School Tax Rate Comparisons — Two Viewpoints

I'm beginning a series of posts on school district tax rates in Dutchess County.  School taxes are by far the largest single property tax for most taxpayers.  In fact, property owners often pay more in school taxes than in all other property taxes combined.  Another way of saying this is that the school tax rate is greater than the sum of all the other tax rates (town, county, fire, library, etc.) for a typical taxpayer. 

Comparison Requires True Value Tax Rates

In order to properly compare tax rates — any tax rates — the tax rates must be expressed in dollars per thousand dollars of market value, as I have explained countless times in this blog (for example, here, here, and here).  Tax rates expressed in terms of market value rather than assessed value are sometimes called true value tax rates.

True value tax rates are useful for comparing school tax rates with town, county, fire, and library tax rates, as above, and they are also useful for our main focus here, which is comparing various school tax rates with each other.  Comparison of school tax rates arises in a number of useful contexts, including comparisons among school districts, comparisons in the same district among years, and comparisons within the same district (or even different districts) among taxpayers.  We will investigate all of these contexts in this series of posts.

School District Viewpoint versus Taxpayer Viewpoint

It is important to understand that in Dutchess County, school tax rate comparisons should be conducted in two different ways, depending upon the purpose or viewpoint of the comparison.  These two viewpoints are the taxing authority viewpoint (in this case, the school district viewpoint) and the taxpayer viewpoint.  These seemingly similar viewpoints can be described by the following two sets of questions:

Q1 (School District Viewpoint):  How steeply does each school district tax its tax base?  Which school district in Dutchess County has the highest tax rate?  The lowest?  Where does your school district stand in the ratings?

Q2 (Taxpayer Viewpoint):  How steeply are property owners taxed by their school district?  Which property owners in Dutchess County pay school taxes at the highest rate?  The lowest?  Where does your property stand in the ratings?

If every school district taxed all their property owners at the same true value tax rate within the district, the above two sets of questions would have the same answers.  Unfortunately, this is not quite the case.  Of the 13 school districts in Dutchess County, 8 school districts tax all their property owners at the same true value tax rate within the district.  The remaining 5 school districts have a more complex taxing structure, taxing different property owners at different rates.  These different rates occur for two different reasons, homestead tax option and apportionment option.

School District	Tax Rate Structure
Dover Hyde Park Millbrook Pawling Pine Plains Red Hook Rhinebeck Webutuck	Single tax rate
Poughkeepsie Spackenkill	Homestead tax option
Arlington Beacon Wappingers	Homestead tax option Apportionment option

(I've chosen to ignore for the most part the small regions in Dutchess County lying in the out-of-county Carmel, Haldane, and Taconic Hills school districts.)

Homestead Tax Option

Under New York State Real Property Tax Law, school districts and certain other taxing authorities can opt to classify the taxable properties in their jurisdiction into two separate classes.  Properties in the homestead class (essentially homes) are taxed at a relatively low rate, while properties in the non-homestead class (essentially businesses and commercial properties) are taxed at a higher rate.  The Poughkeepsie, Spackenkill, Arlington, Beacon, and Wappingers school districts utilize the homestead tax option, as shown in the above table.  In these five school districts, a property's true value tax rate depends upon whether the property is classified as a homestead or a non-homestead property.

Apportionment Option

Nearly all school districts in Dutchess County comprise portions of more than one town.  (The only exceptions are Poughkeepsie and Spackenkill.)  The portion of a school district lying in a particular town is called a municipal segment.  Ordinarily, property taxing authorities in New York State are required to apportion their tax levy among municipal segments in such a way that all properties (or all properties of a given property class, if the homestead tax option is used) are taxed at the same true value tax rate.

However, for school districts, New York State Real Property Tax Law provides an optional exception to this common-sense rule.  The exception permits school districts to apportion their tax levy among their municipal segments based on a different criterion than uniform true value tax rates.  Essentially, the tax levy is apportioned based on total market value, rather than on total taxable market value.  Only the Arlington, Beacon, and Wappingers school districts utilize this special apportionment option, as shown in the above table.  The important point here is that in these three school districts, a property's true value tax rate depends not only upon the property's class (homestead or non-homestead), but also upon which town (municipal segment) the property lies in.

School District	Number of Towns
Arlington	9
Beacon	3
Wappingers	5

OK, enough about real property tax law.  Here's how the two sets of comparison questions can be answered using various kinds of tax rates:

Aggregate Tax Rate

I define the aggregate tax rate for a school district to be simply its total tax levy divided by its total taxable market value.  The aggregate tax rate is a true value tax rate which measures how steeply a school district taxes its tax base.  Thus, the aggregate tax rate is appropriate for comparing school districts with each other (Q1).  If a school district taxes all its taxpayers at the same true value tax rate, as do 8 of the school districts in Dutchess County, then the aggregate tax rate is this rate.  If a school district taxes different taxpayers at different true value tax rates (5 school districts with homestead and/or apportionment options), then the aggregate tax rate is the average of those rates, weighted by the proportion of taxable market value in each taxing class and/or municipal jurisdiction.

Homestead and Non-Homestead Tax Rates

For a school district using the homestead tax option, the homestead tax rate is simply the portion of its total tax levy assigned to the homestead class, divided by the total taxable market value of its homestead class.  Thus the homestead tax rate is a true value tax rate.  The non-homestead tax rate is defined similarly.  For property owners in the Poughkeepsie and Spackenkill school districts, these rates are appropriate for measuring the steepness of their taxes, and comparing them with those of property owners elsewhere (Q2).

Segment Tax Rates

In the Arlington, Beacon, and Wappingers school districts, a property's school tax rate depends not only upon the property's class (homestead or non-homestead), but also upon which town (municipal segment) the property lies in.  I define the homestead segment tax rate for homestead properties in a municipal segment to be the portion of the homestead tax levy apportioned to homesteads in the municipal segment, divided by the taxable market value of homesteads in that municipal segment.  Thus the segment tax rate is a true value tax rate.  Non-homestead segment tax rate is defined similarly.   For property owners in the Arlington, Beacon, and Wappingers school districts, the segment tax rates are appropriate for measuring the steepness of their taxes, and comparing them with those of property owners elsewhere (Q2).

For example, in the Arlington School District, the 2010 homestead tax rate in the Town of LaGrange is $18.92 per thousand dollars of market value, while that in the Town of Poughkeepsie is $18.61.  This means that a homestead property in the Town of LaGrange paid 1.7 percent more Arlington school tax in 2010 than a homestead property with the same taxable market value in the Town of Poughkeepsie.

Ranking the School District Tax Rates

In subsequent posts, I'll present the rankings of Dutchess County school district tax rates, from both the school district and the taxpayer viewpoints.