Original AVI Analysis from Administration
In April 2012, the administration provided an analysis of 46 neighborhoods (called Geographical Market Areas or “GMAs”) showing how property taxes on an average current market value and average sales price would change under the proposed Actual Value Initiative (AVI). This initial GMA analysis including the following assumptions:
- The use of “smoothing” such that property taxes would not be 100% based on the new accurate values until 2015;
- a homestead exemption of $15,000 (meaning that homeowners who live in their houses would not pay taxes on the first $15K of value of their homes); and
- an eventual tax rate, after smoothing ends, of 1.25%.
The eventual tax rate would be 1.25% if the total taxable value of real estate in the city is approximately $100B and a $15,000 homestead exemption is in place. The taxable value of real estate now on the city’s books is approximately $36.6B.
The administration’s analysis showed that some neighborhoods would have tax increases under AVI and some would have tax decreases. Whether or not a particular property will have a tax increase or a tax decrease under AVI depends on two things: (1) the property’s new assessed value; and (2) the new tax rate. In general, the more a property is “under-assessed” now, the more likely it will have a tax increase under AVI.
An analysis indicated that “smoothing” resulted in some taxpayers paying even higher taxes in the first two years of AVI due to the higher tax rates needed to pay for smoothing relief. The administration later testified in City Council that “smoothing” would hurt more taxpayers than it would help; as a result, it is being removed from the AVI proposal.
Updated AVI Analysis
This week during a City Council hearing, the administration indicated that the total taxable value in the city may be closer to $80B than $100B.
With this new, lowered total value estimate, the likely tax rate is not 1.25% but somewhere between 1.6% and 1.81%, depending on what relief measures are in place. (The lower the total taxable value, the higher the tax rate needed to generate the amount of revenue the administration is seeking.)
The relief measures under discussion in City Council include a $30K homestead exemption and gentrification relief, which would cap the market value of homes in which the owner has lived for at least 10 years at three times the current market value on the city’s books. Also being discussed by Council is a proposal to raise $40M in additional revenue for the School District from the real estate tax and $45M for the District from the “use and occupancy” tax, which is paid on occupied commercial/industrial real estate.