Local governments raised rates to maintain property tax revenue, Public Policy Forum says
Total property values in southeastern Wisconsin dropped 5% in 2012, but municipal and school district property tax levies did not follow suit, says a Public Policy Forum report to be released Wednesday.
As values declined for the fourth consecutive year, local governments and school districts boosted 2012 property tax rates an average of 6.3% to sustain levies for their 2013 budgets, the forum’s annual values and taxes report found.
Total levies from 2012 tax bills in the seven-county region increased 1% from the previous year, reversing a trend of slowing growth or decline in levies from the previous two years, said Rob Henken, president of the Milwaukee-based nonpartisan government watchdog group.
The report examines a standard component of budget-setting practices for school districts, cities, villages, towns and counties in Wisconsin: If property values decline, then the tax rate applied to each property must increase to yield an equal or greater amount of property tax revenue than the previous year.
As a consequence, a decrease in the assessed value of one’s home does not always translate into a lower tax bill, according to the report.
From 2011 tax bills to 2012, the forum found aggregate property tax levies — a combination of municipal, school district, technical college and county taxes — had increased in 101 of 147 communities in the region.
“Municipalities and school districts in Wisconsin are much more reliant on property taxes as a primary source of revenue than local governments in other states,” Henken said.
Such dependence shows the need for a greater diversity of revenue sources, he said.
Todd Berry, president of the Wisconsin Taxpayers Alliance, agreed that local governments in this state are more dependent on property taxes.
“In Wisconsin, the state government decides who gets to use what tax,” he said.
For municipalities, the only local option tax, other than a property tax, is a room tax on lodging, but not every community has hotels and motels, according to Berry. Use of room tax revenue is restricted and not authorized for general costs of government.
A sales tax is available to counties, and that rate is fixed by the state, Berry said.
Limits on levies
Other states provide local governments with more revenue options or directly fund more local services than Wisconsin, he said.
The 2011-’13 state biennial budget imposed levy limits, and the region’s total 2011 property tax levy dropped 0.3%, the first overall levy decrease in 10 years, according to the Public Policy Forum report.
This year’s 1% increase in the region’s total levy can be partially explained by relaxed limits on school districts for the 2012 levy.
Although districts were required to cut total revenue by 5.5% in the first year of the biennium, no additional cuts were imposed in the second year, and revenue was allowed to remain flat. For their levies to stay the same from one year to the next, tax rates had to be increased to offset declining property values.
The total school districts’ 2012 tax levy for the region increased 0.4%, one year after a 1.2% decrease.
Levy limits for municipalities and counties are tied to the value of new construction added each year to the property tax base. Those levies largely were held in check since there has been little building of new residences or commercial properties in much of the region.
Limits on levies are good news for property-tax payers, Henken said.
But the combination of levy limits and declining property values poses a challenge for local governments and school districts to maintain services in the face of steady cost increases, according to the report.
The Southeastern Wisconsin Regional Planning Commission has recommended creation of a state task force to propose strategies for reducing “the heavy reliance on property taxes to fund schools and local government services.”
In a regional housing study published this year, the commission suggests local dependence on the levy is one barrier to building more affordable workforce housing projects in the region.
One perspective expressed by municipal and school district officials is that higher-cost housing generates more tax revenue, so there is no incentive to set aside space for lower-cost housing in their communities, according to commission staff.