Lower property tax rates could benefit economic development

Notice of property tax assessments were sent out on August 13, 2019 for taxes to be paid in 2020, a quadrennial tax year. The new property tax assessments are available online at Winnebago County Supervisor of Assessments website at wincoil.us.

This year’s deadline to file an assessment complaint or appeal is September 16, 2019

Property assessments were up again this year for the fourth time since the last quadrennial assessment in 2015 for taxes paid in 2016. My property value has now been assessed at approximately the same value it had a decade ago.

The average property assessment increased approximately 6% in Rockford Township this year, which means the tax rate will decrease by approximately 6% assuming the taxing districts in the township retain their tax levies from last year as they have proposed.

The Rockford tax rate has now decreased from a peak of 15.2963 in 2016 to 14.27 in 2019 and will drop to approximately 13.4138 in 2020 assuming a 6% decrease in tax rate from this year’s 6% property assessment increase.

With the continued increase in property values, keeping the tax levy the same, the tax rate will continue to decrease – the opposite effect that occurred when property values were decreasing for more than five years from $5.6B in 2009 to $4.25B in 2015, a 25% drop in Assessed Value in Winnebago County.

With tax rates decreasing due to home values rising, homeowners and businesses will discover that even though their tax levy remains the same, it will be a smaller percentage of the Fair Market Value of their property, consequently reinforcing the rise in property values. Assessed Value has recovered over 14% during the last 4 years, not including the 6% growth in property values during this assessment.

Rockford and RSD205 taxing districts comprise more than 74% of our local property tax bills and have joined with other taxing districts to hold the line on their tax levies, with the only exceptions thus far of Winnebago County and the Park District, which together make up 15% of the tax bill.

Having the property tax levy remain the same in the city and with RSD205 holding the line on property tax for the last 7 years or more has aided in the local recovery of property values over the past few years thus lowering tax rates, which could expand the tax base and increase economic development!

An increase in property tax rate does not always increase the tax levy and an increase in property values does not always result in a tax levy increase. The terms are not interchangeable. We can make these assumptions using the relationship between the tax levy, the tax rate and the property value using the following formula,

Tax Levy = Tax Rate * Property Value.

There are two main problems trying to explain this relationship as a mathematical formula. First, many people intensely dislike math and second, the varied properties and the complexity of tax rates within Winnebago County follow this similar formula, despite 112 different tax code combinations of taxing districts in various townships. In Rockford’s tax code 001 alone, there are 11 taxing districts.

The simplest way to explain the assessment process is by using a symbolic pie consisting of 122,000 slices of varying sizes representing each property and corresponding tax levy within Winnebago County.

The size of each slice of pie depends upon its property’s value and how much of the tax levy it contributes to the size of the pie, which represents the total tax levy collected by all the taxing districts. 

Though the tax rates vary throughout the county based on the taxing districts which provide each property owner services, the overall relationship between your tax levy, the tax rate and the property value is similar in structure in whatever township you reside.

Therefore, if your property’s assessment increased 12% or 19.5%, as some of my neighbor’s property did, their slice of the pie increases in size and increases its contribution to the pie, so the average slice of pie (6%) must remain the same size or be reduced to restore the pie (total tax levy) to its original size.

The bottom line is with the current trend of increasing property values, the various tax rates will continue to decrease, which should further increase property values and further lower tax rates. This trend provides an opportunity for increased economic development and expanding the tax base if the tax levies remain relatively constant or decrease!