Recent CLA assessment to push education tax rate up for most
By Polly Mikula
Of the 254 municipalities in the state listed on the annual Equalization Study, Killington topped the list for it’s actual property value being undervalued by its Grand List. According to newly released CLA determinations, Killington’s Grand List accounted for just 61.60% of a properties true market value.
Stowe had the second highest discrepancy in the state with it’s Grand List at 66.59% of market value, followed by Winooski at 68.93% of the fair market value.
CLA stands for Common Level of Appraisal and it was devised by the state to ensure that each town pays its fair share of education property tax to the state’s Education Fund. In order to ensure fairness across townships, the accuracy of Grand Lists must be evaluated.
Since towns don’t reappraise every year, and real estate markets are constantly changing, a correction factor, or “Common Level of Appraisal,” equalizes what is paid in education property taxes across towns, the Dept. explains on its website.
The annual Equalization Study, performed by the Dept. of Taxes, does this by comparing the ratio of the Grand List listed value to the sale prices in the town over the prior three-year period. The study considers sales price as the best measurement of fair market value.
“If Grand List values are generally less than sale prices for the recent sales, the town will end up with a CLA less than 100%. If Grand List values are generally more than sale prices for the recent sales, the town will end up with a CLA of more than 100%,” the Dept. explains.
In other words, when current property values increase in a town, it decreases the town’s CLA, which causes the town’s education tax rate to increase.
Once the CLA is determined, it is used to adjust the homestead and non-homestead education tax rates, which are what will appear on the property tax bills issued by each town to its residents.
Effect of CLA on tax rates
So what does this mean for state education tax rates? They’re going up for most across the state; and the further your town’s Grand List is from its assessed 100% of current market value (the lower your CLA) the higher the rate will be to compensate.
To calculate, take the homestead education property tax rate in your town before the CLA is applied (to find yours visit: tax.vermont.gov/property/education-property-tax-rates) and divide it by the CLA.
By way of example, for Killington, it’s $1.5115/.616, which equals $2.4537 (per $100 of property value) — So for a house valued at $500,000 that’s $12,268.67 in state education taxes. Last year, Killington’s CLA was 75.70%, which put the education tax rate at $1.9966 (or about $9,983.48 for that same $500,000 house). Thus, the CLA valuation for Killington, leads to a 19% increase in education property taxes over last year.
Local rates, upcoming reappraisals
The CLA is also used as one measure to determine whether a town must conduct a full reappraisal of its properties. Municipalities must reappraise if the CLA is below 85% or above 115%. Of the 254 municipalities in the Dec. 2022 report, 165 are listed as “Subject to Statutory Order to Reappraise.”
In Rutland County, after Killington, Tinmouth had the next greatest discrepancy with a CLA of 77.43%, followed by Pittsford at 77.89%. All but two of the 28 towns in the county had undervalued Grand Lists, only Mendon (100.77%) and Pittsfield (103.68%) were listed as overvalued in relation to their Grand List (both have recently undergone reappraisals in 2021 and 2022, respectively). In Rutland County, 16 towns are “Subject to Statutory Order to Reappraise;” 12 are not.
In Windsor County, Norwich led the list at 74.48%, followed by Woodstock at 75.37%, then Stockbridge at 75.98%. All 24 towns in the county had undervalued Grand Lists, and 19 are “Subject to Statutory Order to Reappraise,” according to the recent CLA valuations.
The average actual 2023-2024 (FY24) education property tax rate (what taxpayers see on their bills, which reflect both the voted school budget and the adjustment factor for the town level of appraisal) is $1.57, according to a letter Craig Bolio, commissioner of the Dept. of Taxes wrote to the Legislature Dec. 1 regarding forecasted education taxes.
Factors that contribute to increasing evaluations, rates
“Because of the increases in value in real estate in Vermont over the last couple of years, the CLA has been reduced significantly in many communities across the state, and the actual tax bills taxpayers see in those communities may be higher than what is indicated by the average equalized rate,” Bolio explained in his letter to the Legislature. “Property value appreciation, on top of higher-than normal school spending growth, are the main reasons the average property tax bill is projected to increase.”
The Education Fund surplus from last fiscal year, however, will likely be used to “buy down” the forecasted property tax rate later this spring. Bolio projects a surplus of over $63 million, “which buys down equalized rates approximately six cents,” he wrote. “While this projected surplus is significantly lower than the never-before-seen surplus of over $95 million from last fiscal year, it is still extraordinary considering surpluses were generally in the $10-15 million range prior to FY22.”
But even after applying the surplus, the average tax bill is likely to still rise by 3.7% he said. Bolio projected an 8.5% overall growth rate in school spending, which is double last year’s projected growth rate, and higher than any growth rate in at least the last decade, he said.
