In a previous post, I stated that market values in Dutchess County have doubled in a decade, but that the tax rate is about the same as a decade ago. This does not mean that we've seen a steady increase in market value during the decade. This also does not mean that the County's tax rate been constant during the decade. In fact, as I show below, both of these assertions are false. But why should we care about these details? Isn't it enough to know where we stand now, and where we stood a decade ago?
I think not. The trend in the past decade is not at all what one would expect from just looking at 2002 and 2011. Therefore, the future cannot be extrapolated from just those two years of data. Unless you've just arrived here from Planet 10, you know that there was an economic meltdown two years ago. Has this affected the County tax situation? You betcha! Let's see how. Here's what's actually been happening to the Dutchess County government's property tax situation in the last decade:
I don't know about you, but looking at all these digits makes my eyes glaze over. We can see better what's happening by charting each column. The biggest part of the story is the trend in market value:
The above chart shows clearly that although market values have doubled from 2002 to 2011, they actually more-than-doubled from 2002 to 2008, and have dropped 15 percent in the last three years. That's the economic meltdown right there. Note that although real estate values began dropping in early 2008, the effect is delayed from a tax viewpoint. That's because the government figures market values a year and a half behind the property tax bill. For example, your January 2011 tax bill is figured based on the market value of your property as of July 1, 2009. The drop in market values since 2008 has actually been accelerating, as can be seen clearly from the following chart:
This decrease in the tax base is a major reason for the increase in the tax rate. But there's another. Since the tax base has been getting smaller, the cost of services from County government has been decreasing also, right? Just kidding! When does that ever happen? Here's the trend in tax levy — the major source of income for Dutchess County government:
Notice that the tax levy has doubled in the past decade. But unlike for market value, there is no dip in tax levy after 2008. This fact is Bad News for the tax rate, as we'll see shortly. Here's a closer look at how the tax levy has changed year-by-year:
The tax levy increase for 2011 isn't missing — it's zero! The goal of zero tax levy increase for 2011 was proposed by County Executive William Steinhaus in his original budget message in October, and the County Legislature essentially concurred with this spending limit. A year ago, Steinhaus also proposed a zero tax levy increase for 2010, but the legislature chose to increase the tax levy by 7 percent. In both cases, Steinhaus and the legislature cynically focused on the change in the tax levy, rather than on the tax rate, which they knew (or at least Steinhaus knew) would tell a more sobering story. And here is the story, which Steinhaus has gone out of his way to hide:
The tax rate is simply the tax levy divided by the taxable market value. As you can see, the 2011 tax rate is the highest in 10 years, though admittedly by only a few cents. Still, the trend of the last three years is ominous. The tax rate increases can be seen more clearly in the following chart:
You did know that Dutchess County's tax rate is up 8.4 percent, right? Although Steinhaus has made a major effort to hide this information, the Poughkeepsie Journal has been doing a good job to inform its readers of the 8.4 percent tax rate increase. The Journal has reported this fact frequently this season, including in today's story, which announces the final budget outcome. This is a big improvement for the Poughkeepsie Journal, compared with last year at this time. As I've blogged here and here, Steinhaus was silent about the tax rate increase last year, and the Poughkeepsie Journal just went along with it. Once again, a big improvement in reporting by the Poughkeepsie Journal.
So what does this all mean? To start, the trend of the last three years is drastically different from what one would think looking just at 2002. The county tax rate hit a low in 2008, and has been increasing at an average of more than 10 percent per year since then. The 2011 tax rate is up 34 percent over that in 2008. In other words, holding the tax levy constant, as Steinhaus has been proposing, isn't good enough to keep the tax rate from rising significantly. That's because the economic meltdown has caused property values to fall dramatically in recent years.
The economic meltdown of 2008 is the worst economic event in the memory of most people alive today. It doesn't just affect real estate values. It affects us in 100 different ways. The 8.4 percent increase in the Dutchess County property tax rate is just one more of these ways.
Acknowledgement: Many thanks to the Dutchess County Real Property Tax Service Agency for providing most of the data used in this report.
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I'm not sure how the rest of the county is faring, but in 2010, after the 2010 tax bills were paid, my home in LaGrange had an automatic 10% reduction in assessed value, thus affecting 2011 and later. It only makes sense that if the entire county had a 10% reduction in value, that the rate per $1K has to increase to maintain tax levy at the 2010 level. In theory, an 11% increase in the tax rate would net no increase in tax liability to the homeowner. However, there have been additions and subtractions from the tax base that don't make this that simple. But, with the data that Mr. Rubin has in his table shows an 8.4% tax rate increase. If $3.07/$1K assessed holds true to be the 2011 rate, then my taxes will actually go down this year.
