Public Finance Algebra 101

There is a routine semantic deception used by local government officials and their friends in local media and it has become deeply ingrained in the public’s mind.  When challenged even our friends don’t often understand it at first.

Levying the taxes on local property starts with a basic and simple algebraic formula.  A x B = C.  Where “C” = the total property taxes for the fiscal year collected for all funds.  “C”  is the product of “A“,  which is the total taxable valuation (not necessarily market valuation, state depending) in the political jurisdiction divided by $100 or $1,000 (state depending) times “B“, which is the total millage or levy rate. 

Here is Copperhead Consulting Service’s Algebra 101 public finance axiom!

Whenever a local government official issues a press release or states at a public hearing on their budget (or worse, the local media puts a headline on a story)  proclaiming the improvement in one factor of the equation (I.e. B “the tax rate”) unilaterally apart from the other factor (I.e. A “taxable valuation”) and apart from  their combined impact on the product (I.e. C “property taxes”) well, the taxpayers are most likely being manipulated!

When they focus on a steady or declining millage/levy rate, for example, and your committee knows that assessments have risen dramatically for the coming year, you should ask one public question of the officials responsible for this.  “Are you ignorant of the math involved in levying property taxes or are you deceiving us by omission?”  With falling property values in many cities/towns across America they may soon be reversing the game and ignoring levy rate increases, at least up to any limits established by their state law.

Be ready to follow up with a question (as an example) similar to this – “What’s your purpose in focusing on a 2% reduction in the millage/levy rate when you’ve raised valuations by 23% on our homes for the coming year even though the city realtor association says the average listing price has declined by 8% this past year?”

So often we have seen in print-media where  the positive trend in the one factor will be blazoned across the headlines.  Then in the last paragraph of the story they’ll admit the disastrous trend in the other factor, having to concede a major property tax increase is scheduled.

Don’t let them win the PR battle.  What they bank on is that the taxpayer will soon forget their headlined positive spin in three months when their property tax statement shows up  in the mail and they see their taxes went up 14% for the coming year.

Make them declare a major property tax increase is in the offing! This will compel them to address why their spending is skyrocketing and that’s ultimately where this contest needs to be taken.

For more help with this you can contact Copperhead here.