Even though Halloween is complete, we noticed that there is still something spooky going on in Raytown. Misinformation regarding the re-assessment of real estate by the Jackson County Assessor is being distributed throughout the community to create a “vote no” panic. But should we be worried?
No, and here is why:
How do Property Taxes Work?
Navigating the nuances of real estate appraisal and assessment in Missouri can be mindboggling. We plan to help break this topic into more manageable bites so that our everyday citizens can understand why property taxes and assessments should not cause panic. Re-assessment occurs every-other year on odd numbered years (2017,2019, 2021, etc.). The next re-assessment will value properties as of January 1, 2023, not today or last summer, but as of January 1, 2023.
First things first. To calculate someone’s property taxes, it requires three items: a market value, an assessed value, and a mill levy. Let’s define those quickly:
- Market Value, broken down, is the price a buyer is willing to pay, and a seller is willing to accept for their property. This is derived by the County Assessor via a mass appraisal process. Mass appraisals are outside of the scope of this article, but we can touch on those on a later date.
- Assessed Value is just the market value multiplied by the assessment ratio. For commercial properties in Missouri, the ratio is 32% of market value. For residential properties in Missouri, the assessment ratio is 19%.
- A Mill Levy is nothing more than a term for a tax rate. In Missouri, the mill levy represents the amount of property tax paid per $100 of assessed value. In Raytown, the mill levy is comprised of nine taxing jurisdictions, listed below:
- Raytown C-2 School District
- City of Raytown
- Raytown Fire Protection District
- Jackson County
- Mental Health
- MCC (Community College)
- Mid-Continent Library
- State Blind Pension
The table below illustrates how the property tax is collected:
As an aside, the portion the City of Raytown would collect from this hypothetical property tax bill, to run the Police Department, Public Works, Municipal Court, etc.) is around $49. At this point you may be saying “this mailer I received said my assessment will go up over 25% in 2023. I can’t afford that!” We are here to tell you, that on the macro level, assessments do not matter.
The Hancock Amendment (RSMo 137.073)
The Hancock Amendment (not John Hancock). Is a piece of state legislation written in 1980 that limits the amount of Missourians’ income that may be used to fund state government to no greater than the portion used to do so in 1981, except as authorized by a vote of the people.
The simple answer is, the Hancock Amendment ensures that taxing jurisdictions (state, city, county, fire district, etc.) cannot increase revenue without a vote of the people. This concept applied to property taxes and allows for an annual inflationary adjustment.
So now that we have learned that our taxes will not skyrocket, let’s check out a graphic on how the revenue to taxing jurisdictions is balanced:
Above, we found that revenue cannot be increased without a vote of the people. When assessed values increase, the mill levy MUST decrease to keep revenue neutral to avoid violation of the Hancock Amendment. The table below illustrates the property tax income to the City of Raytown over the past five years:
You’ll notice a sharp increase in property values for the 2019 reassessment. Did property taxes skyrocket? No. Is there a need to panic this time around? Also no.
Just like we stated above, when the city’s property value increases, the mill levy MUST decrease to avoid excess revenue and violation of the Hancock Amendment.
To conclude, let’s assume something crazy to prove a point. The table below illustrates a hypothetical increase in property re-assessments of 150%. No that is not a typo.
Will taxes skyrocket? No. We already knew that because if values increase, the mill levy must decrease:
