Understanding Levy Limits and Net New Construction in County Budgeting
State budgeting in 2005-2007 introduced levy limits tied to net new construction growth rates, impacting property tax levies. The law included a guaranteed 2% increase which later varied. Assessed values, equalized values, and net new construction play key roles. Options like exceeding levy limits by referendum or encouraging development are discussed.
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LEVY LIMITS & NET NEW CONSTRUCTION MARCH 2023
History: The 2005-2007 state budget established levy limits and tied increases in a county s property tax levy to the growth rate of net new construction (more to come on that in a minute) in the county. As enacted, the law provided a 2% floor. In other words, if net new construction in a county was less than 2%, the property tax levy could still be increased 2%. Over the ensuing five years, the floor ranged from 2% to 3.86%. The 2% guaranteed increase was eliminated in the 2011-2013 state budget. Property taxes used for debt service are exempt from the limits. Counties can exceed the limits only by referendum.
Assessed value - Assessed values are the values the assessor places on the properties and are used to distribute the municipality's tax burden among the individual property owners. Equalized Value - Because assessors in different taxing districts may value property at different percentages of market value, it is necessary for DOR to convert the assessed values by taxing jurisdiction, to a uniform level. These uniform values are called equalized values. Equalized Value is an estimate of the market value of all residential, commercial, manufacturing, productive forest, other (farm sites and farm buildings), and personal property.
Net New Construction: The amount of new construction that occurred within the county in the prior minus the value of any demolition. This net amount is divided by the year s total equalized value to determine the applicable percentage.
Net New Construction CPI 12 month % change $20,000,000 2016 1.20% $240,000 $20,240,000 2.1% 2017 1.70% $344,080 $20,584,080 2.1% 2018 2.10% $432,266 $21,016,346 1.9% 2019 1.30% $273,212 $21,289,558 2.3% 2020 1.00% $212,896 $21,502,454 1.4% 2021 1.60% $344,039 $21,846,493 7.0% 2022 1.35% $294,928 $22,141,421 6.5%
Options for Spending Additional Levy Exceed the Levy Limit by Referendum ie. In 2009, Dunn County passed a referendum to exceed the levy limit by $500,000 a year for 5 years to fund the Dunn County Health Care Center. Do more of something by doing less of something else. Even if there is unanimous desire to add a service, program or staff, if it will cost additional levy the only way to do so is to reduce cost in another area. It is not an option to tax more. Encourage building and development to increase net new construction.
