Home News and Features TMD: Combined Tax Bills Could Rise by 5 Percent

TMD: Combined Tax Bills Could Rise by 5 Percent

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Photo by Gage Skidmore via Wikimedia Commons.

The presidential primaries will likely be the hot draw this year, but Montpelier residents who vote early or at City Hall on March 3 will also be asked to weigh in on 15 Montpelier articles, including city and school budgets totaling $35 million.

If the two budgets and all other items on the City Meeting ballot are approved, residential property tax bills will increase by about 5 percent in the 2021 fiscal year (FY21), which begins July 1. The increase may be lower for homeowners who qualify for state property tax credits that are based on income.

The proposed FY21 city budget of $9,933,719 represents a 4.9-percent increase over the current budget. That’s higher than the annual CPI inflation rate, which is running at about 2.5 percent, or the Social Security 2020 cost-of-living increase of 1.6 percent, but the city this year was facing sharp 25-percent increases in health and workers compensation insurance. This made it difficult for the City Council to reach its philosophical goal of keeping the budget increase to no more than 4 percent.

Other items affecting the city budget include an increase of 1.65 full-time-equivalent (FTE) employees to 118.65 total FTEs; a 2-percent increase for the fire department union employees and nonunion employees (police and public works contracts have yet to be negotiated); $45,000 granted to the homelessness task force; and $23,500 for the Central Vermont Public Safety Authority.

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If the city budget and all other related articles pass—the largest of which is a request for $350,471 for the Kellogg-Hubbard Library—the municipal tax rate will increase by 5.3 cents, a 4.7-percent increase.

On the school side, voters are being asked to approve a Montpelier-Roxbury school budget of $25,054,900 and a $270,000 supplement to the schools’ capital reserve fund. Together, these represent a 5.2-percent increase in spending.

Among other things, the budget includes the addition of a full-time seventh- and eighth-grade teacher, a full-time behavior position at Main Street Middle School, three coaches, and a half-time pre-K position at Union Elementary School.

If passed, the school budget and reserve fund increases will push the Montpelier residential school tax rate up to $1.725, a 4.9-percent increase. The Roxbury residential tax rate would be $1.610, a 5.5-percent decrease.

One reason for the difference in the two tax rates—and Roxbury’s tax rate decrease—is the Common Level of Appraisal (CLA) in the two towns. The CLA figures—calculated by the state—are a way to account for the different levels of appraisal among towns and are used by make the statewide school property tax more equitable. More than 5 cents of the 8-cent Montpelier tax rate increase is a result of the CLA adjustment.

According to the state, the average property in Montpelier was appraised in 2019 at 86.86 percent of fair market value, down from 89.67 percent in 2018, which indicates property values are rising. By contrast, Roxbury’s CLA rose from 97.11 percent to 97.64 percent, which means property values there are dropping slightly, in theory. Without the CLA adjustment, the proposed FY21 Montpelier residential school rate would be 2.6 cents lower than in FY18, (before the Montpelier-Roxbury merger), in part due to state incentives for mergers. The school district still has two more years to go with an annual two-cent reduction in the statewide rate that comes as a merger incentive, according to the school district.

The table above shows the Montpelier residential property tax bill increases which will occur if the municipal and school budgets pass and all other budget items are approved, including petitioned requests. The increase in the total tax bill from the current tax year would be 5%. Most Montpelier homeowners receive state property tax credits that reduce their property tax bills; the figures above reflect the proposed increases for those who do not receive any of these credits.

Tax-wise, the merger has worked out better for Roxbury residents—10 times better. Leaving the CLA aside, the proposed FY21 residential tax rate will be 26.2 cents lower than in FY18.

If all budget items pass, the resulting combined Montpelier residential property tax bill increase of 5 percent would mean taxes on the average $228,000 residential property in the city would rise $316. (See table for more comparisons).

Homeowners in Vermont are eligible for state property credits that reduce property tax bills, usually based on income. Homeowners with household incomes up to $90,000 can pay their school tax based on a percentage of income, with the benefits phasing out for households with incomes of $90,000 to $136,000. The income-based rates will not be finalized until the Legislature passes a state budget. Homeowners with household incomes of $47,000 and below may also qualify for a reduction in the municipal portion of their tax bills. This tax credit—sometimes called the “circuit breaker”—caps municipal bills at various percentages of income established by statute.

In tax year 2019, the majority of Montpelier homeowners received tax credits, according to the state Property Valuation and Review 2019 annual report. Sixty-nine percent of Montpelier homeowners received an average of $1,443 in education tax credits, while 19 percent received a municipal tax credit averaging $1,095.