Lower tax rate may provide little relief

Residents receive bills for property levy

July 31, 2008
By Greg Elias
Observer staff

What comes down may still go up.

That perhaps best describes the sometimes topsy-turvy world of property taxation in Vermont, where a lower tax rate can produce — with many ands, ifs and buts — a higher property tax bill.

Bills were mailed to all property owners in Williston on Friday. They showed a 20 percent decrease in the combined municipal and education property tax rate, which was set at $1.53.

Yet due to many factors, including a recent town-wide reappraisal that increased assessed values by an average of 31 percent, many if not most homeowners will still see a tax hike.

Brennan Woods resident Peter Fife, for example, saw his property tax bill rise 11 percent to $6,397. Fife said he and his wife, Brenda, earn a good living as nurses, but the incessant property tax hikes are still a drain on their household budget.

“It gets a little irritating year after year,” he said. “I just work harder and dig in, dig deeper.”

Tax bills are determined by multiplying the rate, expressed in dollars and cents per $100 in valuation, by the appraised value of a given property. But that is only the start of the mathematical gymnastics that go into the calculation.

Driving the complexity is the education tax. Amid a long-running political and legal debate over the best way to equitably fund public schools, the state Legislature settled on a complex formula. The Vermont Tax Department uses a 23-line worksheet to arrive at a final number called the homestead tax rate.  

The factors include how much the state contributes to education funding, how much a local school district spends per student above a base amount set by the Vermont Legislature, and how close the town's appraised values are to the actual market value, a measure called the common level of appraisal.

There is a separate rate for what the state classifies as non-residential property, which includes commercial property, second homes and open land. The rate for Williston, adjusted for the CLA, is $1.45.

The state set Williston's CLA at 93.9 percent even though the town just finished an appraisal. The adjustment had the effect of raising the tax rate by 8 cents.

The CLA issue, combined with all the other statistical machinations, has Fife questioning the fairness of the system.

“They are playing a lot of voodoo and black magic,” he said. “That's what's bugging me.”

Bill Johnson, director of property valuation and revenue for the Vermont Tax Department, said he did not know why Williston's CLA was set at less than 100 percent. One possibility is that the town's appraisal pegged values artificially low.

Dick Ransom, Williston's assistant assessor, said values were set conservatively, taking into consideration the weak housing market. He noted that the last time the town did an appraisal, the state said the CLA was less than 100 percent.

Other factors can also impact tax bills.

The first is a shift in the tax burden from businesses to homeowners. The reappraisal increased the average value of residential property by 43 percent. Values for commercial property rose just 20 percent, so homeowners are carrying a larger share of the tax burden.

That irks some residents, including Phil Ronco, who penned a guest column to the Observer (see page 6) complaining about his unaffordable tax bill.

“Let's be honest,” he wrote. “Commercial businesses such as Wal-Mart, Maple Tree Place and other commercial properties drove the need for new police and fire stations and are driving the need for increased municipal services. Therefore, the commercial property owners should be paying for the increased costs of these services that they require, rather than being subsidized by homeowners.”

Another factor is the adjustment known as income sensitivity, which calculates education property taxes based on household income. The formula also factors in per-pupil spending and the CLA.

Those with a household income of $90,000 or less are eligible for the tax break, according to Johnson. Above that income level the tax break is phased out.

Johnson acknowledged that income sensitivity can create a Robin Hood effect, forcing well-off residents to shoulder a larger share of property taxes than those of more modest means.

Of course, municipal and school spending also affect the tax rate. Increases were relatively modest this year: 5 percent for the municipal budget and about 4 percent for Williston schools.

As for the bills themselves, the town was tardy in mailing them because the appraisal process ran behind schedule.

Normally, tax bills are due by the 15th of the month. But because the town must give property owners at least 30 days to pay and the bills were not mailed until July 25, Town Clerk Deb Beckett decided to set the due date for Aug. 29.