On December 21, 2015

Shumlin administration recommends 1 cent increase in property taxes

By Tiffany Danitz Pache, VTDigger.org

On Dec. 2, the Shumlin Administration recommended a 1-cent increase in the statewide property tax rates—the lowest increase in three years—for residential and commercial property for fiscal year 2017. Each year, the Agency of Education, Department of Taxes, and Joint Fiscal Office work together to predict what will be needed to pay for the schools.

They are expecting the average homestead property tax rate to go up $1.53 per $100 of assessed value while nonresidential property will increase by three-tenths of 1 cent to $1.538. Those who pay with income tax will see a reduction from 2.74 percent from this year to 2.72 percent in FY17. The average tax bill for all three types of payers together is projected to go up 1.12 percent.

Last year, the average statewide property tax rate increased by 2.5 cents and 2 cents for nonresidential. The prior year, the average property tax rate went up by 9 cents and nonresidential by 7.5 cents.

Gov. Shumlin said the announcement is good news. “Property taxes increased less than they have in the last couple of years. There are a number of drivers to that including that with the rebounding economy we are seeing some growth in the Grand List,” he said.

The dramatic student exodus from registrar rolls continues, with the Secretary of Education predicting that there will be 591 fewer “equalized” pupils enrolled in 2017. School spending is expected to increase by 2.5 percent, according to the AOE. Last year, AOE predicted a 3 percent rise in spending, in 2015 there was a 5 percent increase, and in 2013 spending also rose by 3 percent.

“I want to congratulate school boards across the state of Vermont and Vermonters for actively working together to try and contain education costs,” said Shumlin.

In previous years, the funding formula relied on a base amount per equalized pupil in relationship with a property tax rate–a certain amount of cents–that fluctuated from year to year.

With Act 46, lawmakers tried to make it easier for voters to understand how much they would be spending so they set the homestead tax rate at $1 per $100 of assessed value. They call it a “property dollar equivalent yield.” They also set the rate for those who pay their school taxes with their income at 2 percent. They call it an “income dollar equivalent yield.”

“These two numbers are designed to illustrate how much per pupil spending the $1.00 and 2 percent education property tax rates will support in the coming year,” wrote Tax Commissioner Mary Peterson.

The nonresidential rate will continue to be interpreted in the traditional way.

So a district’s residential education tax rates will be its per pupil spending divided by the property dollar equivalent yield or the income dollar equivalent yield, according to Peterson.

The forecasted spending for FY17 looks like this: $1 of every $100 in assessed value property taxation will yield $9,955 per pupil spending; likewise, 2 percent of income taxes will yield $11,157 per pupil spending.

Act 46 also imposes a cap on education spending for FY17 and FY18. The “Allowable Growth Percentage” or AGP, as it is known, is meant to keep statewide spending increases to 2 percent. School districts can grow their budgets from 0 percent to 5.5 percent based on what they spent per pupil the prior year. If they overstep their allowed growth they will be double taxed on every additional dollar spent.

School districts that vote to merge and are operating in the new unified district by July 1, 2016, will also be able to take advantage of a 10 cent tax break under Act 46. This all creates some variability in the prediction released Tuesday.

“It is important to remember that these are projected yields; rates and bills are all based on forecasts and averages,” stated Peterson. “Taxpayers may see more significant changes due to local decisions.”

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