Increase in Rockford property tax rate, does not always increase tax levy
Two short years ago, the tax rate in Rockford broke the $12.00 barrier. When Rockford area property owners receive their tax bills early next week, they will be shocked to see the tax rate per hundred dollars of assessed valuation for tax code 001 is now $14.0023.
Tax code 001 includes Rockford School District, the City of Rockford, Winnebago County, the Park District, and Rock Valley College, the Rockford Library, Rockford Township, the airport and numerous smaller municipalities.
An unintended consequence of the PTELL tax cap law, allows our taxing bodies, in a decreasing property value market, to levy the same amount of taxes as levied the previous year, plus the rate of inflation or 5% whichever is less.
So, as property values decrease (7.3% in Winnebago County in 2013), the taxing bodies can increase their tax rates to recover the tax levy lost due to the drop in property values, plus the rate of inflation (1.7%) – a total of 9.0%, as long as state statutory limits are not exceeded.
Some taxing districts, during the last four years, have kept their extended tax levy the same as the previous year, by not levying the tax rate increase allowed for inflation.
Property owners are billed for the property tax levy, which is the tax rate multiplied by the assessed value of the property. An increase in the tax rate, therefore, does not raise your property taxes, if the percentage of the tax rate increase is the same as the percentage decrease in the assessed property value.
Rockford’s Equalized Assessed Valuation decreased from $1.700B to $1.544B dollars from 2012 to 2013, a decrease of over 9.1%. The tax rate could have increased from 9.1% to 10.7% by including the 1.7% inflation factor.
To demonstrate the disconnect between the tax rate increase and the tax levy increase, consider that Rockford’s tax rate increased from $2.8178 in 2012 to $3.0811 in 2013, an increase of 9.34%.
Despite that increase in the tax rate, Rockford’s tax levy increased by only 0.38% or $169,236 out of approximately $44M in total revenue collected, and that small increase was primarily due to new property being added to the assessed value during the year.
Rockford area property taxes were the fifth highest in the country in 2010, as a percentage of the Fair Market Value (FMV), according to Forbes Magazine. Forbes obtained the data from the Tax Foundation in Washington D.C., which listed the median tax bill at $3234 on a median home value of $136,000 for a rate of 2.4% of FMV.
The value of property has continued to drop since 2010, increasing the tax levy as a percentage of FMV. An example of this year’s calculation will illustrate the property tax levied on a $100,000 home in Rockford at the current $14 dollar tax rate.
The Assessed Value would be one-third of $100,000 or $33,333 minus the Owner Occupied Exemption of $6000 equals $27,333. Divide $27,333 by 100 because the tax rate is based on $100 of assessed valuation and that result equals 273.33.
The 273.33 is then multiplied by the $14.0023 tax rate to obtain the tax levy on the $100,000 home, which equals $3827.25 or 3.827% of the FMV of a $100,000 home. Therefore, the tax levy as a percent of FMV of our homes has risen 59.5% since 2010.
To further show the disconnect between the tax rate and the tax levy, the Rockford School District, which is over 51% of our property tax bill, decreased their tax levy by $16M in 2012 for the 2011 tax year and did not levy the inflation factor in 2012 or 2013, despite an average loss of 8.0% in property value within the district each year.
The district’s tax rate, however, still increased from $6.5595 to $6.6884 last year and to $7.2301 this year in Illinois’ topsy-turvy PTELL Tax Cap world, despite the substantial reduction in the school district’s tax levy.