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Home My WebLink AboutAgenda - 04-15-2025; 7-a - Revenue Neutral Tax Rate for FY 2025-26 1 ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: April 15, 2025 Action Agenda Item No. 7-a SUBJECT: Revenue Neutral Tax Rate for FY 2025-26 DEPARTMENT: County Manager's Office ATTACHMENT(S): INFORMATION CONTACT: Presentation Travis Myren, 919-245-2308 Kirk Vaughn, 919-245-2153 PURPOSE: To review the revenue neutral tax rate calculation for FY 2025-26. BACKGROUND: The Tax Administration Department has completed the 2025 revaluation of real property. The revaluation is intended to adjust property values to reflect market value as of the appraisal date of January 1, 2025. The 2025 revaluation was mandated in 2022 when the County's sales ratio or the comparison between assessed value and market value dropped below 85%. NCGS 105-286(a)(2) states: A county whose population is 75,000 or greater according to the most recent annual population estimates certified to the Secretary by the State Budget Officer must conduct a reappraisal of real property when the county's sales assessment ratio determined under G.S. 105-289(h) is less than .85 or greater than 1.15, as indicated on the notice the county receives under G.S. 105-284. A reappraisal required under this subdivision must become effective no later than January 1 of the earlier of the following years: a. The third year following the year the county received the notice. b. The eighth year following the year of the county's last reappraisal. The sales ratio for 2022 was 0.8197 which was below the standard of 0.85 and triggered a mandatory revaluation within three years. By 2024, the sales ratio had dropped to 0.6445. The 2025 revaluation resulted in a 38.6% increase in the total tax base compared to FY 2024-25, increasing the total tax base by $9 billion to $32.6 billion. Property tax revenues are calculated by applying a property tax rate to the property tax base. If the tax rate were left unchanged following a revaluation, property tax revenues would automatically increase as a result of the increased property tax base. However, the State of North Carolina requires counties to publish a revenue neutral tax rate following a revaluation. The revenue neutral tax rate is the tax rate that would produce the same amount of revenue that was 2 generated in the prior year given the new tax base. The revenue neutral tax rate is then adjusted for the average annual natural growth that occurred since the last revaluation. • The total tax base is the combined value of real property, personal property, and motor vehicles. When those amounts are combined, the total tax base is $32.6 billion. • The total tax levy in FY 2024-25 was $203.2 million. When that is adjusted for natural growth that has occurred since the last revaluation (2.52%), the tax levy for the purposes of calculating the revenue neutral rate is $208.3 million. • The revenue neutral tax rate required to produce $208.3 million in tax revenue using a total tax base of $32.6 billion is 0.6384 per $100 of assessed value. This is a decrease from the current tax rate of 0.8629 per $100 of assessed value. All tax districts are required to publish revenue neutral tax rates. The table below details the revenue neutral tax rates for the Chapel Hill-Carrboro City Schools Special District Tax and the rates for each of the Fire Districts: Tax District 4-25 Tax Rate Revenue Neutral Rate ICHCCS DISTRICT TAX 19.80 14.62 CEDAR GROVE FIRE 9.00 6.54 CHAPEL HILL FIRE 13.87 10.79 DAMASCUS FIRE 12.80 9.79 EFLAND FIRE 10.28 7.38 ENO FIRE 11.98 8.71 LITTLE RIVER FIRE 7.39 5.35 NEW HOPE FIRE 13.84 10.15 ORANGE RURAL FIRE 11.49 8.21 ORANGE GROVE FIRE 8.27 5.81 SOUTH ORANGE FIRE 9.09 6.67 SOUTH TRIANGLE FIRE 12.80 8.75 WHITE CROSS FIRE 13.84 10.30 FINANCIAL IMPACT: The new revenue neutral tax rate will serve as the starting point for the tax rate applied in the FY 2025-26 Budget. 3 ALIGNMENT WITH STRATEGIC PLAN: This item supports: • MISSION STATEMENT — Orange County is a visionary leader in providing governmental services valued by our community, beyond those required by law, in an equitable, sustainable, innovative, and efficient way. • GUIDING PRINCIPLE — COMMUNICATION AND AWARENESS We provide information and opportunities for engagement in a transparent manner so that all in our community have knowledge, understanding, and a voice. • GUIDING PRINCIPLE — STEWARDSHIP AND ADVOCACY We make proactive data supported decisions and advocate to local, state and Federal governments in response to our community's needs in a way that best utilizes our resources. RECOMMENDATION(S): The Manager recommends that the Board receive the presentation and provide any comments and questions. 