A: GS 159-11(e) was amended in 2003 to require
local governments in each year in which a general
reappraisal of real property has been conducted
to include in the budget a statement of the revenue-neutral
property tax rate for the budget. The revenue-neutral
rate is defined as "the rate that is estimated
to produce revenue for the next fiscal year equal
to the revenue that would have been produced for
the next fiscal year by the current tax rate if
no reappraisal had occurred." The rate is to
be calculated as follows:
Assume a general reappraisal is conducted for
tax year 2000-2001. The assessed value of property
in the taxing unit for 2000-01 is $1.1 billion.
The tax rate is 65 cents. In 2001-02, the assessed
value of property increases to $1.3 billion. Of
that amount, $100,000,000 represents the assessed
value of property acquired in an annexation. The
assessed value of property in 2002-03 is $1.4
billion. The assessed value of property in 2003-04
is $1.5 billion. A reappraisal is conducted for
tax year 2004-2005. The reappraised value is $1.8
billion.
The revenue-neutral rate is calculated as follows:
Step 1.
Revenues for the current fiscal year are $9,750,000
[$1.5 billion x .0065]. To produce the same amount
of revenue in 04-05, the tax rate would have to
be 54.2 cents [$9,750,000 / $1.8 billion].
Steps 2 & 3.
Growth factor from 00-01 to 01-02 is 9.1%.
This is calculated by first subtracting the
$100,000,000 in value attributed to the annexation.
The resulting $1.2 billion is a 9.1% increase
from $1.1 billion.
Growth factor from 01-02 to 02-03 is 7.7%.
$1.4 billion is a 7.7% increase from $1.3 billion.
Note that the annexed property is included in
this calculation.
Growth factor from 02-03 to 03-04 is 7.1%.
$1.5 billion is a 7.1% increase from $1.4 billion.
The average growth rate is 8% [(9.1 + 7.7 +
7.1) / 3].
54.2 cents [tax rate calculated in Step 1] x
1.08 = 58.5 cents.
Thus, 58.5 cents is the revenue-neutral tax
rate.
