School district reps often say they need to correctly guess the future Total AV for their district’s tax area for each of the future years of their tax measures. Their assumption is incorrect and ends up misleading voters/taxpayers. And district reps’ incorrect logic also usually leads to underestimating the true costs of their measures to taxpayers.
In contrast, for the property tax impact estimate calculators on this website, the author uses a Proportional Obligation Factor (POF) method.
Total AV: Total AV is the total assessed value of all private properties within the school district's tax area.
Using the 2024 Total District Assessed Value (AV), the POF of the example property was calculated:
POF = (2024 Example Property AV) / (2024 Total District AV)
The POF was then multiplied by the total amount that the district expects to collect each year for the duration of the measure in question (bond or levy) to obtain the estimated taxes for the example property for the measure.
Using this methodology, it doesn’t matter if all properties increase in AV by 20% or all decrease in AV by 20% (which could happen in a recession). The tax collection schedule shown in the charts and tables would still apply for the example property. The example property’s proportion of obligation for the bond debt or levy remains the same over the bond payback or levy period. Tax rates, however, would change. If all properties increase in AV by 20%, the tax rate for the measures would decrease by approximately 20%. If all properties decrease in AV by 20%, the tax rate for the measures would increase by approximately 20%.
Note for the POF annual change parameter for the enhanced calculator versions:
For properties that are increasing in POF (Proportional Obligation Factor), a positive POF annual change will give more accurate results. For properties that are decreasing in POF due to rapid new construction or for other reasons, a negative POF annual change will give more accurate results. However a value of 0% will generally be slightly conservative and will generate estimates that are usually within 5% of actual costs.
It is the author’s opinion that county assessors (in all 39 WA counties), using sound accounting principles, should be providing these calculators for their constituents.
Example calculator calculation:
Centralia SD for their 2023 Enrichment Levy tax measure
Total District AV for 2023: $4,131,948,094
Example property’s AV for 2023: $350,000
POF for 2023 assumed to be the same for years 2023 - 2025: $350,000 / $4,131,948,094 = 8.471E-05
Enrichment Levy amount to collect in 2024: $6,700,000
Example property’s 2024 tax for the Enrichment Levy: POF * (Enrichment Levy amount to collect in 2024) = 8.471E-05 * $6,700,000 = $568
Similarly for the year 2025
Enrichment Levy amount to collect in 2025: $7,600,000
2025 tax = 8.471E-05 * $7,600,000 = $644
For any particular future year:
(1) {Tax For An Individual Property For The Year} = {Tax Rate For The Year} X {Property’s AV For The Year}
(2) {Tax Rate For The Year} = {Known Total Tax To Collect For The Year} / {Total AV For The Year}
The apparent problem is that the {Property’s AV For The Year} is not known and the {Total AV For The Year} is not known. That’s 2 unknowns. But we have 2 independent equations. 2 equations, 2 unknowns. Algebra to the rescue.
We can substitute {Tax Rate For The Year} from (2) into (1)
(1a) {Tax For An Individual Property For The Year} = {Known Total Tax To Collect For The Year} / {Total AV For The Year} X {Property’s AV For The Year}
But {POF} = {Property’s AV For The Year} / {Total AV For The Year}
Therefore:
(1b) {Tax For An Individual Property For The Year} = {Known Total Tax to Collect For The Year} X {POF}
POF stays relatively constant for an individual property over many years and regardless of how properties values are rising or falling. The POF for an individual property can be accurately calculated for the current year and used for future years.
Individual properties’ AVs and therefore Total AVs substantially fluctuate from year to year.
This is why even if guesstimated future Total AVs (and therefore guesstimated future tax rates) were accurate, they are not necessary. And worse, guesstimated future tax rates can be set to almost anything by just adjusting the guesses for future Total AVs. Select a higher future Total AV growth, then the future tax rate will be lower. Select a lower future Total AV growth, then the future tax rate will be higher. However, the POF for an individual property does not change as property AVs rise or fall. School districts and other taxing districts should be prohibited from stating their guesstimated future tax rates on their tax measure resolutions and in their campaign materials. That practice misleads voters. School districts, of all institutions, should teach and practice proper logic and mathematics, accurate financial analysis, and ethical behavior.
Voters/taxpayers are voting on amounts in dollars - not guesstimated, inaccurate, future tax rates. This is why TILA (Truth In Lending Act) rules should apply to school district levies and bonds.
If school districts still want to show future rates for their new measures, they should then assume no change in Total AV from the current year and THEN calculate their future rates. Citizens can then calculate their future levy amounts based on the value of their properties’ current year AV.
See the Issaquah SD example bond calculator to demonstrate how guesstimated future tax rates are meaningless: