Businesses pay for bonds at higher rate

Published 12:00 am Friday, September 27, 2002

Forty-three percent of the tax increase associated with the $25.7 million courthouse project will be collected from non-farming residents, while farmers’ share is 33 percent, the county assessor’s data show. It also indicates the commercial and industrial properties will pay a disproportionately large amount of taxes, and large businesses in particular will be hardest hit.

The county board decision not to have a public referendum on the bonding brought some crucial changes, besides a slightly higher interest rate, to the allocation of the tax burden.

Residential and non-residential homesteads, which make up about 54 percent of 22,000 properties in the county, will yield 43 percent of the $2 million annual installment over the next 20 years. Agricultural properties, including residences, farmland and non-homestead farmland, will share 33 percent of the burden, county figures show.

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The largest disproportion of the tax burden allocation falls on commercial and industrial property owners.

While the referendum bonding would have been repaid through taxation spread on the net market value of all properties except farmland, the repayment of non-referendum bonding will be spread over the net tax capacity of all properties in the county.

The tax capacity is based on the market value, but is calculated differently depending on the property type.

For example, in an imaginary world consisting of only three taxable properties of different type &045; a homestead, farmland and commercial property, each of which has an identical market value of $100,000 &045; the three owners do not pay equal amounts of taxes.

Instead, the tax collector applies different multipliers: 1/100 to the homestead, 0.55/100 to the farmland and 1.5/100 to the commercial, to compute the tax capacity, which will be 1,000, 550 and 1,500 respectively. This means that the homestead owner is responsible for paying 32.8 percent share of the tax levy, while the farmland owner is 18 percent and commercial property owner 49.2 percent.

The multiplier, called the property classification percentage, is higher for

apartments, commercial and industrial properties, and lower for farmland. It also changes in increments if the property value exceeds a certain threshold: 1.25/100 for the part of a homestead exceeding $500,000 value, 1/100 for farmland over $600,000, and 2/100 for commercial over $150,000, for instance.

There are 1,109 commercial and 162 industrial properties in the county, which are only about 6 percent of all taxable properties. The value of those properties, which is generally higher than other equivalent size of properties, will be magnified by the tax capacity equation, and they will consequently pay 12.4 percent of the taxes, collectively.

Yet, the taxation resulting from referendum-style bonds based on the market value would not necessarily have been better for the commercial and industrial property owners, because farmland would have been be excluded from the levy.

In the imaginary world example, the commercial property owner will share 50 percent of the new tax, which is more than in the case of taxation based on the tax capacity. The farmland owner des not pay any in that equation.

But in the real world, there would be more tax increases for the commercial and industrial properties under the referendum bonding, for properties valued at less than $200,000. Only properties with a higher value than that could have saved some taxes by the referendum.

The residential homestead owners unanimously benefit from the non-referendum. But farmers, though they will reduce the share for their homestead, end up worse off because of the tax on farmland.