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While the valuation of property subject to taxation by a political subdivision is dictated by market conditions and subject to the Uniformity Clause of the Nebraska Constitution, the amount of tax collected per $100 of valuation, called the tax levy, is set by each political subdivision annually. An examination of your property tax statement lists which political subdivisions you are paying taxes to and the levy rate. Expressed as a decimal figure, the rate is calculated as a percentage of total valuation collected in taxes.
To illustrate, you own a home with an assessed value of $100,000. The levy for your public school is .95, your community college is .1125, and your natural resources district is .045. Annually, you would pay taxes of $950 to your school district, $112.50 to your community college, and $45 to your NRD. If you own an 80 acre parcel of farmground with a market value of $5,000/acre your valuation for taxation purposes would be 75% of market value, or a total of $300,000. The same rates would apply. Tax levies are also subject to the Uniformity Clause in the sense that the rate must be uniform throughout the political subdivision, regardless of class of property.
The tax levy is under the sole authority of the political subdivision that charges the tax. The board of a political subdivision will establish its budget for the year, reflecting the revenue it must collect from property taxes. Using the total value of taxable property from the assessment and equalization process, the local board sets the levy to match revenue to their budget. The levy can be kept the same, lowered, or raised. A common statement is that a subdivision is “levy neutral”, meaning they have not changed their tax levy from year to year. That does not mean they are collecting and spending the same amount of taxes.
The only control of tax levies at the state level is in the form of limits. Established in state statute, levy caps set a maximum rate a political subdivision can charge. School districts have a levy limit of 1.05, the highest of all political subdivisions. Counties and cities are limited total levy of 0.45, with an additional 0.05 for joint agreements and the option to designate a portion to other agencies within the county or city, such as county fair boards, hospital districts, fire districts. Natural resources districts are authorized to levy up to $0.045, community colleges having a levy limit of $0.1125, and educational service units have a limit of $0.015.
Any political subdivision can exceed the statutory levy limit if approved by a public vote of the people in the subdivision. Public bonds can be issued by most political subdivisions, subject to a vote of the taxpayers. Property taxes collected to repay bonds are outside of the levy limit. Additionally, some NRDs levy additional taxes to meet compliance with the Nebraska Ground Water Management and Protection Act.
Budgetary management and local authority to set property tax levies is a reflection of the value among Nebraska voters of local control. Locally elected officials with the best knowledge of the needs and challenges of a community control the cost to educate a child, maintain local services, manage ground water, and provide vocational education. Local voters have a direct say in whether to issue bonds for school construction, city infrastructure upgrades, or hospital expansion. Local voters determine what the spending priorities are within each local community. As taxpayers and voters, every Nebraskan has an ability to influence the amount they pay in property taxes by engaging in the budget process with their local governments. I encourage citizens to do so.
There are several policy issues at the state level which can address the fundamental process of the property tax system. Next week I will address the state policy issues and the impact they may have on local control, alternatives to revenue sources based on property, and the state budget.
Your voice is important in these conversations. Examine your property tax statements, understand the needs of local spending, and talk to your local officials about the challenges they face. If you have any questions regarding property tax levies or any other issue across the state, please do not hesitate to contact my office by email at email@example.com or 402-471-2732. For daily updates, please follow me on Twitter @JohnKuehnDVM.
Senator John Kuehn, District 38