Tax bills in Decatur County are increasing in part because the value of all property in the county is increasing very slowly.
From last year’s tax billing cycle to this year’s, the gross value of all property in Decatur County increased 1.35 percent. However, the net value of all property, which helps determine the tax rate, which helps determine your tax bill, increased only 0.28 percent, far below the state average 1.64 percent.
The county’s net value of all property, also called net assessed valuation (or net AV) is the gross AV minus all of the property that is exempt from taxation — through such mechanisms as tax abatements for businesses or the homestead exemption for homeowners.
For example, when a business invests $10 million in machinery, the county’s gross AV grows by $10 million. However, the net AV may not increase at all if that business gets a tax abatement on the investment. Tax abatements phase in the property taxes a business has to pay over a set period, usually 10 years. As an example, in the first year of the investment, the business may be allowed to pay no taxes. Each year, the amount of taxes the business has to pay could increase by 10 percent, until it has to pay 100 percent of its tax bill. Abatements serve as an incentive for investments. They also help businesses overcome startup phases, which typically are the most difficult for a business.
In the second year, when the business is asked to pay 10 percent, for example, of the value of the new investment, the county’s net AV would increase by $1 million (10 percent of the initial $10 million investment). In the third, when the business has to pay 20 percent of its taxes on the investment, the county’s net AV would increase by another $1 million.
Similarly, if a Decatur County resident builds a home that is assessed at $100,000, the county’s gross AV increases by $100,000. However, if the resident lives in the home, he may take a homestead and supplemental homestead deductions, which decreases the taxable value of the home (and therefore the county’s net AV) by $64,250. The homeowner ends up being taxed only on a home value of $35,750.
With its gross AV growth of 1.35 percent, Decatur County ranked 49th out of 91 counties (LaPorte County data were not available), which placed it behind all of its neighbors, which recorded growth rates between 2.41 percent (Jennings) and 5.68 percent (Bartholomew.)
Decatur County ranked only 69th in net AV gains. Its growth rate of 0.28 percent was far behind its neighbors, which recorded growth rates between 2.16 percent (Jennings) and 5.35 percent (Rush.)
The net AV is one critical factor in determining the tax rate and how much property taxes you pay. Net AV essentially tells governmental units how big the pie is from which they can cut their piece to provide services.
A second critical element in determining whether your taxes go up or down is how much money local government units are allowed to spend — or how big of a slice of pie they can cut from the total pie.
How much more each governmental unit gets to spend is determined by a state formula: the six-year average of nonfarm personal income. This year, the units, such as Decatur County and the city of Greensburg, were allowed to increase their spending (their maximum levy) by 2.6 percent from last year.
For example, if the city of Greensburg’s maximum levy was $10 million last year, the state formula allowed the city to increase its maximum levy by 2.6 percent this year, to $10,260,000. Governmental units do not have to take the maximum, but they usually do, because they deal with increasing costs for anything from health insurance to salaries and roof repairs. Both the city of Greensburg and Decatur County opted for the maximum increase this year.
So the governmental unit’s slice of the pie (the maximum levy) grew by 2.6 percent — but the total pie (the county’s net AV) grew by only 0.28 percent, which means the slice of pie you have to fork over got bigger.
How much you have to pay depends on the tax rate in your taxing district. Tax rates are calculated by the following formula: Tax Rate = Tax Levy / (Total Net AV/100)
Tax rates, increased for all taxing districts in Decatur County, from Adams to Washington Townships. In Greensburg city, the district that covers the largest number of Decatur County residents, the tax rate this year is 2.5398, up 7.6 percent.
If the tax rate increases, homeowners pay more taxes even if their home value has remained the same. If the tax rate increases and their home value goes up, the bill goes even higher — unless the homeowner already has hit her 1 percent tax cap. The cap limits a homeowner’s taxes to 1 percent of the home’s value. For example, the owner of a home assessed at $100,000 can be charged no more than $1,000 in property taxes.
The formula to calculate your tax bill is: (Net home value/100) x tax rate. So if your home is assessed at $100,000, and you qualify for the homestead deduction ($45,000) and supplemental homestead deduction ($19,250), your tax bill would be $907.98. Last year, for that same home, you would have paid about $844. Of course, if the assessed value of your home has increased within the last year, the difference between last year’s bill and this year’s will be even greater.
You can calculate your bill (and prior years’ bills) at tinyurl.com/lzcfrt8. You will need the gross assessed valuation of your home and choose homestead (if you own the home) and check boxes for whichever additional deductions apply (mortgage deduction, 65 and older deduction, etc.).
The first installment of this year’s tax bill is due by Monday.