4 ORANGE COUNTY NORTH CARC31LINA Revenue Neutral Property Tax Rate for FY25-26 April 15, 2025 Board of Commissioners Business Meeting 5 Why Conduct a Revaluation Now? • Value all property in the County to reflect market conditions/market value at the time of the revaluation - Equity - redistribute the responsibility for property tax payments based on market value • Required by NCGS 105-286(a)(2j: — A county whose population is 75,000 or greater according to the most recent annual population estimates certified to the Secretary by the State Budget Officer must conduct a reappraisal of real property when the county's sales assessment ratio determined under G.S. 105-289(h) is less than.85 or greater than 1.15, as indicated on the notice the county receives under G.S. 105-284. A reappraisal required under this subdivision must become effective no later than January 1 of the earlier of the following years: a. The third year following the year the county received the notice. b. The eighth year following the year of the county's last reappraisal. • In 2022, Orange County received notice of a mandatory revaluation - Sales ratio for 2022 was 0.8197 which was below the standard of 0.85 - By 2024, sales ratio dropped to 0.6445 i� ORANGE COUNTY 2 NORTH CAROLINA 6 Revenue Neutral PropertyTax Rate • County is required to publish but not adopt a Revenue Neutral Property Tax Rate - The tax rate that would be required to raise the same amount of revenue as the previous year, plus an allowance for average natural growth rate. - Current tax rate - 0.8629 cents per $100 of value • Revenue neutral tax rate will drop if tax base increases - Property Tax Base t X Property Tax Rate 1 = Property Tax Levy • Average natural growth rate due to new construction for the past three years and growth in the value of motor vehicles = 2.52% i ORANGE COUNTY NORTH CAROLINA 7 Revenue Neutral PropertyTax Rate Property Tax Base X Property Tax Rate = Property Tax Levy 111111 "Ills 0 1282 Real Property • Land + Improvements/Buildings $29,645,160,916 • Adjusted by 5% for expected appeals Personal Property & Public Utilities • Unlicensed vehicles, trailers, campers, boats, $1 ,242,143,886 jet skis, etc. • Power company, gas company, railroad, etc. Motor Vehicles $1 ,743,029,203 TOTAL $32,630,334,005 38.6% Increase from FY2024-25 i ORANGE COUNTY 4 NORTH CAROLINA 8 Revenue Neutral PropertyTax Rate Property Tax Base X Property Tax Rate = Property Tax Levy I& Property Tax Levy W. Property Tax Levy Amou FY2024-25 Property Tax Levy $203,189,402 3 Year Average Growth — 2.52% $5,117,355 TOTAL $208,306,757 i ORANGE COUNTY 5 NORTH CAROLINA 9 Revenue Neutral PropertyTax Rate Property Tax Base X Property Tax Rate = Property Tax Levy r Property Tax Rate WE roperty Tax Base Revenue Neutral Tax Levy $32,630,334,005 0.006384 $208,306,757 Or...0.6384 per $100 of Assessed Value i ORANGE COUNTY 6 NORTH CAROLINA 10 Impact of the Revenue Neutral Property Tax Rate • Interaction between increased value and tax rate decrease FY2024-25 &M Rate 24-25 Pre-Revaluation $ 400,000 0.8629 $ 3,452 Post Revaluation Value $ 500,000 0.6384 $ 3,192 $ (260) Value 25%Increase Pre-Revaluation $ 400,000 0.8629 $ 3,452 Post Revaluation Value $ 600,000 0.6384 $ 3,830 $ 378 Value 50%Increase • Break even percentage increase in value — 35% FY2024-25 Tax Est. Rev. Tax Change FY2024-25 Pre-Revaluation $ 400,000 0.8629 $ 3,452 Post Revaluation Value $ 540,000 0.6384 $ 3,447 $ 5 Value 35%Increase i ORANGE COUNTY 7 NORTH CAROLINA 11 Revenue Neutral PropertyTax Rate Total Property Tax Base Growth Real Property Increase 50% Increase Adjustment for Appeals 42.5% Increase in Real Property Only Include Personal Property and Motor Vehicles 38.6% Increase in Total Tax Base • Slower Growth Compared to Real Property Account for Natural Growth in 35% Break Even Increase Property Tax Revenue i ORANGE COUNTY 8 NORTH CAROLINA 12 Revenue Neutral PropertyTax Rate All Taxing Districts are Required to Publish Revenue Neutral Property Tax Rates PropertyTax District FY2024-25 . . It Tax Rate Tax Rate CHCCS DISTRICT TAX 19.80 14.6 CEDAR GROVE FIRE 9.00 6.54 CHAPEL HILL FIRE 13.87 10.79 DAMASCUS FIRE 12.80 9.79 EFLAND FIRE 10.28 7.38 ENO FIRE 11.98 8.71 LITTLE RIVER FIRE 7.39 5.35 NEW HOPE FIRE 13.84 10.15 ORANGE RURAL FIRE 11.49 8.21 ORANGE GROVE FIRE 8.27 5.81 SOUTH ORANGE FIRE 9.09 6.67 SOUTH TRIANGLE FIRE 12.80 8.75 WHITE CROSS FIRE 13.84 10.30 i ORANGE COUNTY 9 NORTH CAROLINA 13 Questions? ORANGE COUNTY NORTH CAROLINA