The Property Tax Rate - YouTube

Larry: Hey look at this!

Do you know what this is?

Property tax rates

Indiana district property tax rates

the same rates that show up on your tax bills

How about that

Well you know, it doesn't really show how they're

calculated

That would be good to know

I bet we could figure it out

Tell you what?

You watch the titles, and I'll look into this

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Larry: Almost got it

Um I'm Larry DeBoer by the way

a professor in Agricultural Economics Department

and Extension Specialist with Purdue University

This is another one of our videos

about Indiana Local Government

This one about property tax rates

Okay here's the deal

Each local government sets its property tax rates

each year

The rate is multiplied by the taxable assessed value

of property to determine each property owner's tax bill

The sum of all of those tax bills is the levy

that provides much of the revenue that

local governments use to deliver services

So how are rates calculated?

One way to figure that out is

to look at the budget quarter

The State's Department of Local Government Finance

issues a budget order for

each local government each year certifying the budget,

assessed value, the tax levy, and the tax rate

for each government and each fund

We can look at a budget order to

see how a local government sets its property tax rates

Uh it's a good idea, let's just do that

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Let's take a look at how a tax rate is calculated

Turns out the Elkhart county government

has a clipboard tax rate

Let's use Elkhart County as an example

Here's the 2014 budget order for Elkhart county

this is the order that authorized

the county government's budget

It shows each of the county's funds

funds separate the spending of the government

into categories

dedicated to things like roads and bridges

health, parks and recreation,

repayment of debt and so forth

For most governments

The general fund is the biggest

It's dedicated to the operating costs of the government

a lot of it goes to wages and salaries of employees

so let's look at Elkhart's 2014 general funds

start with the budget

that's the total amount

that the departments and agencies

of the county figured they need to deliver services in 2014

Elkhart is a pretty big county

so the budget is a pretty big number

more than 33 million dollars

The levy is the amount to be raised from property taxes

But look, it's only about 2 thirds of the total budget

23.8 million dollars

to figure the levy, the county subtracted other revenues

from the budget amount

Like local income taxes

motor vechile excise taxes

charges and fees

state distributions

it's actually called miscellaneous revenue

Take the budget, subtract miscellaneous revenue

and what's leftover has to be raised

from the property tax

Now here's assessed value

In Elkhart for 2014 taxes

It was more than 7 billion dollars

That's taxable assessed value after all deductions

are subtracted

The rate is calculated by dividing the levy

by assessed value

The result is expressed in dollars/100 dollars

assessed value

there it is

That's about 31 cents/100 dollars assessed value

You can think of it as a percentage

about 3/10 of 1 percent

If all the property owners pay 3/10 of 1 percent

of their taxable assessed value to the county

there will be enough for the general fund levy

But the general fund is just 1 of many funds

that Elkhart uses

Let's look at the list

Here's the first page of Elkhart's 2014 Budget Order

Here's the general fund at the top

and the tax rate we just calculated

there's also an election and registration fund

with a rate

just under 1 penny/100 dollars assessed value

There's a reassessment fund

to pay the costs of property reassessment come 2015

and a highway fund

to pay for road construction and maintenance

but look, the property tax rate is 0 for those funds

some funds are not supported by property taxes

the county highway fund is paid for almost entirely

with a distribution of motor fuel taxes from the state

Elkhart uses property taxes for bridges though

so the county has a cumulative bridge fund

and a major bridge fund

On the second page of the budget order

It's got a health fund

and 4 other funds too

add them up

and the county property tax rate is just over

45 cents/100 dollars assessed value

this is a rate near the middle

of all county property tax rates in Indiana

a typical county rate

So to sum up

local governments set the budgets for each of their

funds to deliver the local services supported by that fund

they subtract miscellaneous revenue

and what's left will be raised by the property tax

the levy is divided by the assessed value to get the rate

and the sum of the rates for all the government funds

makes up the goverment's total rate

But wait

(loud noise)

