Rinnngggg.
OK, class, if I can have your attention.
As you know, we’ve been delving into the intricacies of the state’s property tax system as part of our studies in Indiana Civic Government. But I feel the need to kind of circle back to the very basics since it appears some have not been listening or paying attention.
As we have seen, the property tax system is very complex. The crafting of county, city, school and other taxing unit budgets and the often confusing process of assessing property values is only the beginning. How state limitations are applied, and the impact of tax credits and deductions and tax caps can be mind-boggling. It is all interrelated. There is no one single controlling element that determines what a property owner’s property tax bill will be, whether they be a homeowner or commercial property or a farm.
However, there are two basic elements:
1) The budget. This is how much a government unit wants or needs to spend in a given year, which ultimately translates into how much they will need to raise in property taxes. Complications begin already as budgets draw revenue from different sources. The state — specifically the Department of Local Government Finance — sets the portion of each unit’s budget that will be covered by property taxes for most categories. Their determinations apply to General or Operations Funds, for example. Meanwhile, Debt Service and Cumulative Funds are exempt from DLGF controls but are subject to other limitations. In the end, each unit arrives at how much will need to be raised via property taxes across all fund categories, which becomes its “tax levy.”
2) Your property’s assessed value. The county assessor has set procedures to follow. There is certainly room for some subjectivity and how regulations are applied — thus an appeal process — but for the most part, the procedure is established by state law.
Now, once the assessment process is complete, the government computes the total assessed value of the county and for each individual taxing unit — schools, cities, townships, etc. Then each taxing unit’s tax levy is divided by the total assessed value of all the properties within its boundaries which results in a tax rate that is then applied to each individual property, which results in the property tax bill you get in the mail.
I have to tell you that accurately boiling it down to the basics was surprisingly difficult. So it comes as no surprise that we’ve spent pages of newsprint on the details.
But pay attention to the basics: The government unit establishes a budget. Property has value. While individual results will vary (undoubtedly the understatement of the year), the tax rate is a result of those two factors. Or should be.
I read an article last week that re-asserts the notion that by keeping their tax rate the same, a governing unit should be held blameless if your taxes go up.
“The only thing we control is the tax rate,” one of the decision makers of that unit said. Technically true, but it bypasses the indisputable fact that a tax rate is the result of decisions made on how much will be spent. The insinuation was that the cause rests solely with assessments.
Further evidence that our lessons are not being heard is seen in the results of a poll taken by another decision maker of that unit. Of 37 people questioned, 35 agreed with him that keeping the tax rate the same is a good thing. Which it would be if the taxing unit’s Total Assessed Value stays the same or rises modestly. In this case, the TAV had increased by 11.5% in 2024 and will increase another 14% in 2025.
A curious thing: When I ask 10 people about this issue, 9.5 agree with me. But I digress.
Class, I am not arguing that this taxing unit is acting irresponsibly in their spending decisions. Frankly, there is evidence to argue they are making sound and necessary decisions. However, by placing all of the blame of rising property taxes on the assessor is simply not fair nor is it right. It muddies the already muddy waters of how property taxes work.
May I remind you, class, we have seen in our studies that other taxing units have made decisions that have also increased — and will increase in 2025 — their patrons’ property taxes. Some of that has been accomplished as the rate was actually lowered and indeed, some have increased their rate in order to meet their stated needs or wants. However, they have argued their cases on merit or have put their decisions into an historical perspective, rather than blaming the assessor.
To repeat: There is no one single element in this complex process that determines what your property tax will be. It is all interrelated.
That interrelationship was on no better display than at the budget meeting for the Town of Markle just a few days ago. The council had managed to reduce their budget, which resulted in a $2,000 drop in their tax levy. Hence, they were rightly puzzled to find that their proposed tax rate would increase from this past year’s 1.10 to 1.29 — a 17% increase. Diving into their numbers, one of the council members discovered that the town’s Total Assessed Value had somehow been reduced from a reported $52 million to $44 million — a decrease of about 15%. Assuming there has to be a calculation error somewhere in the process, the council will be getting updated numbers before finalizing their budget.
(Wells County Assessor Laura Roberts reported Friday morning that apparently the mistake occurred on the Huntington County side of Markle or in the compilation of the two, since her numbers show a modest increase in the Wells County portion.)
So you can see how this is all interrelated. It is interesting to note that a government unit can manage the process to arrive at a targeted rate. It would also be interesting to delve into which element of all the factors that go into the formula has the most impact. And whether that would be one of the two basics — the budget or the property value. Which brings in what we have concluded to be a definitive “tax shift” in which homeowners have come to pay an increasingly larger piece of the total property tax pie and what the legislature might do about that and how the inconsistencies of home assessments have seemingly unfairly impacted certain homes and certain neighborhoods and how something called the MLGQ comes into play and …
Rinnngggg!
Well, perhaps we’ll discuss that during our next class.
miller@news-banner.com
