(H/T – Nick)
In order to give instant gratification to the fine folks of the Town of Oregon that were screwed over by the Department of Revenue on their 2006 property taxes to the tune of at least $578,000 through an error in the equalized assessed values of the properties in the town, the Legislature is fast-tracking a “no-interest” loan program.
What happens when the DOR screws up that equalized assessed value? In three words – taxes go up. Longer explanation – there are three potential ways the taxes go up. First, there is at least the potential for a reduction in state aid to the property-taxing authority, and taxing authorities being the charter members of the Party In Government they are, tend to refuse to cut their plans of spending accordingly. This affects the entire taxing district negatively, not just the portion in the directly-affected municpality.
Second, in property-taxing districts that include other municipalities, the ratio of the equalized assessed value in the municipality where the value was inflated to that in the municipality (or municipalities) where the value was not inflated. This automatically inflates the tax bill in the directly-affected municipality, while artifically reducing the tax bill in the remainder of the district.
Finally, under the now-expired Craps Tax Anti-Freeze, the various property-taxing authorities had the authority to increase taxes by the value of new construction. If the value of new construction was artifically inflated by the DOR, guess what? The authorization to further jack up taxes just showed up fraudulently, and knowing the PIGS that are the taxing authorities, they wouldn’t pass up this opportunity. To be fair, this would also have happened under the various versions of the Republican tax freezes that were vetoed by Doyle.
The current “fix” for an error in the calculation of equalized value that results in a higher-than-otherwise-allowed property tax bill is to have the DOR to adjust the following year’s equalized value downward in the hope that that tax bill will be lowered by the amount that it was “mistakenly” raised. Since the equalized value is frozen months before the budgets of the various property-taxing authorities, and thus their mill rates, are set, it is merely a hope on the part of the DOR that they got it right the second time.
Becuase this imperfect relief comes late, the Legislature got this bright idea to create a mechanism for a no-interest loan to those affected by a major foul-up by the DOR (one that is at least 10% high) in the form of AB-20. In short, it gives the affected property owners a more-or-less exact relief in the form of a no-interest loan from the state through the taxing municipality at the beginning of the year, with the amount of that loan added to the tax bill at the end of the year. In theory, the current “fix” outlined above pays off the loan with no additional money coming from the taxpayer. Unfortunately, since that relief is imperfect, if the DOR doesn’t get it right and the year-end relief is less than the loan, guess who has to come up with the money?
On to the reason why this bad fix is headed on the fast track. The fraudulent overtaxation of the fine folks in the Town of Oregon that spurred this “fix” was a result of an error on the part of the state Department of Revenue back in August 2006. At that point, they certified that the property in the Town of Oregon was worth $47 million more than the amount at which should have been certified. Take a good look at that date. That is roughly 3 months prior to the date the state figures out how much aid to give various units of local government, and 4 months prior to the date those governments set their budgets and determine their mill rates. You mean to tell me that, in those months between the foul-up by the DOR and the fraudulent increases in the tax bills, nobody figured this out?
A major part of that fraudulent tax increase is blamed on the effect of that foul-up on the school district’s levy; in fact, the linked Milwaukee Journal Sentinel story focused solely on that. Since the school district also includes the Village of Oregon, there are two parts to that; the reduction of state aid to the district, and the change in balance between the property values in the town and those in the village. Color me cynical, but both the new “fix” and the existing “fix” sure seem to only address the latter, and the folks in both the town and the village just got screwed.
So, what’s the fix? First, don’t wait 5 months to double-check those equalized values. In this case, if the DOR would have caught this in early October, none of this would have happened. Next, instead of guessing how much relief is going to occur in the portion of the district that was screwed the previous year, implement an actual amount and dun those that improperly got a break (be it the state or the property owners outside the directly-affected municipality) appropriately. Then and only then can the “instant gratification” loan work.
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