Each year the city council works on a budget for the upcoming year. Most years the effort takes a good deal of time starting in June or July. The process takes on all forms of reviewing records; looking at projections and determining what needs are and will be for up to 18 months in the future.
This year was no different in these respects but what was of concern was that of what will happen to the tax base. Taxes are paid by property taxes which are determined through a set of formulas and calculations. It all starts with the value of a piece of property. The County Assessor looks at each individual property to determine a value based on market conditions. Market conditions are defined by willing buyers and sellers. Properties that are foreclosed on are not used to determine market. Each property, by law, must be assessed between 90% and 105% of the market value for a property. All properties in each taxing jurisdiction are assessed.
The next step in the process is to develop the Tax Capacity for each jurisdiction. Taxpayers fall into classes of residential homestead, non-homestead residential, commercial, industrial and others as defined by statute. With these categories a class rate is assigned to determine tax capacity. Homestead residential is 1% of the market value for the first $500,000. Commercial is at 1.5% for the first $150,000 and 2% for values above that. Each property is then assigned a tax capacity and that amount is the value you are taxed on.
Local taxing jurisdictions set their levies for the upcoming year looking at revenues and expenditures. The preliminary levies are certified to the county. Once the county has determined the Tax Capacity for a taxing jurisdiction and a city its levy, the levy is divided by the Tax Capacity to get a tax rate. This is expressed in a percentage and the projected rate for Breezy Point was based on the preliminary levy to be 35.189%. With further reductions to the preliminary levy the city reduced the levy another $16,942 dropping the tax rate to 34.854%. This revised levy amount was $10 less than the levy set last year.
Last year the tax rate was 33.137%. The problem came with the loss of tax capacity of the city which came mostly from a general reduction in property values. Keeping the levy the same but with a reduction in tax capacity by 5.5% resulted in a 1.717% increase in the tax rate. The unfortunate part is we don’t have or know the tax capacity until early December for the upcoming year.
The city council felt that with the loss of tax capacity and the potential for additional reductions next year that cuts to the budget were needed. The goal is to reduce the level of taxes (tax rate) to that of last year. The final levy needs to be certified to the county prior to December 28th.
