The nature of property taxes

The nature of property taxes


The policy wonks who follow Wallingford’s mayoral contest should be salivating over the big issue of the election season: Property taxes. Yum.

Democratic challenger Jason Zandri is claiming that Wallingford residents pay too much taxes for the municipal services they receive from the town. Mayor William W. Dickinson, Jr., disagrees. To understand this controversy, however, we need a solid understanding of the nature of property taxes and how a tax bill is determined.

We know that a tax bill is generated when the mill rate is applied to the value of property being taxed. We also know that the assessed value of property is determined by a periodic valuation and revaluation of that property. We know that homes are appraised every five years, but how is the mill rate determined?

The calculation of the mill rate requires an estimate of Wallingford’s expected income and expenses, and it’s done when the budget is prepared. What will be the cost to fund the fire and police departments, for example? How much will be required to pay for the Department of Public Works? What will it cost to provide all the town’s insurance? What will the pension contribution be, and what equipment needs to be replaced or repaired? The Board of Education typically uses about 60% of the budget; what will it need? How much should we pay the mayor and the town councilors?

Revenues need to be computed too, because the town must be careful to take in enough cash from all sources to pay the bills. The town’s revenues include not just taxes but income such as grants, return on investments, and charges for services the town provides for a fee. The mill rate is calculated, therefore, when it’s known how much taxes will be needed in addition to these other sources of income so that the anticipated revenues match anticipated expenses.

The mill rate can go up, dragging taxes with it, even if the town does not increase spending by a dime. How could that happen?

If grants decreased, for example, taxes could go up to make up the loss. If return on investments went down, we could need more taxes to fill the gap. If the grand list of taxable property went down, taxpayers would have to pay more to make up for the lost revenue, and the mill rate would have to increase.

And if after revaluation, residential property values went up more than the values of commercial and industrial properties, homeowners would pay additional taxes even if the town’s spending stayed flat, because the values of their homes increased relative to other properties.

A dominant driver of a mill rate increase, however, is increased spending. If spending went up more than new tax revenues created by the grand list, and if grants and other income didn’t make up the difference, taxpayers would have to step up and pay out. So has spending increased?

Using the fiscal year ending 6/30/06 as a base , according to the most recent data available, non-education spending has gone up about 10 percent over the following 6 years. This equates to almost 1.8 percent per year. Voters should decide whether that was reasonable or whether that was too much of a burden, given the economic conditions residents faced during that time. If tax increases were unavoidable, most voters would excuse them. If waste and inefficiencies caused tax increases, we should get the specifics so there can be accountability and so we don’t make the same mistakes again. If bigger tax bills were the result of policy choices and discretionary spending, those choices need to be identified and debated.

Tax policy should be an issue in this campaign. If the administration is proposing to stay the course with similar increases in spending and taxes, we should know that before the election. If the challenger is proposing something different, we should know his specific plans, too.

Mike Brodinsky is a former town councilor, chairman of the School Roof Building Committee and host of public access show “Citizen Mike.”

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