Property, Properly

On average, the largest source of money for Missouri public school districts comes from each district’s local property tax levy. On July 1, Gov. Matt Blunt signed into law Missouri Senate Bill 711, which will change the way many school districts collect that money.

Generally, there are three main sources of revenue for a public school district: Local tax revenues, state funds, and federal funds. Each school district goes to district voters for a property tax levy increase when it needs more money. In the end, voters approve the maximum percentage of assessed land valuation that a school district can collect each year.

But what about rising property values?

If a school district collects a 4-percent tax levy and land values in that district spike 20 percent (maybe someone found oil), do that district’s local tax revenues spike as well? Well, before Senate Bill 711 takes effect on August 28, the answer is sometimes yes.

It’s tricky. But if a school district collects a lower tax levy than approved by voters (say it collects 3 percent, though voters approved 4 percent), then when property values spike, the district can collect the windfall up to the amount it could have collected at the maximum percentage approved (4 percent).

If, however, the school district was collecting the maximum (in this example, 4 percent), then when property values spike, the district is only allowed to collect what it did the previous year, plus inflation.

Blunt and Senate President Pro Tem Michael Gibbons are hoping to protect “Missourians from the threat of rising local property taxes” with the bill, which now states that in neither case can a school district collect a property value spike windfall.

This will affect school districts. A significant amount of each district’s funds comes from the local property tax. On average for the 2004–2005 school year, about 50 percent of Missouri school districts’ funds came from local sources. And that is a very, very conservative estimate.

I can’t tell you at this point exactly how many school districts collect below their voter-approved tax levy maximum. According to Gibbons, about 80 taxing districts in St. Louis do.

School districts that have been counting on collecting property value windfalls will soon have to collect at a higher property tax levy — the maximum their voters approved in the first place, which will just make things less confusing.

As part of my research, I’m looking at the success rate of proposed school tax levies and bond issues. If you have any questions about this post or that research, leave a comment below or email me.