The Jackson Herald Special Report: TAX DIGEST

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 operate.
 
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 be taxed.
 
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 DIGEST
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 amenities.
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.
 
DIGEST RATIO
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.
 
STATE INFLUENCE
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 today
 
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, businesses
 
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 above.
 
·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 this exemption.
 
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 period.
 
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 agriculture.

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:
 
Jeff Robinson
Chief Tax Appraiser
Jackson County
706-367-6330
 
Don Elrod
Tax Commissioner
Jackson County
706-367-6320
 
Georgia DOR
Web Site
http://www2.state.ga.us/Departments/DOR/ptd/rules/section/index.html

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