Public Policy Forum Blog

Change in technical college funding framework delivers promised property tax relief

Property taxpayers in southeast Wisconsin had little to gripe about in 2015, as the amount of gross property taxes levied across the region declined by 3% ($121 million) from 2014.  Each of the seven counties in the region also saw a dip in total property tax levies – the first time that has happened since at least 2000.

Those were among the findings contained in the Forum’s annual report on property taxes and values in southeast Wisconsin, which we released this morning.  The report not only examines property tax trends by county and municipality, but also measures trends in property values and examines how they impact the capacity of local governments and school districts to raise revenues. 

In 2015, we find that the decline in levies resulted largely from the passage of Wisconsin Act 145. That legislation – signed into law in March 2014 – provided more than $400 million in additional state aid for the state's technical colleges, with a corresponding requirement that property taxes across the state be reduced by a roughly equivalent amount.

In the southeast Wisconsin region, Act 145 helped produce a $137 million decrease in property taxes levied by technical colleges, which caused the percentage of the region's aggregate gross levy that is derived from technical colleges to decline from 7% in 2014 to 3.5% this year. 

We note that while Act 145 succeeded in lowering property tax levies in 2015, it also created a larger obligation for state taxpayers to finance the state’s technical college system. This was one of the factors that contributed to difficult and contentious deliberations this past spring and summer on the 2015-17 state budget.

Local officials also were helped by 2.6% growth in property values in 2014, which contributed to lower property tax rates (2015 levies are based on 2014 property values).  Our analysis shows that the region's property values continued to grow 2015, though the 2.0% growth rate was slower than last year's 2.6%. 

Other key findings from the 2015 analysis of property values and taxes in southeast Wisconsin:

  • The decrease in the region's aggregate tax levy was accompanied by an even larger (5.4%) decrease in the aggregate gross tax rate for property owners in the region, from $23.93 per $1,000 of equalized value in 2014 to $22.63 in 2015. This is the first year the region's tax rate has declined since 2008.
  • In 2015, every county in the region experienced an increase in property values, though there were disparities in increases across the region. For example, property values in Kenosha County increased by 4.8%, while those in Milwaukee and Walworth counties increased by only 0.7%.
  • The City of Milwaukee was one of only 26 municipalities in the region that did not experience an increase in overall property values from 2014 to 2015. Property values declined in Milwaukee by 0.6%.
  • The property taxes levied by school districts remain the largest component of the annual property tax bill, accounting for 45.4% of the aggregate tax levy in southeast Wisconsin. In 2015, the budgeted aggregate school district levy for southeast Wisconsin remained mostly unchanged (decreasing by 0.06%), thus contributing slightly to the region’s overall decline in tax levies.
  • To calculate an average tax bill in southeast Wisconsin, we apply the average residential property value in the region to the gross tax rate. The hypothetical average tax bill in the region declined by $118 to $4,298 in 2015.

The overall message conveyed by this year’s analysis of property values and taxes in southeast Wisconsin certainly is a positive one. Not only were tax levies and tax rates down for 2015, but 2015 property values are up, signaling less pressure on policymakers to raise rates for 2016. While the expenditure pressures facing local governments and school districts undoubtedly have not subsided, this year was one in which services appear to have been largely maintained without increases in local taxes. 

Author: 
Rob Henken