Report: Caps aid taxpayers
Local government, schools in southeastern Wisconsin limited in setting levies
State-imposed caps on property tax collections by local governments and school districts in southeastern Wisconsin appear to be working out in favor of taxpayers as tax levies are not keeping pace with increasing property values, says a Public Policy Forum report to be released Friday.
Total property values in the sevencounty region pushed up 3.5% in 2017, the fastest pace since 2007, the report says. Values grew by 3.2% in 2016.
After four consecutive years of growth, the aggregate of all school district and municipal equalized property values moved closer to pre-recession levels, the report says. The region attained a total value of $185.4 billion, or 96% of the 2008 total.
The aggregate of all property taxes levied by school districts, municipalities and counties grew by 1% from 2016 to 2017. Total property tax collections increased 1.8% from 2015 to 2016.
“Taxpayers appear to be reaping a greater share of the benefit of enhanced valuations than school districts and local governments, whose ability to capitalize is limited by state-imposed levy caps,” Public Policy Forum President Rob Henken said.
“That clearly was the hope of lawmakers who created those caps, and this year’s report provides new evidence that it is playing out the way they intended,” he said.
Levy increases for municipalities and counties are tied to the percentage increase in property values from new construction only. The state limits the combined amount of general state aid and property taxes a school district can receive per pupil.
The caps are having a similar effect statewide, Wisconsin Taxpayers Alliance Research Director Dale Knapp said.
Levy caps on municipalities and counties have been in place since 2005. Prior to that, property values were growing 7% to 8% or more each year and local governments were increasing levies by 4% to 5% a year, Knapp said.
As property values have rebounded from the recession in recent years, the Wisconsin Taxpayers Alliance has documented spotty growth with 29 of 72 counties lagging behind the others.
Tied to this is a lack of new construction in many rural areas. Those local governments are not able to increase levies to match inflation even though they face steadily rising costs, Knapp said.
The Public Policy Forum tracks annual changes in property values because it is a critical indicator of the health of the regional economy, according to Henken. The seven counties in the region are Milwaukee, Waukesha, Washington, Ozaukee, Racine, Kenosha and Walworth.
“When property values are rising, other underlying factors like gross domestic product, employment and wages tend to be similarly on the upswing,” he said. “Conversely, when the overall economy is sluggish, property value growth tends to be sluggish as well.”
Although the region’s growth in property values rose at its fastest pace in a decade, it lagged behind the statewide 4.1% increase this year, the report says.
Another reason to track the values is that any change, positive or negative, impacts the capacity of local governments and school districts to raise revenues, the report says.
Rising property values in each of the last two years enabled local tax collectors to increase tax levies without raising local tax rates. Property owners likely will see the same equation at work in this December’s tax bills for 2018 budgets.
“While efforts to ensure an appropriate balance between controls on property tax levies and sufficient funding for public sector services never are easy, they are far more manageable in an era of sustained property value growth,” the report says.
The first step in the annual equation is for each government to decide how much tax levy is needed to support annual budgets. A tax rate is calculated to generate the levy.