Levies, Bonds, and Your Taxes
There are many common misconceptions about how your property taxes and school levies and bonds are related. This article will clarify that relationship.
How are Property Taxes Assessed?
Each property tax line item is computed by multiplying its tax rate by the assessed property value. The tax rate is generally given as a millage rate, or the amount of tax paid per $1,000 of assessed value.
For example, if the tax rate was 1.5000, the owner of a home assessed at $200,000 would pay $300. This amount is found by multiplying the tax rate by the assessed value and dividing by 1000.
Note: The tax rate is sometimes shown in dollars and cents, as in $1.50, and sometimes as a decimal number without the dollar sign, as in 1.5000. I use the latter format on this page, but both methods are interchangeable.
So, do we vote on the Tax Rate?
No. School levies and bonds are set at a fixed dollar amount.
For a levy, the school district looks at its needs and determines the dollar amount over and above state and federal funding required to meet those needs.
For a bond, the total amount needed from tax payers is determined by the payment that needs to be made each year on bonds purchased to fund new buildings, land purchases, and other capital projects.
Then how is the Actual Tax Rate determined?
The tax rate for local school taxes is determined by dividing the bond or levy amount by the total assessed value of all properties in the district.
Example: 2006 Local School Tax Rate
The levy amount was $8,455,042—exactly the amount approved by voters back in 2003—and the payment on voter-approved bonds was approximately $5,614,500.
When we divide these amounts by the total assessed value of $5,152,048,181 and multiply by 1000, we see that the levy tax rate is 1.64110, and the bond tax rate is 1.08976.
Therefore, the total local school tax rate is 2.73086. You should see this tax rate on your 2006 Tax Statement on the Local School line.
How is the Estimated Tax Rate determined?
The district estimates a tax rate in order to help taxpayers understand how much the issue will cost them. Look at the sample ballot () from the past May 2006 levy election for an example of this.
In order to calculate an estimated tax rate, the district must estimate the total assessed value for each levy year. This is done using historical data and trends. The following chart shows the Battle Ground School District total assessment over the past 10 years:
Based on this information, the district chose the conservative estimate of 8% for its May 16 Levy proposal.
What if the assessment goes up more or less than estimated?
If the total assessed value goes up more than expected, then the total levy dollars will be divided by a larger assessed value, which will result in a lower tax rate. If the total assessed value goes up less than expected, then the total levy dollars will be divided by a smaller assessed value, which will result in a higher tax rate.
This explains why the district is careful to conservatively estimate the growth: they would rather surprise taxpayers with a lower-than-expected tax rate than a higher-than-expected tax rate.
Example: 2004-2006 Levy
When voters approved the 2004-2006 levy, the estimates tax rate was $2.02 for each of the three years. When assessed values increased more than expected, the district could not collect any more money than voters had approved, so instead the tax rate went down: from the 2.02 estimate to 1.9651 in 2004, 1.8993 in 2005, and 1.6411 in 2006.