Region’s Property Tax Collections See Only Modest Growth

Of all the local government and school district policy issues researched by the Public Policy Forum, perhaps none generates more contradictory conclusions than our annual review of property taxes and values in the region.

This year’s report — which we release this morning — offers a good case in point. Our key finding — that property tax collections in the region grew by only 1% while property values grew by more than 3% — likely comes as good news to most taxpayers. Essentially, it means that while the value of their property is growing, their local property taxing bodies are not availing themselves of the full amount of that growth via their property tax levies, but instead are preserving a portion for tax relief.

That was undoubtedly the intent of lawmakers who created stringent property tax levy caps on local governments and school districts, and it’s playing out in practice. But what’s good news for taxpayers may not be as beneficial to local government and school district officials. That’s because many of them need to capture any growth they can derive from increased property values to accommodate rising costs in areas like fringe benefits and infrastructure, which often grow faster than the rate of inflation, let alone the rate of growth allowed under the State’s levy limits.

We don’t take sides in this hypothetical debate, but simply strive to lay out the most recent information and trends for elected officials and citizens. Here are some of the highlights from this year’s report:

• In 2017, aggregate equalized property values in southeast Wisconsin increased for the fourth consecutive year. In fact, this year’s 3.5% growth rate is the highest since 2007.
• Residential property values in the region also grew at their highest level since 2007, increasing 4.0% from 2016. Washington County saw the largest increase at 5.9%.
• The 1.0% increase in the region’s aggregate gross property tax levy collections is lower than last year’s increase of 1.8%. Every county in the region except Racine County experienced an increase in property tax levy collections, with Kenosha County’s the largest at 2.2%.
• The aggregate property tax rate in the region declined from $22.60 per $1,000 of equalized value in 2016 to $22.11 in 2017 (2.2%). This is the third consecutive year in which the region’s aggregate tax rate has declined and is the lowest rate since 2012.
• To calculate an average tax bill in southeast Wisconsin, we apply the region’s average residential property value to the aggregate gross tax rate. The hypothetical average tax bill in the region decreased by $59 to $4,292 in 2017 — the lowest since 2007.

Overall, whether you welcome property tax relief, or you think local governments and school districts should be able to tap into the growth in property values like State government is able to do when sales and income grow, it’s clear that finding the appropriate balance is much easier in an era of sustained property value growth. The region’s 3.5% increase in values in 2017 means that this positive environment will continue for most local governments and school districts as they get set to consider their 2018 budgets and levies.

The report is sponsored by Baird, the Commercial Association of Realtors Wisconsin, and the Greater Milwaukee Association of Realtors.