The Future of Education: A property tax lesson
03/01/07 12:00AM By Nina Keck
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(Host) The cost of education and how to pay for it really hits home when your property tax bill comes in the mail.
This is one of the moments when statewide education facts and figures get personal.
So we asked VPR's Nina Keck to provide us with a crash course in how to understand your bill.
(Keck) All right, admit it. You get that property tax bill and your eyes kind of glaze over. You try not to look, but you can't avoid those bright red letters that scream out Total Tax Due.
But at least that line's easy to understand. That's what you owe. That's the number you write on your check. But what about those other lines - the ones that include base rates, abbreviations and adjustments? Confusing? For a lot of people, yes.
Bill Talbott is Chief Financial Officer for the Vermont Department of Education.
(Talbott) "The questions I hear most have to do with - how is my rate set initially? and then - what is the common level of appraisal and how do we get that?"
(Keck) Let's start with that first question - how are tax rates set?
Bill Talbott says education tax rates are basically set by three main factors. How much is spent per pupil in your community, how much your property is worth and how much that value has changed. How much money you make factors in too. But we'll get to that later.
It starts will calculating the average cost per pupil.
(Cash register sound)
(Bill Talbott) "And in Vermont we have a complicated way to count kids. Why not with the way everything else is. We recognize that different types of kids cost different amounts to educate. So we count different kids differently. Secondary kids count 25% more than elementary kids. Kids from poverty cost more than kids not from poverty. So we have this adjusted count."
(Keck) Once all the various cost issues are taken into account state education officials set the base rate that Vermont is willing to spend on each pupil. This year the base rate is $7,330.
To raise that amount with taxes property owners must pay 95 cents for each $100 of property value they own.
This is the statewide property tax for this year.
With me so far? On your tax bill that 95 cents - or .95 - is called the base rate.
(Keck) There wouldn't be much to talk about if every town spent the base rate. But the reality is most communities choose to spend more per pupil.
My town, for example, Chittenden, spends $10, 279 per student - 40% more than the base rate. You can find out how much your town is spending per pupil by looking for the spending adjustment rate - or spending ADJ. On my bill it comes out to be 1.40 - forty percent more than the base rate set by the state.
So I take the 95 cents and add 40% to it to get the combined local and state tax rate.
If you're still with me let's shake things up a bit and talk about the common level of appraisal.
Bill Talbott, of the Department of Education says that's the little number that's causing the most problems.
(Talbott) "Well sure that's the complicated piece of it. We pay for education based on our property value. And to make it the same in a state-wide system, to make it equal across the state, everybody has to report property value in the same way. And if the town doesn't have you listed at your fair market value, then the state has to make an adjustment. And that's when it gets complicated."
(Keck) To ensure fair market values, Talbott says each town's grand list is compared with actual sales listings going back three years. Those sales figures are compared with the town's grand list and the percentage difference is listed on your tax bill as your Common Level of Appraisal - or CLA for short.
(Talbott) "If the CLA in your town for example is 86%, that says in general property values are listed on the town's grand list at 86% of the fair market value, not at fair market value. Now there's variance within a town. Some properties are higher than that and some are lower than that. But the 86% is the central number that is reflective of the town."
(Keck) So your CLA, whatever it is, can raise your tax bill.
There is another adjustment everyone needs to keep in mind and that has to do with income sensitivity.
If your household income is less than $105,000 a year, you qualify.
As a matter of fact, 2/3 of Vermonters qualify for income sensitivity on their homestead, which includes their house and up to two acres of land.
That means that if you're in this group, you'll pay less because your tax bill will be based on your household income and not on the value of your property.
What does that mean in dollars? In most cases people will pay between 2 and 2.5% of their income.
For Vermont Public Radio, I'm Nina Keck.