ReplyDelete@Anonymous: Your 10 percent reduction in assessed value is a bit more than the County's average reduction of 7.7 percent. That's why your 2011 County tax amount will go down even as the tax levy holds constant. Of course your Town tax, fire tax, etc. may be another story.
ReplyDeleteMy reduction in county taxes was 2.7%. For the average reduction that you quote of 7.7% (assuming that's the residential number), the average homeowner would still have seen a decrease. Example, a homeowner with a $100K assessment in fiscal year 2010 with a tax rate of $2.833614 per thousand would have paid $283.36 (+ maybe a penny). That same "average" homeowner with a 7.7% reduction would have an assessment of $92.3K for fiscal year 2011. With a tax rate of $3.064031 per thousand, that taxpayer would be paying $282.81 this year. That is a decrease of about 0.2%. The tax rates I quoted are directly off my tax bills. By the way, I actually got lucky on fire - no change there. Town, not so good, just under 2% increase there. Back to the county - tax levy went down from 100,781,717 to 100,535,541. That's at least pretty good if not awesome as union benefits (specifically pension and health care expenses by the county) seem to continue to be increase greatly. I have to believe that more properties were added to the rolls than were taken off. If so, a smaller levy divided by the larger # of properties means the average taxpayer should see a decrease (unfortunately average doesn't mean everyone). Now I certainly can't argue that there have been years where taxes have gone up significantly, and believe me, I've been pretty upset with our state government for increasing mandates on the county while decreasing aid to the county. I think we need to applaud the county for reducing taxes (albeit by a small amount) when more burden is put on the county by the state.
ReplyDeleteHi Bill,
ReplyDeleteThanks for offering your insights into this tax data - it certainly helps us layman make sense of it all.
I was just curious regarding your figures - how did you put together all these data? Did you draw on some kind of online database, or was it all hard math adding up the figures for the different years?
Please let us know if you could. Thanks.
@Anonymous: I’m very glad to know you find this work helpful. As I mention in my acknowledgement at the bottom of this post, I obtained the basic data (taxable market value and tax levy for Dutchess County for each year) from Dutchess County’s Real Property Tax Service Agency. From there, it’s trivial (conceptually, at least) to calculate percentage differences and tax rates. Needless to say, using a computer to do the math makes it all feasible. My main tool is Microsoft Excel®.
ReplyDeleteIt is also possible, but much more effort, to derive the Dutchess County taxable market values and tax levies by adding up the separate amounts from the two dozen jurisdictions (towns and cities) listed in the tax rate pamphlets. I’ve done that in the last few weeks, and the results agree very closely with those in this report.
So from your data and that of your posters, one should conclude that although the tax rate increased, the county was able to keep property taxes from actually increasing. If property values go down, then the tax rate must go up in an inverse propotion for the tax levy to stay constant. Conversely, if property values go up, then the tax rate must be reduced in an inverse proportion for taxes to stay the same. Tax rate is just a multipler and I think that most folks don't need to care what the change in tax rate is - they really only need care about the bottom line - "how much are my taxes going to go up this year". In the case of Dutchess County, I also looked at my tax bill and noticed that DUTCHESS COUNTY TAXES DECREASED FROM 2010 to 2011. Thanks, Mr. Steinhaus for taking the lemons that the state gave you and making lemonade.
ReplyDelete@Anonymous: I agree with almost everything you say. It’s probably true that most folks do not care about the tax rate or about changes in the tax rate. They presumably only care about how many dollars they must pay this year. I’m not writing this blog for those folks. I’m writing this blog for property owners who want to understand how high their property taxes are compared with their personal wealth, as measured by the value of their home. That’s exactly what tax rate in dollars per thousand dollars of market value measures. If home values fall significantly, as has happened in the last three years, you’re kidding yourself if you think that you’re coming out ahead with a slightly smaller tax amount. If you try to sell your home, you’ll see how much you’ve lost in the market. A smart prospective buyer will compare your tax rate with that of a similarly-priced home elsewhere, and will rightly conclude that the lower tax rate is the better bargain. In my view, a lower tax rate for your home is a better bargain for you even if you don’t sell your home.
ReplyDeleteI’m also writing this blog for local government officials, tax policy wonks, and readers of the Poughkeepsie Journal. I agree with you that Steinhaus has done a relatively good job controlling spending in the last few years, since the economic meltdown. Steinhaus is smart enough to understand what’s happening with the County’s tax rate, and has gone way out of his way to avoid talking about it. Steinhaus doesn’t need this blog. But I’ve found that many government officials in other local jurisdictions are remarkably uninformed about the facts of property-tax life. See my posts on the Towns of Pleasant Valley and Hyde Park last fall. Similarly, the Poughkeepsie Journal has a long record of misunderstandings in reporting on property tax issues, evident in published stories. Many of my blog posts have addressed the Journal’s mistakes.