The Ada County Assessor’s Office will be mailing out property assessment notices over the next week. It is a common misconception that property tax burdens change directly in proportion to property values. To better help you understand the difference and the relationship between assessments and taxes, the following letter was included with your assessment notice. If you’re a property owner, we wanted to make sure you didn’t miss this important information.
Understanding the Relationship Between Assessments and Taxes It’s no surprise Ada County is one of the fastest growing areas in the nation. Those of us lucky enough to call Ada County home are experiencing the greatest market appreciation since the end of the Great Recession. Median value increases for many neighborhoods are in the double-digits this year. With this upward trend in values comes understandable concern about its effect on property taxes.
It is a common misconception that property tax burdens change directly in proportion to property values. Idaho’s property tax system is budget-driven, not rate-based, and state law generally limits taxing districts’ authority to increase their budgets. In Idaho, the allowed budget increase is 3%, plus a growth factor which captures new development. This restriction prevents taxing districts from realizing a windfall during periods of market appreciation. Conversely, this limit also preserves the consistent delivery of property tax funded services (like law enforcement and fire protection, emergency services, road maintenance, and other essential services) during periods of market decline. Budgets are established first and approved through a public hearing process. Once budgets are finalized, levy rates are calculated and then certified for each tax code area by the Idaho State Tax Commission.
The example below illustrates the indirect relationship between assessed values, tax levies, and taxes.
2016 Assessed Value: $250,000
Median Tax Levy: .011413132
Tax Due: $2,853
2017 Assessed Value: $275,000 (+10%)
Median Tax Levy: .010932278 (-4.2%)
Tax Due: $3,006 (+5%)
This two-year comparison shows the downward pressure an appreciating market has on tax levies. While the amount of property tax due still went up, it was not to the same extent as the assessed value increase. The key to understanding calculations in a budget-driven system is that tax levies adjust to meet the budgetary requirements of taxing entities; property assessments are adjusted only to meet the 100% market value standard that is required by law.
The primary objective of the Assessor’s Office is the fair valuation of property. This ensures an equitable distribution of property tax burdens between owners. The individual taxing districts have budget setting authority, and control the magnitude of your property tax. Please understand levies are not approved until October, so tax levies can only be estimated at this time.
We encourage owners to use the Idaho State Tax Commission’s property tax estimator which will be available online in early June (www.tax.idaho.gov). We hope this explanation of Idaho’s budget-driven model addresses and alleviates some of the concerns you may have.
Robert H. McQuade, Assessor