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Your property tax bill is the product of two independent factors: the assessed valuation of your property and the levy rate set by the local government that spends the money. Neither of these values remains constant from year to year. Fluctuations in assessments, levy rates, and total taxes due create unpredictability in the tax bill for property owners.
For example, if a local government’s budget grows by 3% that does not mean your individual tax bill will increase that rate. Instead, valuation changes impacted by property sales far from your property and unrelated to your local market may increase your valuation dramatically. You may see the levy rate decrease, yet your total amount paid increase due to valuation increases of property across your taxing district. Changes in the valuation mix of different classes of property and a shift in the distribution of property value may result in your farm home taxes actually going down, while the taxes paid on your Ag land increases.
With both components of the property tax equation in flux from year to year, it is no wonder taxpayers are frustrated. During my four years in the Legislature, various proposals have been introduced that attempt to address the consequences of the current property tax system in Nebraska. Few have passed and none have fundamentally corrected the structural problem that exists. This session I have introduced a constitutional amendment, LR290CA, which would bring simplicity, transparency, neutrality, and stability to the property tax system in Nebraska.
If adopted by Nebraska voters, all property in Nebraska would be valued for property tax purposes at its market value on the date the owner of the property assumed title, determined by the actual purchase price. That valuation would not change until the property is sold to a new owner.
Fair market value of any property is only truly known when there is a willing buyer and a willing seller, both of whom know the uses and capability of the property, and money changes hands. Until that transaction occurs again, any valuation is an estimate at best. A home buyer in another community who is willing to pay more for a particular house based on their individual family wealth should not impact your tax bill. Investors who pay high prices for land on the other end of the county should not result in an increase in taxes for a young farmer trying to make a living on their family farm. New commercial developments subsidized by TIF projects should not raise the costs for an established business operating for decades in the town square.
If adopted, many of the frustrations of property tax payers would be eliminated. Gone are fluctuating valuations, equalization protests, and tax bills that make budgeting for families impossible. The complex and often confusing appraisal process is replaced with a simple and fully transparent valuation: the price on your bill of sale. Until you sell it and realize any increase in value, it does not change. Total property values in a district would have a more predictable rate of growth from year to year, providing greater stability to local governments and taxpayers alike. The system is neutral for all classes of taxpayers, since individual buying decisions, and those alone, determine your valuation for property tax purposes. The personal choices of other buyers will not cost other taxpayers on their own property.
This is a bold, structural change to how the market value of property is determined. Statutory changes to levy limits, both high and low, will need to be changed. Nevertheless, in the face of inaction by the Legislature to make incremental statutory changes to the current system, I feel compelled to place a bold, structural change before the public to consider. Many proposals fail to meet the standards of simplicity, transparency, stability, and neutrality. This structural change to determining market value of property embodies them all.
For many taxpayers, understanding how their total property tax bill is determined can be confusing. When property owners receive notice that the assessed value of their property has been increased by the county assessor, sometimes substantially, they are understandably concerned. In most cases, the valuation increase means a tax increase.
Your property tax bill is determined by two factors: the assessed valuation of your property and the total tax levy rate set by the local political subdivisions in which you live. Neither of these numbers remain constant over time. Local political subdivisions establish a budget based on their spending plan. They then look at the total assessed value of property within their taxing district. The levy rate is set, within the bounds of levy limits, to generate the amount of revenue to pay for the predetermined budget.
Your property tax bill may go up, but the levy rate may stay the same or even decrease. If this occurs, the assessed valuation on your property has been increased. For many property owners, increases in the assessed valuation of their property has driven a significant rise in their property tax bill. For agriculture land owners, rapid valuation increases have created a dramatic and unprecedented shift in the total property tax distribution. That shift has most notably impacted the school equalization aid formula, TEEOSA, resulting in the majority of rural school districts in Nebraska receiving no state equalization aid.
The Nebraska Constitution requires property to be valued uniformly and proportionately. The value is determined based on an assessment of the market price of the property, or an estimation of what the property would be sold for if offered for sale in the open market between a willing buyer and a willing seller. Equalization is the process by which the assessed value of your property is adjusted to reflect the market value of similar properties for the purposes of determining your property tax.
When property owners feel the value placed upon their property for the purpose of taxation is in excess of market value, they can file an official protest with the county clerk using Form 422A. They then must appear before the County Board of Equalization or their assigned agent to demonstrate why their valuation is not accurate.
