How much difference does a year make?
In terms of taxable property in Mooresville, it comes out to nearly $1 billion.
That’s how much more Mooresville’s residential and commercial properties are worth now than in April 2018 after this year’s Iredell County reassessment and the addition of properties through annexations, according to the latest projected figures.
The combined residential and commercial values in Mooresville rose from a little more than $5 billion in April 2018 to slightly more than $6 billion as of last month, according to Iredell County Tax Assessor Melia Miller.
The nearly 20 percent jump is significant because Mooresville commissioners must now set a property-tax rate to be applied to the reassessed, annexation-adjusted total – along with a virtually unchanged $1.3 billion in personal property – to fund the bulk of the town’s budget for the fiscal year that begins July 1.
The current budget is the 11th in a row to leave the tax rate at 58 cents per $100 in value. Leaving the rate unchanged for another year, however, would result in an overall tax increase. How that would affect individuals would depend on how much their property values increased.
Reappraisals of all properties in Iredell and Mecklenburg and counties in 2019 have led to significant increases in total values for the entire Lake Norman area.
As they also plan their budgets for next fiscal year, commissioners in Huntersville, Cornelius and Davidson also face the challenge of setting a tax rate at a time of inflating property values.
A key question often hangs over such deliberations in a revaluation year: Does a reassessment provide some amount of political cover for elected officials to raise taxes, especially since a segment of the population may believe that what they pay is related solely to what their property is worth, and not based on the rate set by commissioners?
Whether a result of expediency or not, a limited amount of research concludes that local governments are more likely to raise property taxes in revaluation years, said Donnie Charleston, director of state and local fiscal engagement at the Urban Institute in Washington.
The last relevant study in North Carolina was in the 1990s, said Charleston, a Rowan County native. But a 2015 study of local governments in Virginia by a researcher at George Washington University found that taxes increased significantly more in reassessment years.
In an analysis of data from 2001 through 2011, Justin Ross of GMU’s Mercatus Center looked to gauge the impact of the “fiscal illusion” of revaluations on the decision to raise taxes.
Ross concluded that local governments were more likely to raise taxes in a reassessment year, but that the added revenue tended to be set aside for future expenditures rather than spent as part of the next budget. That strategy can insulate local governments from having to raise taxes again in the near future, he noted.
Regardless of what they decide, Charleston suggested that counties and municipalities do all they can to help citizens understand the interplay between property assessment and tax rates.
“Transparency in the revaluation process is a best practice in local governance,” he said.
“And, the trend counties are displaying towards more frequent revaluations is also consistent with good governance principles.”
Shorter windows of time between reassessments help to prevent “sticker shock” due to substantially higher values, Charleston explained.
Mecklenburg historically has done countywide revaluations every eight years, as required by state law. But county officials have said they plan to shift to a four-year cycle. Iredell County already reassesses every four years.
In fast-growing communities like those in the Lake Norman area, local governments experience consistent increases in revenue in the years between reassessments. New property and improvements to existing property add to the tax base, so the same tax rate yields more revenue year over year. That’s how Mooresville could increase spending for more than a decade without raising the tax rate.
This year, however, there is no built-in growth because all property – existing, new and improved – was assessed at the same time.
In all four towns, keeping the tax rate the same for next fiscal year would result in a significant tax increase for most property owners, because values consistently increased in the area. In fact, commissioners actually could trim several cents from their tax rates and trigger an overall tax hike.
That “fiscal illusion” is what can lead some property owners to blame the revaluation for a tax increase without taking into account the effect of the corresponding tax rate set by commissioners.
Mooresville’s projected “revenue neutral” tax rate is 52 cents per $100 in value, which is 6 cents lower than the current rate.
Here is a look at other current tax rates for Lake Norman area towns, and their projected (numbers could change based on reviews and adjustments) revenue neutral rates.
Current: 30.5 cents per $100 in value
Projected revenue neutral: 24 cents
Current: 25.5 cents
Projected revenue neutral: 20 cents
Current: 35 cents
Projected revenue neutral: 27.5 cents