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Unwelcome Tidings

By Staff | Aug 8, 2008

Tax statements were found in the mail of area property owners in recent days, but for most folks, the contents of the statement weren’t welcome news. An equalization order from the Iowa Department of Revenue meant homeowners saw the values of their houses jump by 29 percent, while ag lands in the county, in many cases, saw their taxes decrease from last year.

The tax bills generated a bit of discussion during the Palo Alto County Board of Supervisors meeting on Tuesday, August 5. The board members asked County Treasurer Mary Hilfiker and County Assessor Lois Naig to join them in discussing the tax bills, which were mailed out last week.

“For the record, I want to state publicly that the tax increases that everyone is seeing in their tax bills does not come from Mary Hilfiker, Lois Naig or the Palo Alto County Supervisors’ spending habits or policies,” Supervisor Jerry Hofstad said to lead off the discussion. “This increase is coming directly from the State of Iowa Department of Revenue, not Palo Alto County.”

“That’s correct,” Hilfiker agreed. “The big jump is due to a 29 percent mandated increase in residential valuations.”

“This came about because housing sales have gone up in the past year,” Lois Naig explained. “The Department of Revenue tracks housing sales, and if houses sell higher, then the valuations have to rise, so they issue these equalizations orders to make taxes more equitable. It’s all based on the law of supply and demand. You could say that the buying and selling of houses is what caused this bump.”

According to Naig, the Department of Revenue based the 29 percent bump seen on the tax statements on sales figures from 2007.

“So, where is this extra money going?” asked Supervisor Ed Noonan, who produced his own tax statement. “This is what people are wondering. Where is this extra money going?”

Naig noted that the state issued equalization orders that increased residential valuations by 29 percent, while commercial properties received a 16 percent increase and ag-lands were ordered an 11.5 percent increase, all based on sales figures from last year.

“The thing about this is that when assessed values go up, tax levies should go down,” Naig noted, “And, this equalization order was issued a year ago, on August 15.”

As the discussion continued, Noonan asked the question of just how much of the tax bill the supervisors actually had any control over.

Each tax statement has a breakdown at the bottom of the statement, listing the taxing authority, the percentage of taxes, amount of tax and the prior year’s tax amount for the individual, as well as the current total tax asking and previous amount of the authority, and the percentage.

In Palo Alto County, there are 42 budget authorities, including the nine towns, nine school districts that serve residents in the county, Iowa Lakes Community College and Iowa Central Community College, two benefited fire districts, a sanitary sewer district and the county’s own budgetary areas: General Basic, General Supplemental, Mental Health-Developmental Disabilities Services Fund, Debt Service Roads, Rural Basic, Ag Extension Education, Palo Alto County Hospital, Assessor and the Brucellosis and Tuberculosis Eradication fund.

For all county taxpayers, taxes are collected for the General Basic Fund, General Supplemental Fund, Mental Health-DD Services Fund, Debt Service-Roads, Assessor and Ag Extension budget areas. However, tax statements then differ, depending where the taxpayer lives.

“Basically, the supervisors actually control about 20 to 25 percent of the taxes on the tax statement,” Hilfiker replied to Noonan.

Another factor coming into to play for the equalization orders are the rollbacks that apply to the orders, according to Naig. “Ag lands had an 11.5 percent equalization order, but they also had a 10 percent rollback. For a lot of ag land orders, the taxes actually went down this year. The taxpayers who really got hit hard were commercial property owners.”

According to Hilfiker, the residential rollback was 44.08 percent, while commercial property had a rollback of 99.3 percent.

“If you had a home assessed at $100,000, the 29 percent equalization would make it $129,000. Multiply that by the 44.08 rollback and that gives you the taxable value,” Naig explained.

As the discussion wrapped up, all agreed the tax statements were a surprise to many and may create problems in the near future.

“These are tough,” Hilfiker noted. “There are a lot of people who are going to struggle to pay their taxes. I’m especially worried about the older folks on a fixed income – it’s going to be very tough for them to meet these tax bills. I think we could be seeing more foreclosures and fewer re-financings for folks. I don’t think we’ve seen the worst of this yet.”