AV Property values

Property valuations are very slightly up compared to last year's certified property valuation for the City of Corinth. The certified property valuation reports were published at the end of July. The total property valuation for the city is used to determine the property tax rate necessary for the next fiscal year budget (starts in October 2012).

State law ties the effective tax rate to the comparison of this year's net property valuation in the city with the certified appraised value from last year. Essentially the effective rate is defined to set a rate that would generate the same property taxes overall for the city on existing properties as last year's actual property tax rate generated on last year's certified appraisal value. Of course the law is not actually that simple - it is a convoluted and tortuous path from the two appraisal values to the effective rate for this upcoming year.
First, it is very important to note that this discussion applies to the total value of all property in the city - not to any one individual property. Any single property's tax levy is based on that property's appraised value and the property tax rate. The city sets the tax rate based on the total net value of all property in the city.

With that in mind, let's discuss property values in the City of Corinth. All of the following discussion is based on information provided by our finance staff at the July 31, 2012 workshop meeting. First we have to start with last year's certified net taxable value, which was $1,390,506,929. The net taxable value comes from the total assessed value, which was $1,465,431,011, less all of the applicable exemptions, which were $74,924,082.

The next step is to obtain this year's values for the same properties: the assessed value for those same properties this year is $1,447,716,080, which is $17,714,931 less than last year; the value of all applicable exemptions is $86,650,053, which is $11,725,971 more than last year. Thus the net taxable value for all properties that were on last year's certified tax roll is $1,361,066,027, which is $29,440,902 less than last year. This represents a 2.12% decrease in net taxable value.

This year's certified tax roll includes $32,632,489 of new property, such as new homes, apartments, commercial buildings, etc. This increases the total net taxable value for this year to $1,393,698,516 which is $3,191,587 more than last year.

Last year's tax rate was $0.59135 per $100 property valuation. This combined with the $1,390,506,929 next taxable value from last year resulted in a tax levy of $8,222,763 (to the nearest dollar). That same tax rate applied to this year's net taxable value on the same properties (not the new property) would result in a tax levy of $8,048,664 which is less total tax than last year. To achieve the same tax levy with this year's net taxable value as with last year's net taxable value, the tax rate would have to be increased to 0.60414 which is about a 2.1% increase in rate. This is known as the effective rate.

The actual effective rate as calculated by the finance staff is 0.60489, which is slightly higher than the simple calculation I made above. This is where the convoluted and tortuous path comes in, as the actual calculation includes properties that were under review at the time of last years certified rolls, properties that had subequent legal procedings, and other arcane situations.

The effective rate is a calculated rate that is an important component of the 'Truth in Taxation' process that all entities that levy property value based taxes have to follow. The State of Texas requires any entity, such as the City of Corinth, to notify its taxpayers of any intent to set the property tax rate above the effective rate. As long as the city doesn't plan on setting a rate higher than the calculated effective rate, there are no special notices required beyond the normal budget notice and public hearing. On the other hand, if the city believes that it may have to (or may want to) set a rate over the effective rate, then the council has to propose the rate in a resolution, adopt the resolution, and then post notice of the proposal in the papers and online. Two public hearings must be held on the proposed rate, in addition to the regular budget hearing.

Actually setting the tax rate isn't done just based on the property values. Setting the rate requires that the budgeting process have already determined the expected expenditures for the year, so that we know how much has to come from property taxes.