Varying rules, effects
of growth affect basis
for property taxation
in Jackson County
- October, 1998 -
What's your property worth? Moreover, what's
the value of all the property in Jackson County?
Those multi-million dollar questions go to
the heart of how property taxes are levied by local governments.
They are also questions much in dispute today in Jackson County
as those who manage the property tax system attempt to resolve
what has become a growing outcry from frustrated property owners
who pay taxes and the governments who depend on those taxes to
While the various county, city, fire and
school districts in Jackson County are about to set their millage
rates, those numbers are only a part of the property tax equation.
The largest and perhaps most difficult part of property taxation
is arriving at values for the property to be taxed.
Part of the problem is that there are so
many different kinds of property to be taxed. Houses are different
than commercial property; large tracts of land are different
than small lots; agricultural land gets a different treatment
than land being held for resale or speculation; and personal
property, such as cars, boats, industrial equipment and farm
equipment, make up a large sub-category of property that is to
In an ideal situation, all of that would
be assigned a "fair market value" and taxes levied.
But making the matter even more complex are a number of special
exemptions that begin to skew what is and is not to be taxed.
In some cases, those exemptions distort the tax digest and shift
the tax burden to other classes of property, so that while some
people see their taxes drop, others see an increase.
The combined value of all property in a county,
or a particular tax district, is called the "digest."
It is that number to which a millage rate is applied to arrive
at the dollars to be collected.
But calculating a tax digest isn't a straightforward
matter. Some of the calculations come from standard sources,
such as state-provided reference books from which to value mobile
homes. But other types of property get a value based on a variety
of sources. Houses, for example, are often judged against recently
sold comparable-sized homes, thus the term "comp."
Likewise, land values are often assigned based on the recent
sale of similar land in a surrounding area.
But those factors are not always accurate,
as many angry property owners discover. One example in Jackson
County would be a rural home on several acres that abuts an expensive
subdivision development. Because the per acre land price in subdivisions
is usually higher, the surrounding rural land values are often
pushed up. But subdivisions usually have amenities that rural
property doesn't, even though that rural land gets treated on
the tax digest the same as the more developed property.
The same kind of problem applies to houses,
especially in rural areas where there is less density and thus
fewer comps to measure. The result is that newer, more expensive
homes show up in comp sales and thus pull up the assessed values
of surrounding homes, even if those houses are older with fewer
On the other side of the problem, houses
are sometimes undervalued, or completely missed in the tax books.
Additions and improvements often add value to a home, but those
can be missed by those who track property for county assessors.
And sometimes new homes and businesses don't get put into the
system as they are simply overlooked.
Another important but little understood factor
affecting how property taxes are levied is the ratio of different
kinds of property to each other. For example, in the City of
Jefferson, some 62 percent of the net city tax digest comes from
industrial or commercial property. But in the county as a whole,
only 30 percent of the net tax digest is industrial or commercial
(see chart). That means in Jefferson, the property tax burden
is weighted more toward industrial and commercial property owners
and away from residential homeowners.
Those ratios change over time, depending
on how certain areas grow. They are also affected by the type
of exemptions offered. In recent years, for example, agricultural
property has been given more exemptions through the conservation
use program, thus lowering the ratio of agricultural values compared
to other classes of property.
The Freeport exemption for industries also
plays a major role in how local property taxes are distorted.
County-wide, for example, industrial goods in transit get a 100
percent Freeport tax exemption. But in Jefferson, those same
goods get only an 80 percent exemption and in Commerce, only
a 20 percent exemption.
If all of that wasn't enough to deal with,
the state has a large influence over the setting of a county's
tax digest. Once all the property in a county is accounted for
and the exemptions removed, taxes are levied on 40 percent of
the gross digest value. To keep counties from purposely under-valuing
property, the state double-checks counties by looking at property
sales and comparing the sales price to what the county had actually
valued the property for tax purposes. If counties are not being
accurate in their tax values, they are fined by the state. On
top of that, school systems are required to add extra millage
to account for property that is undervalued. (Even more complex
is the fact that two audits are done, one by the general state
government and one by the state school board.)
All of that has been a problem in Jackson
County, and local school systems have been hit hard by those
state tax digest audits, even though the schools have no direct
control over how the digest is calculated or maintained. The
result, however, is that some property owners are being taxed
extra to make up for property that is being undervalued, or that
is missing from the tax books.
Four main factors affect county digest
There are four main factors affecting the
Jackson County tax digest today. These factors to some extent
shift the tax burden around to other classes of property owners.
1. Freeport Exemption: This is the largest
single category of exemptions on the digest knocking off some
$70.8 million in personal property values from a net industrial
value of $189 million county-wide. But where this really begins
to distort the tax picture is in the towns of Jefferson and Commerce.
Jefferson only allows an 80 percent freeport exemption, and since
it has a large industrial base, that nets the town nearly $4
million in extra tax base. Commerce only allows a 20 percent
freeport exemption, adding an additional $6 million back to its
tax base. Since both Jefferson and Commerce have independent
school districts, those distortions help fund those operations
and shift the burden further away from homeowners. The county
school system, however, already has a small industrial tax base
and 44 percent of that comes off in the form of a 100 percent
freeport exemption. For that school system, the burden gets shifted
more toward residential and large landowners.
2. Conservation Use: This is the second largest
exemption taking some $55 million off the county tax digest.
