (and perhaps as much as 4) cents per $1,000 Gross AV. The net amount will be impacted by each property’s deductions, such as mortgage and Homestead deductions.
Wells County Council President Seth Whicker was not surprised to learn these numbers and defends the decision. The revenue removed from the property tax credits was primarily applied to public safety.
“The county’s number one priority is the safety of our citizens,” he says, noting the challenges and costs facing 911 and EMS services. “We had to fund these issues and this was the most efficient way to do that.”
County council was also advised by tax consultant Darren Bates that the property tax credit option is going to be removed by the state at some point.
• Budgetary pressures: One cannot ignore the fiscal pressures for local taxing units to provide needed government services in an inflationary environment and in a labor market that has become increasingly competitive. Evidence has been seen recently in conversations at the county-level meetings regarding pay and benefits, specifically in addressing issues at the health and highway departments. A breakdown of budget changes from 2023 to 2024 is included in a chart above.
Tax levy
growth limitations
The Indiana Legislature has had an established limit on how much local government tax levies can grow. It is called the Maximum Levy Growth Quotient — MLGQ for short, and often also referred to as simply the MGQ, Maximum Growth Quotient. That limit for 2024 is 4%.
So the question is, if the state limits the tax levy growth at 4%, how can Wells County’s increase in the total tax levy be more than 12%?
The quick answer is: there are exceptions. Perhaps the largest is municipal and school debt, but those increases have limitations as well. How that works is complex.
There are adjustments that are applied which, for example, resulted in the county’s general fund levy increase of almost exactly 5% to come in at $1,754 below the MGQ of 4%.
Taxing units can also appeal to the state to collect a higher levy, a process that apparently does not include a public hearing.
As displayed on the accompanying chart, 15 of Wells County’s 24 taxing units appear to exceed the 4% MGQ, with Jefferson Township having the largest percentage increase. The News-Banner is continuing to research this particular puzzle, including how school debt factors in, what bases taxing units can appeal for the MLGQ exceptions and how widely utilized those appeals are. The News-Banner is also analyzing the variances in property tax bills throughout the county.
While 2024 property tax bills are still being prepared and will not be mailed out for a couple weeks, taxpayers can see what their 2024 bill will be by going wellscounty.org and clicking on the “GIS” link in the top menu bar and then searching for their property.
miller@news-banner.com
