The Current article by Anna Skinner published October 30, 2018 titled "A township tax: Township approves $15 million bond split into three series, the first of which is $5.7 million" is very confusing. It is hard to blame the Current because the way taxes are designed - It's pretty complicated. I'm writing this blog for more clarity. Summary of this Blog
Lack of Public Transparency
The Bond Schedule
Who Will Pay?
What is this?
Understanding A Circuit Breaker Credit
Assessed Value of A Parcel Protected by the Caps
Old Rates vs Estimated New Rates for Pay 2019
It's true - A rate increase does NOT mean paying more taxes
Dependency on Other Units
Residents May Be Shocked
Lack of Public Transparency I want to start by saying the best government informs the public before passing any huge debt tax increase for any reason. The Westfield Washington Township Board approved a $15 million bond on October 23 by a 2-1 vote and The Current article was published on October 30th, after the Township passed the resolution. There was little to no public transparency before the vote, and should be remonstrated for that reason alone. David Gill was the lone No vote sighting more discussion is needed.
The Bond Schedule In order to make the payments on the first bond series, the Township needs $410,000 to have the money available to spend.
Who Will Pay? The Answer is mostly Homeowners.
The Township published budget calls for an increase of $400,000. The following is the calculation based on the certified assessed valuations.
Note: This is proof the TIF receives unearned dollars just because another unit raises its tax rate. The township could receive TIF dollars in this case, demonstrating TIF causes higher Rates for current property owners. These dollars are unearned by the TIF funds since the real purpose of the rate increase is not toward economic Development. Everyone does pay for TIF funds diverted toward hand selected business incentives.
What is This? The Current Article - "The tax for the first bond in the series only affects city residents with an assessed home value of $142,000 or less, and township residents with an assessed home value of $110,000 or less due to property tax caps on higher priced homes." In addition to printing the rates backward and using "old" threshold valuations, I thought we should understand it and give my opinion.
Understanding A Circuit Breaker Credit Our Indiana Constitution places property tax caps on a the amount a property owner pays.
If the local taxing units like the schools, city, township, county and others have a combined tax rate that is above the maximum dollar pay capped set by our Constitution, this property owner will get what is called a circuit breaker credit. A circuit breaker credit is money a property tax payer saves, and the taxing units won't get. Once a property reaches the circuit breaker, it can’t pay any additional property taxes.
Assessed Value of A Parcel Protected by the Caps Today, about every home in Westfield City incorporated is protected by the 1% caps. Using the typical standard deductions and only considering homestead without additional barns or extra property, that valuation is >$123,186 And this is not as reported in the article. If you don't live in the Westfield City limits and unincorporated, respectfully the amount is >$175,401.
- Rental property in Washington Township incorporated or unincorporated are in the tax cap circuit breaker and this saves property owners money since the tax rates in Westfield and Washington Township are above 2%. Example: Westfield City Rental Properties - Total Rate today 2.7760 less School Referendum .20 = 2.5760 and thus a rental property will not pay any additional dollars above 2.00 or that additional .5760 tax. - All commercial properties have yet to reach any tax cap saving since the tax rate is below 3%. A commercial property will be forced to pay for any rate increase by any taxing unit until the Rate less Referendum is >3%. Today, the total Rate 2.7760 less School Referendum .20 = 2.5760, thus any new rate increases, businesses will pay. Note: When Rates outside a referendum increases, more properties fall into circuit breaker credits.
Old Rates vs Estimated New Rates for Pay 2019 The Current Article - "The bond creates a 1.36 cent tax for certain residents within the township, in addition to their property taxes." All the taxing units are approving budgets for Pay 2019 and can be estimated based on public notice. The following is what we know. Your taxes are going up due to the School Referendum passed last year. The referendum voted last year is estimated a plus .3019 tax rate increase to the current referendum rate of .2000 and the Township is estimated a plus .0136 tax rate increase in addition to the current rate.
It's true - A Rate Increase Does NOT Mean Paying More Taxes The Current Article - Carey Tolan, “So, understanding that some homes are under the tax cap here could be affected and are on a limited income, yes, I understand that debate. But really, I don’t see $4 a year being a burden on someone.” Ms. Tolan's published numbers assume the Referendum was not passed and Washington Township increases the Rate from 0.093 to 2.29 cents per $100 in Assessed value. Example of a $95,000 valued home under the tax caps. This home will pay an increased tax. Homes above About $120,000 will not pay any additional property tax.
However, most Westfield properties have increased in assessed value plus there is a coming referendum. This example is a more transparent example. This property will see a 3% increase in assessed value and also the increase in a school referendum.
Note: Tax Rates are not final until about February 2019.
Residence May Be Shocked I predict many Washington Township residents are going to be shocked next property tax bill. The school passed a whopper of tax referendum. It's my guess most homeowners won't have a clue until that bill arrives in 2019 given only 4,864 voted for the referendum for an estimated population of >37,458,
Dependency on Other Units This is important to understand and it was not said. The Township new tax rate increase results in the other units to receive less tax revenue - unless these other units also raise their tax rates. Based on published budgets, press releases and public comment, the other taxing units are not increasing rates. When one taxing unit raises rates and the others don't, the percentage of distribution to those other units are reduced.
When assessed values grow, all units will receive more tax distribution. For any property in a circuit breaker tax savings (Which is almost all Westfield Incorporated) the consequence of this bond rate increasing the levy, the other units (including the school and city) will not receive the full distribution dollars they would normally receive. This example of Ashley Apartments is a realistic comparison scenario in 2019. The Township rate increases takes growth dollar revenues normally distributed to the other taxing units.
To perhaps further Clarify
Since the Assessed Value Growth from Pay 2018 to Pay 2019 is about $313 million and mostly in Homestead Westfield and Rental or Personal Property, the Township will likely divert >$150,000 of the $410,000 it needs from other taxing units. More information can be found on this subject here. Rough Math... - $0 from Commercial & Personal Property - About $97,000 from Westfield Incorporated assuming 100% are in caps (which about are all) - About $45,000 from all Westfield Rentals Properties.
Conclusions - Who pays this $410,000 bond payment - Mostly Homeowners - The increases in assessed values already determined on homes, rentals and business. - The reallocation of funds from other taxing units due to the dependency of other units. PS... If anyone questions my math or finds any errors, please let me know. Email: fcohcindiana@gmail.com David Giffel is a Fishers Indiana homeowner, Republican elect for Hamilton County Delaware Township Board, Hamilton County Delaware 19 Republican precinct Committeeman, FCoHC Board-member, Chairman Central Indiana IoPP Chapter, entrepreneur and has over 29 years business experience in manufacturing polymer resins, compounds and plastic films.