Changes in Additional State
Aid (Homeowner’s Rebate) –
Details
AASBO Bi-Monthly Meeting
September 8, 2010
Prepared by:
Judy Richardson, Vice President
602.794.4012
[email protected]
HB 2008 – Homeowner’s Rebate
(Laws 2010, 7th Special Session, Ch. 8)
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Changes the computation of Homeowner’s Rebate (property tax
reduction) effective FY 2012
Current computation – the lesser of:
a) 40% of the school district’s adjusted primary property tax rate
(recalculated after subtracting certain items)
b) The QTR
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New computation - the lesser of:
a) 40% of the school district’s adjusted primary property tax rate
(recalculated after subtracting certain items)
b) 40% of the QTR
Not changed:
a) Constitutional homeowner primary tax limit of 1% of primary
value (= $10.00 primary tax rate)
b) $600 rebate limit for individual homeowner
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HB 2008 – Homeowner’s Rebate
For most school districts, the rebate is currently 40%
of the adjusted primary tax rate
For a few small districts with high tax rates, the rebate
is currently the QTR
For most districts, the rebate will be 40% of the QTR
in FY 2012, which will be a reduction
Districts not affected:
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Those with no or low adjusted primary tax rates (below the
QTR)
Those with total homeowner primary property tax rates (for
all jurisdictions) above $10
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Adjusted Primary Tax Rate
Adjusted primary tax rate is currently supposed to
exclude:
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Adjacent ways
Dropout prevention programs
Bond issues portion of tuition
Small school adjustment (first year over the size limit)
Adjustment for tuition loss if a school district does not qualify for
equalization assistance
Adjusted ADM for high school districts that do not qualify for
equalization assistance (this provision repealed effective 7/1/11)
Liabilities in excess of the budget pursuant to ARS 15-907 (not
usually in adopted budget, so hard to exclude)
QTR for Optional Performance Incentive Programs
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Adjusted Primary Tax Rate
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Adjusted primary tax rate currently includes:
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Desegregation
Career ladder QTR
Difference between TRCL and TSL
Small school adjustment
Interest on registered warrants or TANs
Excessive property tax valuation judgments
(Note: Budget balance carry forwards are
included but should be offset by cash balance)
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Impact of HB 2008
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For most districts:
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The levy for these included items is what causes the
adjusted primary tax rate to be higher than the QTR
The tax rate for these items will no longer be
reduced by 40% for homeowners, which will cause a
homeowner tax increase
The maximum tax rate increase is 60% of the QTR
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This applies to districts with tax rates so high that 40% of
their adjusted primary tax rate is > QTR
QTR minus 40% of the QTR = 60% of the QTR
For FY 2010, 60% of the QTR was $1.65
For FY 2011, 60% of the QTR is $1.78
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Impact of HB 2008
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To estimate the tax impact on your district:
1.
Add up the amounts budgeted for:
o
o
o
o
o
2.
3.
4.
5.
6.
Desegregation
Difference between TRCL and TSL
Small School Adjustment
Interest on registered warrants of TANs
Excessive property tax valuation judgments
Using your Primary AV, determine the tax rate.
(Amount/(PAV/100)
Add the Career Ladder QTR, if applicable.
Multiply by 40%.
Use the lesser of line 4 or 60% of the QTR.
The result is the tax rate increase without considering the
$10 limit.
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Impact of HB 2008
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The $10 tax rate limit is complicated.
If your tax rate is over $10 that doesn’t mean the
homeowner is paying $10 now, because the
rebate must be subtracted first.
Example: If the tax rate was $11.00 in FY 2010,
the homeowner could have paid as little as $11
minus the QTR or $8.25 so they would still see a
tax increase under the new formula.
The $10 limit needs to be tested if the tax
increase is significant, but there are shortcuts.
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Impact of HB 2008
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To test for the $10 limit:
7. Look up the total primary taxes for your district (we
use the ATRA tax book).
8. If more than one, note the lowest and highest.
9. If a rate is less than $9.00, those taxpayers are not
affected by the $10 limit.
10. If a rate is above $13.00, the homeowner should be
above the $10 limit and will not see a tax increase.
11. If a rate is between $9.00 and $13.00, the $10 limit
may apply and will need to be calculated – it
depends on the amount of the current rebate.
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Impact of HB 2008
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For tax rates between $9.00 and $13.00:
a)
Subtract the current homeowner’s tax rate reduction from
the total primary tax. (We estimated the rebate amount by
using 40% of the unified QTR plus the projected tax rate
increase (step 6) for both the elementary and the high school
district.)
b) If the amount in a) is over $10, the formula change will not
cause a tax increase.
c) If the amount in a) is under $10, add the projected tax rate
increase.
d) If the amount in c) is under $10, the tax rate increase is not
limited.
e) If the amount in c) is over $10, the tax rate increase will be
reduced by the amount over $10.
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Impact of HB 2008
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Remember this is the estimated tax increase
caused by the formula change, not the increase
over the prior year.
The total rebate amount and the total tax rate
will be impacted by other factors, including the
primary assessed valuation, the cash balance and
the QTR (will it go up another $0.20?)
The $10 tax rate limit calculation is especially
sensitive to changes from year to year.
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Limits on Tax Impact of HB 2008
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$600 limit on individual homeowner’s rebate
Home Value
Tax Impact of Rebate Change
$500,000 or more
Little or no tax increase because the home is
at the $600 limit with or without the change
$200,000
Full tax increase in districts in which the total
school district primary tax rate is $7.50 or
less
Full tax increase unless the $10.00 tax rate
limit is reached
$100,000 or less
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For More Information
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See “Homeowner’s Rebate Analysis” on AASBO website
under Chuck’s Updates
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