AGENDA #3c
BUDGET WORKING PAPER
TO: W. Calvin Horton, Town Manager
FROM: Kay Johnson, Finance Director
SUBJECT: Revised Real Estate Tax Base Estimate
DATE: April 27, 2005
The purpose of this report is to explain revised estimates of real property valuation in Chapel Hill within Orange County.
BACKGROUND
Every four years Orange County revalues all county properties to adjust real property for changes in market values. The County just completed a revaluation and has established current values for county properties as of January 1, 2005. The new values will be the basis for assessing property taxes for fiscal year 2005-06. Properties located in Durham County, vehicles and other personal property are not included in the revaluation.
DISCUSSION
General Fund and Transportation Fund
In the March 23, 2005 Status Report, based on original projections by the Orange County Tax Assessor, we estimated that real estate values would increase about 25% for revaluation, in addition to normal growth of 2%. After we prepared the March 23, 2005 Status Report, we learned that the County Tax Assessor has lowered his estimates for the Town’s revaluation based on more recent information. The County Tax Assessor believes that 20% is a more accurate estimate of the increase in property values.
We continue to estimate that real estate values will grow at about 2% in Durham County and personal property, motor vehicles and utility properties will grow at about a 3.3% as shown in the table below.
* We have included motor vehicles and other personal property, as well as corporate excess and public utilities property taxes, in “other” Orange and Durham property taxes in the chart above.
We have calculated an estimated equalization rate that would allow the Council to raise the same amount in revenues as would have been raised without the revaluation. Current tax rates are 51.6 cents and 5.9 cents for the General Fund and the Transportation Fund, respectively, for a combined rate of 57.5 cents. After revaluation with 20% growth, the equalization tax rates would be 44.2 cents and 5.1 cents, for a combined rate of 49.3 cents. These rates are slightly higher than the rates shown in the March 23, 2005 Status Report (General Fund 42.3 cents and Transportation Fund 4.9 cents for a total of 47.2 cents) when we had understood the estimated revaluation increase to be 25%.
The chart below shows the estimated equalization rate for the Town’s property tax rates based on the revaluation of Orange County Chapel Hill real estate at a 20% increase in values:
Using the revised equalization rates of 44.2 cents for the General Fund and 5.1 cents for the Transportation Fund revenue estimates for property taxes do not change; the estimates would remain at $23 million for the General Fund and $2.6 million for the Transportation Fund before annexations.
After the calculation of the revaluation rate, we need to add the values of the property that the Council has approved for annexation, Larkspur and Vineyard Square. The table below shows the effect of adding the two areas.
A cent on the tax rate after the adjusted revaluation and the annexation is estimated to be $530,000.
Downtown Service District
The revised valuation estimates require us to adjust the calculation of the equalization rate for the Downtown Service District as well. The current tax rate for the Downtown Service District is 6.2 cents per $100 assessed value. The equalization rate based on the current estimate of assessed valuation of $132,000,000 is 5.3 cents per $100 assessed valuation as shown in the chart below.
|
Downtown Service District |
Original |
Equalization Rate |
Base 05-06 |
|
|
|
|
|
|
Amounts |
70,000 |
|
70,000 |
|
Tax Rates |
6.2 |
5.3 |
5.3 |