Local Government Finance

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there are variations among the states in the matter of local government finance

Wisconsin is representative in many ways

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87,525 local governments in the US in 2002 per the Census Bureau.

1.counties, cities, villages, towns, school districts, vocational school districts and many special purposedistricts 2.many, but not all, have law-making power 3.many, but not all, have the power to levy and collect taxes

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general property taxation

“General” – to distinguish it from special assessments

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this class focus is on the taxation of real property, but the principles remain the same

for taxation of personal property

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Not all local governments rely so much on the property tax

On average – excluding transfers from state and federal governments – a little less than half of all Wisconsin’s county, town, village and city revenues come from the general property tax.

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“gap filling” revenues

make up the difference between budgetary demands and all other local revenues

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In WI real property tax bills are sent out by only one jurisdiction – the city, village or town where the real estate is located

the taxing jurisdiction

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effective tax rate for a single government (city, school district, county, etc.)

that government’s Tax Levy divided by the Equalized Assessed Value of all the property being taxed

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“nominal” tax rate

For good or ill, assessing Jurisdictions usually describe their own tax rate, and the final, combined property tax rate, in relation to local assessed values, rather than equalized assessed values

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nominal tax rates produce the total tax due when

multiplied by the local assessed value

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to compute the Tax on each property

multiply the sum of the Effective Tax Rates for the tax-receiving governments times the Equalized Assessed Value of the property in question.

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considerations when collecting the tax

1.when must the taxes be paid 2.which jurisdiction collects deferred and delinquent taxes 3.interest and penalties 4.collection by lien enforcement

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collection by lien enforcement – 2 ways

1.passive – an owner’s obligation to “clear title” by contract when borrowing or selling 2.active – foreclosure by the government (or by private parties, as purchasers of the government’s rights, where this is allowed)

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lien foreclosure

1.in many places, the power to foreclose is held only by government & liens are not transferable2.in others, tax liens are sold to investors who own the right to collect unpaid taxes and may even be able to force the property into a foreclosure sale

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tax deeds

tax collecting governments in Wisconsin (counties and City of Milwaukee) have the right to take property by tax deeds that wipe out all other interests in the property

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special assessments or special taxes or charges

1.charges to property owners in a limited area to pay for municipal improvements in that neighborhood.

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Don’t be confused by the term “special assessment”

this is entirely different from the assessments (or valuations) for general property taxation described above.

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collection of special assessments (including unpaid municipal utility charges)

is the same as for general property taxes – liens and interest on delinquencies

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No matter which municipality your property is in, it will also be hit by property taxes for:

1.local school district 2.Vocational/Technical Education District 3.county government and 4.the State of Wisconsin charges a tiny property tax that supports forestry activities

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ad valorem tax

general property tax on the value of a person’s property holdings

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assessment assessment

the government’s determination of property values - an important part of the tax process

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property tax by steps Steps 1-8 1.determine whether property is taxable or exempt 2.assess taxable properties within Assessing Jurisdiction 3.Budgeting-how much money needed for government operations?

4. subtract money that will come from other sources 5.determine the tax rate 6.compute tax on each property 7.impose the tax & create lien 8.collect the tax

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Step 1: What should be exempt?

1.YMCA exempt, not private health clubs 2.Wisconsin owned airline hub facilities 3.doctors offices–yes,UW Med Found. 4.private country club-yes if rented from Village that owns land 5.church–if it files tax-exempt status 6.entities must follow all rules

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local assessor’s figures means local assessed value

local assessed values

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taxing Jurisdictions

assessing jurisdictions

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the government that assesses a property also

sends a bill out on behalf of the “Tax-Receiving” governments for that property

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property tax hits in proportion to assessed value,

so you care about your assessment, AND you also care about your neighbors’ assessments

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uniformity

1.properties within an assessing jurisdiction are assessed correctly in relation to each other’s values 2.whether the assessments are all at 100% of fair market value, or some other figure, in relationship to fair market value.

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blank on purpose

blank

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straying from uniformity: 2 examples (1)property tax incentive programs sometimes create favorable assessments for certain classes of property

(2)some states give benefits to those who hold property for a long time-identical properties can have wildly different assessments depending on when they were purchased

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examples of classes of property that get favorable assessments

1. homestead property, agricultural land or forest land

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to prevent straying from uniformity California’s Proposition 13 when a property changes ownership, and otherwise limits assessment growth to a fixed inflation factor adjustment of 2%.

“fair market value” only when a property changes ownership, and otherwise limits assessment growth to a fixed inflation factor adjustment of 2%.

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beyond uniformity

a tax-receiving government may get property tax revenues from more than one municipality - this means that property owners care about how their assessor is doing in comparison with the assessors of other tax-contributing governments

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beyond uniformity – examples (1)Madison school district receives tax revenues from the City of Madison, the Village Shorewood Hills ,Village Maple Bluff, and portions of Fitchburg, Monona, Blooming Grove, Burke, Madison and Westport

(2) Dane County gets property taxes from properties in 8 Cities, 19 Villages and 34 Towns.

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the issue of equalization testing local assessors’ work and trying to correct for variations in order to assure some fairness from one assessing jurisdiction to another

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If Shorewood Hills’ assessor tried to assess all of the Village’s properties at one-tenth of fair market value equalization

if done properly, would divide each local assessed value by one-tenth to determine an Equalized Assessed Value shows that equalization does not cure any underlying lack of uniformity

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tax levy

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Created by: rainesv