That Darn $250,000 House Trope Leads the State Journal Astray

I plan to write in more detail about why I dislike the tradition of explaining property tax levy changes in terms of the impact on the owner of a house assessed at a value of $250,000.   The editorial in this morning’s State Journal is evidence of how reliance on the $250,000 house trope can lead to mischief.

Here are the third and fourth paragraphs of the editorial:

“The Madison School Board just agreed to a preliminary budget that will increase the district’s tax on a $250,000 home by about 9 percent to $2,770. The board was dealt a difficult hand by the state. But it didn’t do nearly enough to trim spending.

“Madison Area Technical College is similarly poised to jack up its tax bite by about 8 percent to $348. MATC is at least dealing with higher enrollment. But the 8 percent jump follows a similar increase last year. And MATC is now laying the groundwork for a big building referendum.”

So, MATC did a slightly better (or, in the view of the State Journal, slightly less worse) job than MMSD in holding down the increase in the property tax levy, right?  Well, not exactly.  For MMSD, the property tax levy goes from $234,240,964 to $247,736,226, an increase of 5.76%.  For MATC, the property tax levy goes from $94,919,048 to $103,402,074, an increase of 8.94%.   (In terms of overall expenditures, MMSD is budgeting for about a $10 million decrease, while MATC is budgeting for about a $5.2 million increase.)

Why does the State Journal get it wrong?  It’s that darn $250,000 house.  The increase in the property tax levy attributable to the needs of MMSD goes up to 8.76%, if one assumes that the assessed value of the $250,000 house remains constant while overall property values decrease 2.76%.  There is no particular reason to entertain this assumption about no change in value in the $250,000 house, except that that’s the way the analysis has always been done and it works to the district’s benefit when overall property values are rising, as they historically have up until now.   The MATC figure does not include this wrinkle.  This makes it an apples-to-oranges comparison, and casts the district’s budgeting efforts in a worse light than I, at any rate, think is appropriate.

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One Response to That Darn $250,000 House Trope Leads the State Journal Astray

  1. Pingback: A New Blog from Board Member Ed Hughes « AMPS

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