Decline in value of property translates into lower income for local governments
The tax digest numbers are in and they forecast more belt-tightening for all Fayette County governments in 2012.
The lingering after-effects of the recession are expected to result in a drop in the overall tax digest of 8 per cent or more. The tax digest is the total assessed value of all private and commercial property in the county that is subject to taxation.
Numbers released last week by the Fayette County Tax Assessors Office showed an 11 percent decrease in the value of residential and agricultural property for 2012.
Once combined with commercial/industrial properties in early April, the total digest is anticipated to decrease by at least 8 percent, a loss of approximately $389 million in value in the past year.
Fayette County Chief Appraiser Joel Benton said Friday that the numbers available to date pertain to residential and agricultural property. Those numbers reflect a decrease of 11 percent in value over last year, Benton said.
Contributing significantly to the lower figures this year is the state requirement to include short sales, bank sales after foreclosures and auction sales. The theory behind that law is that a distress sale of a home on a street lowers the real-world value of the rest of the homes on that street.
Benton said it will be the end of March before the numbers for commercial and industrial properties are tallied. He said tax digest categories such as motor vehicles, mobile homes, timber, heavy equipment and personal and business items might not see a significant change from last year.
Once the commercial/industrial numbers are in and tallied with the other digest categories, Benton said he anticipated the overall digest to decrease 8 percent or more over last year’s figures. If that projection holds true the 2012 digest figures would be on par with the numbers seen in 2004-2005.
The gross tax digest is essentially the combined worth of the various property categories. The numbers for the net digest are obtained by subtracting statutory items such as homestead exemptions, senior school tax exemptions and business inventory from the freeport exemption that account for the great majority of exempted items. Once tallied, the remainder is referred to as the net tax digest.
The tax digest experienced continuous increases over the years that corresponded with Fayette County’s decades-long residential and commercial growth. But that began to change once the recession took hold.
A survey of the net digest numbers since 2001 tells the tale. The net digest stood at $3.27 billion in 2001 and topped out at $5.46 billion in 2009. From there the digest went south to $4.79 billion in 2011 followed by an estimated decrease of $389 million in 2012 to total $4.4 billion.
The 10-year net digest history shows:
2001: $3.27 billion
2002: $3.61 billion
2003: $3.88 billion
2004: $4.21 billion
2005: $4.53 billion
2006: $4.92 billion
2007: $5.24 billion
2008: $5.43 billion
2009: $5.46 billion
2010: $4.99 billion
2011: $4.79 billion
2012: $4.40 billion (estimated)
A falling tax digest has a direct impact on local government budgets. No where is this more acutely felt than in public schools since the Fayette County Board of Education is also a tax-levying entity. This is for two reasons.
One is that the millage rate levied by the school board totals 20 mills, dwarfing those rates charged by the county and municipalities. The system also has topped out on what it is allowed to charge property taxpayers.
The second reason is that the school system currently depends on approximately 53 percent of its funding from local property taxes. With the current school system budget showing an expected sum of $89.8 million coming from property taxes, an 8 percent decrease in the tax digest would mean $7.19 million in fewer dollars for the next school year that begins in July.