The state's department of local finance must have its say

The DLGF is the state agency that oversees the property tax

1 of its functions is to

enforce the maximum levy limits

that have been in place since the early 1970's

If the fund's levy is higher than the maximum set by the state

The DLGF will order the local goverment to

reduce its budget and its rate

to bring the levy down to the maximum

Once that's done

The DLGF will certify the budget's

levies and raise and issue the budget order

the rates on the taxpayer's bill include the county's rate

and the rates of the school corporations,

cities or towns,

township and other local units

We add up all those different government unit rates

to get the rate that the tax payers actually pay

to undertstand those rates though

it helps to know the difference

between tax rates and tax districts

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Let's start with a county, a nice simple square county

now let's divide the county into 4 townships

most counties have 4, the average is about 11

but we'll keep it simple

Now we'll add a town, just 1

although the average county has about 6

it's mostly in township 1

but there's part in township 4

finally, let's add a few township corporations

1 east and 1 west

The average county has about 3,

4 if you count charter schools

Now, look at all the boundaries we've drawn

and think of the county as a big jigsaw puzzle

how many pieces does the puzzle have?

well here's 1

In the county, township 1

School corporation, west

but outside the town

Here's another in township 1, school corporation, west

but inside the town

There's 1 in school corporation east

here's 4

5

6

7

8

then there's 9

A part of the town in

township 4 and school corporation west

and 10

that little piece of the town

in township 4 and school corporation east

there are 7 units

A county,

4 townships, a town, and 2 school corporations

but they overlap into 10 tax districts

In a real county, there would be more tax districts

because there will be more townships, towns,

and school corporations

but there will also be library districts,

solid waste management districts,

fire protection districts,

and more

there are about 2000

tax districts in all of Indiana

so that's about 22 in the average county

Marion county has the most with 61

and Ohio county has the fewest with only 5

let's take a look at 1 tax district

number 3 say

and let's look at it vertically

here's the county

township 1

the town

and school corporation east

which overlap to form tax district 3

each unit has a tax rate

they set their rates based on their levies

and the taxable assessed values within their boundaries

Suppose the county's rate is

50 cents/100 dollars assessed value

a little higher than the typical rate

the township rate is 10 cents

the town rate is a dollar

and the school corporation rate is also 1 dollar

If you own property in tax district 3

You'd owe property taxes to all 4 units

at these tax rates

the county treasurer will send a bill for the total

at the district tax rate of $2.60

That's the sum of the tax rates

so the units in which your property is located

Property tax rates are measured in

dollars/100 dollars assessed value

which means you pay a percent

of your taxable assessed value in taxes each year

but are your tax rates high, are they low,

are they somewhere in the middle?

let's take a look at some charts and numbers

to see how high, how low,

property tax rates are in Indiana

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Here's a chart for the 2000 or so districts in Indiana

It shows percentiles so you can see what's typical

what's high and what's low

the median district tax rate is just under 2 dollars

that means half the districts have higher rates

and half have lower than that

Now here are the 25 and 75 percentiles

25 percentile rate is about a $1.50

and the 75 percentile rate is near $2.50

that's a good rule of thumb

Half of all tax districts have rates between

a $1.50 and $2.50

A quarter of the districts have rates below $1.50

and a quarter have rates above $2.50

That's a bit misleading though

because almost all the highest rates are

in districts that include cities or towns

where there's that extra city/town tax rate to pay

So let's divide the districts into city and town

and rural districts

A little less than half of all the districts

have cities and towns

a little more than half are rural

without cities or towns

But about 2 thirds of assessed value is

in city or town districts

That's a lot of tax payers

take a look

sure enough the median rate for

districts with cities and towns is about $2.50

well the median rate in rural districts

is about $1.50

More than a quarter of city/town rates

are above 3 dollars

well hardly any rural rates are that high

almost a quarter of rural rates are less than a $1.25

but hardly any city or town rates are that low

You could use this chart to compare the tax rates

in your tax district to the rest of Indiana

Once you've made the comparison though

then the work begins or the fun

why are your rates high or low?

Remember that rates are the tax levy

divided by assessed value

are your rates high because the levy is big?

Did 1 of your local governments

borrow to add infrastructure?

which added the new debt service levy

did a school corporation pass a tax referendum

or is the general fund levy high?

which would indicate high operating costs

If your rate is low,

maybe the local governments are providing fewer services

Or maybe services are being paid for

with local income taxes instead

If your rates are high

it might be because assessed value is low

Did some businesses close?

Did home values drop?

Or is it simply the places with lower valued property

let's charge higher rates to provide even basic services

If your rates are low, maybe your jurisdiction has a lot of

high value property to support its levy

The rates by themselves won't answer these questions

If you understand rates, and levies, and assessed value

you can start to ask...

That's our video on Indiana property tax rates

Thanks for watching, I'm Larry DeBoer

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