It has also been a fast-growing exemption, affecting only 44,000
acres in 1995, but today totals nearly 66,000 acres, or 30 percent
of the county's total land area. While the exemption protects
farm land from being valued at higher rates due to growth in
the county, it has also shifted the tax burden more toward residential
homeowners. Because of the conservation use program, the county's
net digest for all agriculture categories has dropped from 24
percent of the total digest in 1995 to 21 percent this year.
The exemption also affects the county school system at a higher
rate since both Jefferson and Commerce have little farmland which
qualifies for the exemption.
3. Mobile Homes: The explosion of mobile
homes as the housing of choice in Jackson County has greatly
shifted the tax burden. Unlike traditional homes, most mobile
homes are generally not taxed for a growth in value, but rather
based on a depreciating price. Thus, they generate little revenue
for government, but bring additional children into schools and
make other service demands on local governments. Again, the burden
has hit heaviest on the county school district since most of
the mobile homes have come to that tax base and not into Jefferson
and Commerce where restrictions are tighter.
All of that will begin to change in 1999,
however, due to new state mandates that will change how mobile
homes are valued. If you own a mobile home on your own lot, you
may not see much difference, but if you own rental mobile homes
or lease a lot for a mobile home, the value could rise significantly
over the current value.
4. Errors in the Digest: An on-going problem
has been a number of errors in the digest with some property
missing, other property undervalued and in some cases, property
overvalued. This situation creates several other layers of problems
in the overall county tax structure. For one, an inaccurate digest
makes setting millage rates very difficult for the various governing
agencies in the county. If, for example, a digest is overstated,
the millage rate might be set too low and thus the government
would have a shortfall of funding. If the digest is set too low,
the millage rate might rise more than it needs to be, thus bringing
in more money than the government really needs.
But the main problem with an inaccurate digest
is that is creates inequality in the county's property tax system.
With some property undervalued, other property owners pay more
taxes to make up the difference. In the case of overvaluations,
property owners also pay too much in taxes. All of that could
lead to legal trouble for the county government if property owners
seek to resolve the problem in the courts.
Types of exemptions available for homeowners,
Exemptions are special exclusions that lower
or do away with property values for the purpose of taxation.
Churches, government buildings, cemeteries, veterans' homes and
certain other non-profit-owned property is not taxed.
In addition to those types of property, some
landowners qualify for various other types of exemptions depending
on certain circumstances. The following is a brief rundown of
the exemptions used in Jackson County. For additional details,
contact the Jackson County Tax Commissioner's office.
Standard Homestead: $2,000 - This exemption
applies to owner-occupied residences and is subtracted from the
property's net assessed (40%) value. It does not apply to school
taxes or to tax millage set for bonded indebtedness, nor is it
currently allowed in the cities of Jefferson and Commerce.
Age 65 or older Homestead: $10,000 - This
applies to individuals age 65 or older who have an earned income
of $10,000 or less from sources other than Social Security.
School Exemption: $10,000 - This applies
to persons age 62 or older who don't have an earned income exceeding
$10,000 per year. The exemption only applies to property taxes
for education. It may be used on top of the other listed exemptions
·Same as above, but with federal adjusted
gross income less than $30,000.
Floating Exemption: - This applies to persons
age 62 and older whose household income from all sources doesn't
exceed $30,000 per year. It replaces all other types of homestead
exemptions. While not widely used, this exemption freezes assessments
at current values.
Disabled Veterans: $38,000 - Any disabled
veteran, or an unremarried surviving spouse, may qualify for
Freeport Exemption: This exemption is used
by industries and not individuals. The exemption applies to inventory
in the process of being manufactured, including raw materials
or partially finished goods. The exemption also applies to finished
goods being warehoused less than 12 months and to be shipped
outside the state.
The level of exemption varies in three forms
in Jackson County: The county government exemption is 100 percent,
meaning the total amount is exempt from property taxes levied
by the Jackson County Board of Commissioners, the various fire
districts and the Jackson County Board of Education. In the City
of Jefferson, the exemption is at 80 percent for taxes levied
by the Jefferson City Council and Jefferson Board of Education.
In Commerce, the exemption is only 20 percent for taxes levied
by the Commerce City Council and Commerce Board of Education.
In addition to Freeport, new industries locating
in the county are sometimes given special tax incentives, such
as phasing in the taxes over a five-year period. Those incentives
are not usually granted for school taxes, however.
Preferential Assessment: This exemption is
used by those in agriculture, mostly for buildings and other
agriculture structures. Owners receive a 25 percent discount.
Conservation Use: This refers to agriculture
property entered in a 10-year covenant that excludes resell.
Based on soil types, this exemption lowers the per acre value
of land that is under some kind of agriculture use, including
some tracts of timber. The maximum allowed is 2,000 acres. Some
30 percent of Jackson County's total land, 65,800 acres, is currently
under this exemption.
Other types of exemptions allowed, but not
currently being used in Jackson County, are:
Landmark and rehabilitated historic property:
This applies to up to two acres and improvements where owners
receive a reduced preferential assessment for landmark or historic
property rehabilitated by the owner.
Residential transitional property: This applies
to residential property in growing commercial areas where commercial
land values increase residential values with unusual growth.
Like conservation use, this is a 10-year covenant program that
values for current use, not true market value. It is limited
to no more than five acres, and large penalties are issued if
the land is sold for commercial use during the 10-year covenant
Environmentally sensitive property: Almost
identical in nature to the conservation use program, this exemption
is designed to protect wildlife refuges, wetlands, mountain ridges
and other sensitive land. The land doesn't have to be used for
Want More Info?
If you need more information about your property
values or about the available exemptions that you may apply for,
you can contact the following sources:
Chief Tax Appraiser