Protesting your property valuation is a time consuming process. For many taxpayers, it means time away from work and family obligations to prepare for and attend the hearing. The standards for the information a taxpayer needs to provide to support their claim are unclear and vary from county to county. Taxpayers are often only given a few minutes to make a case that can have a significant impact on their family budget. For many the protest process is intimidating. Even after the protest hearing is complete, there is no consistent standard by which the Board of Equalization has to accept or reject the valuation.
When the county increases the valuation of your property for the purposes of taxation, it represents an increase in taxes. The burden for justifying the increase should lie solely with the government entity. It should not be the responsibility of the taxpayer to prove the value of their property.
Buffalo County provides an excellent example of the burden placed on property owners by the current system. Last year 1,972 valuation protests were filed with the County Clerk. That is an amazing investment of time and productivity by taxpayers to defend the valuation of their property, and it is down from an all-time record high of 2,566 in 2016. The result of those protests was a total decrease of $66.92 million in assessed property value, out of the original $283.69 million proposed. That amounts to 23.5% of the total valuation increase that was reversed following taxpayer protests.
Taxpayers should never be left wondering “why” their valuation increased, nor should they bear the burden of disproving a positive claim made by the government. In response to this need, I have introduced LB 905, which would require that at any hearing of the county board of equalization on a protest regarding real property, the burden of proof is on the county assessor to show that his or her assessed value is equitable and in accordance with the law.
I encourage county officials to proactively communicate with taxpayers, in detail, about why their property values increased. Every valuation increase should be made with understanding it is the responsibility of the county, not the taxpayer, to defend the increase. Clear, consistent, and objective standards of evidence should be available to taxpayers who wish to protest their valuation. The burden of proof for any government action, including taxation, lies with the government, not the citizen.
The trust and confidence of the public in the integrity of their government is critical. Pew Research Center data shows historical lows in public trust of the federal government, with only 18% of respondents indicating they believe Washington will do what is right “almost always” or “most of the time”. Public confidence in local government is much higher. Gallup research shows much stronger trust in state government, at 62%. Local governments have the highest level of public trust, with 71% of respondents in the Gallup survey having a “great deal” or “fair amount” of trust in local government to solve problems.
Public confidence in government is maintained when public officials develop policy in an open and transparent manner. When citizens do not feel heard, or, even worse, perceive they are intentionally excluded from important discussions by public officials, their trust in government is compromised.
In 1975 the Nebraska Open Meetings Act established the guidelines under which public policy in local government would be conducted. “It is hereby declared to be the policy of this state that the formation of public policy is public business and may not be conducted in secret. Every meeting of a public body shall be open to the public in order that citizens may exercise their democratic privilege of attending and speaking at meetings of public bodies”. If you have ever attended a public board meeting, you have likely heard the chair open the meeting with reference to the law and where to find it posted in the meeting room.
The Nebraska Open Meetings Act recognizes the importance of citizen access and public input to the decisions of public officials. Citizen participation in public meetings is a two-way process. Officials have the opportunity to hear from their constituents before making decisions that impact the public. Additionally, open meetings provide an opportunity for the public to gain information, data, and background that inform board member decisions. Public officials have an obligation to listen to the public. Citizens also have an obligation to educate themselves about important policy issues.
Open communication between government and the public is achieved through many means. Rules about public notice, agendas, and minutes are not procedural boxes to be checked. They are essential elements to insure the public is aware of what government is doing and have ample time to engage in the process if they so choose. Work and family commitments often limit how a voter may be able to physically participate in a public meeting. In such cases, detailed agendas published with adequate notice and comprehensive minutes of official actions are critical.
Nebraska’s Open Meeting Act is to be interpreted in favor of openness to the public. Making difficult and potentially unpopular decisions are not easy as an elected official. However, the more controversial a policy, the greater the need for an open dialogue between public officials and citizens. Public trust is not doing only what is popular or not upsetting people. Open communication and meetings allow even those who disagree to have a voice in the process and make decisions from a common set of facts.
Citizen apathy undermines the effectiveness of representative government. All too often I hear from local elected officials who tell me nobody attends their meetings or asks questions about their decisions. Our civic duty does not end at casting our ballot. It extends to a responsibility to remain engaged in the public process, even when it becomes routine and mundane.
On the other hand, when a controversial issue emerges–like wind farm developments, nursing home closures, or bond issues–hearing rooms are suddenly packed with vocal constituents. While public disagreements can challenge a community, citizens engaging in the policy process is a good thing. When the public cares enough to engage, they are taking ownership of their community. Better public policy will result.
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