As county government and school officials go about the business of establishing budgets and millage rates for the coming year, they do so faced with a factor in the tax equation that during better economic times simply wasn’t an issue — reduced property values.
For years, as Forsyth County rode the tide of phenomenal economic growth and development, the value of property in the county climbed annually. But the past two years have seen the total value of property, as compiled in the tax digest, go down. Once upon a time, that seemed an impossible notion.
This year’s total tax digest, before any exemptions are considered, is about 6.6 percent lower than last year, according to Chief Tax Appraiser Mary Kilpatrick. Last year was about 4.3 percent lower than the year before, meaning a two-year drop of more than 10 percent.
For comparison sake, consider that in the two year period 2006-08, the county’s digest increased some 21 percent, and you get a sense of how quickly a precipitous change has occurred.
Even so, Forsyth is in better shape than many counties in Georgia, as other communities are facing the harsh realities of double-digit declines in total property value for this year.
Certainly, the news isn’t surprising. Anyone who has watched the real estate market over the past few years knows that property today isn’t selling for what it was just a few years ago. Add to that the glut of foreclosed properties that are now part of the housing equation, and the only real surprise might be that the decline wasn’t more.
For property owners hoping to sell their property, diminished value means selling prices are likely to be lower than owners would hope to see. And, conversely, for those in the market to buy property, bargains are likely to be found.
But what does it all mean for those who set rates for property taxes, and those who pay them?
Unfortunately, there is no simple answer.
Property taxes are calculated using a combination of two factors — the value of the property as established by the assessor’s office under state law, and the millage rate as established by governing authorities such as the county commission and the school board.
In broad general terms, if millage rates stay the same and property values are lower, then tax bills are lower and ultimately tax revenues are down. That’s not the case for everyone, however, since not all properties decreased in value. Even though the overall digest is down, roughly 15 percent of tax assessment notices mailed this spring did not reflect a decline in value.
While most discussion of tax levies focuses on millage rates, that truly is only part of the equation.
The burden on those responsible for setting tax rates is to determine the total revenue needed from taxes to balance the budget under consideration, and then to decide what millage rate applied to the existing tax digest will generate the funds needed.
In dealing with a tax digest that is of less value than previous years, budget planners for both the county and the schools face challenges that simply weren’t an issue just a few years ago, when holding the line on the millage rate could mean more tax revenue simply because of higher property values.
More important, however, is the core problem that has led to the reduced values. The economy remains stagnant, many homeowners are struggling just to make house payments, and foreclosure numbers are staggering. The reduction in the value of the tax digest is a symptom of a diseased economy, a fact that cannot be ignored by those preparing tax-supported budgets at any level in the state.