The School Budget Explained
This article is one of a series to help explain to residents some of the more arcane and complicated aspects of school budgets.
It ought to be simple: if the school budget increases by a certain amount, school taxes should go up by that same amount. However, school spending is just one of a number of factors that influence the actual school taxes that property owners pay. In fact, school spending is the only part of the property tax scenario over which the school district has direct control. The following may help to explain how this works. (There are some definitions at the bottom that may be helpful.)
How Are Property Taxes Calculated?
Individual property taxes are determined by this equation:
assessed value x tax rate / 100 = property tax
What do these terms mean? The assessed value is equal to 1/4 percent (.0025) of the market value of a home. For example, a home with a market value of $703,200 (the median value in the Roslyn School District in 2011) would have an assessed value of $1,758 ($703,200 x .0025 = $1,758). Market values are determined by the Nassau County Assessor's office and are periodically re-evaluated.
Property taxes are distributed among different classes of property. In Nassau County, there are four classes of property, each with its own tax rate: Class 1 is for single-family homes; Class 2 is for apartments and condominiums; Class 3 is for utility company properties; and Class 4 is for commercial properties such as factories, offices and stores. Each year, the county determines how much of the overall tax burden will be paid by property owners in each of the four classes. These are called adjusted base proportions, because they represent the proportion of the total tax levy paid by property owners in each of the four classes.
Base proportions play a major role in determining tax rates, though the school district has no role in calculating these proportions. Instead, they are determined by the New York State Office of Real Property Tax Services and the Nassau County Assessor and Legislature. For example, if Class 1 homeowners (who comprise the majority of property owners in most school districts) pay 75 percent of the total tax levy, the base proportion for Class 1 is .75. In that case, the tax rates in Class 1 will be 75 percent of the total tax levy, divided by the total assessed value of all properties in Class 1.
The Board of Education approves a tax levy each year in August, as required by law. The levy is the total amount of property taxes the district needs to fund its operations in the new school year. It is equal to the school budget minus all other forms of revenue. Therefore, more revenue from other sources means a lower tax levy and a lower tax burden for property owners. For example, a school district that receives 20 percent of its revenue from state aid is able to levy lower property taxes than a district like Roslyn that receives less than 5 percent in state aid.
Let's return to our equation: In 2011-12, the tax rate for homeowners in Roslyn is projected to be $692.284 for each $100 of assessed value. So the school tax bill for the median assessed home above is: $1,758 (assessed valuation) x $692.284 (tax rate) / 100 = $12,170 (property tax).
It is important to note that changes in assessed valuation do not change how much tax revenue the school district receives. Whatever amount the tax levy is, that is precisely the amount that will be collected from taxpayers. If there are changes in the community's overall assessed value — whether from changes in market conditions, new properties being developed, or individuals filing tax grievances — tax rates will be adjusted to ensure that the district receives no more and no less than the amount that was levied. For example, the total assessed value of all homes in the school district decreased by 12 percent for the 2010-11 fiscal year, and an additional 4.3 percent in 2011-12. There was a corresponding increase in the tax rate to ensure that tax revenues for the school district were not affected. But, if an individual home's assessed value decreases at the same rate as the community overall, the homeowner's tax bill increases at the same rate as the tax levy, regardless of the change in the tax rate.
Why Is My Tax Increase Usually Different from the Budget Increase?
At the time of the annual budget vote in May, the school district provides to voters an estimate of the tax levy and tax rate based on the best information available prior to that date. By the time the Board of Education sets the tax levy in August, however, the estimated amounts may be different for a variety of reasons that are mostly beyond the district's control.
In the first place, the change in the tax levy is often different from the change in the budget because revenues do not rise and fall in direct proportion to changes in spending. It is possible for the tax levy to increase even if there is no increase in the school budget; for example, if state aid revenues decline from the previous year, the tax levy would rise by the same amount, unless the district is able to make up the shortfall through other sources of revenue.
School spending is the only part of the property tax equation that is directly controlled by the school district. There are a number of other reasons why the change in your tax bill may not be the same as changes in the budget or the tax levy:
• Total assessed valuation for the community can change because of new properties entering the county tax rolls, or because of homeowners' assessment challenges. Remember the equation: a higher total assessed value in the overall community means a lower tax rate for the community as a whole, while a lower total assessed value means a higher community-wide tax rate.
• If a homeowner makes improvements to his or her home, the increased assessed value of that home will result in a larger tax bill for that particular homeowner. Conversely, if a homeowner successfully challenges his or her assessment, the reduced assessed value may result in a lower tax bill.
• The county can change the base proportions. If, for example, the base proportion for Class I increases relative to the other classes, then homeowners may see their taxes rise more than the increase in the tax levy. Overall, property owners will pay exactly what has been levied, but property owners in some classes may pay proportionately more or less than others. There has, in fact, been a trend across the county in recent years to gradually shift more of the burden into Class I (homeowners), though the base proportion for Class I in Roslyn declined slightly in 2010-11 for the first time in many years.
• The school district may receive more or less in state aid than was originally projected before the budget vote. If the state budget is late (which happens more often than not) school districts don't always have an accurate projection of state aid by the time of the budget vote. If the district is notified in June or July that it will receive more aid than anticipated, for example, the school board may lower the tax levy accordingly, and vice versa.
How Are Property Taxes Collected?
Property taxes are collected by the Receivers of Taxes for the Towns of North Hempstead and Oyster Bay and distributed to the school district in two semi-annual payments.
Assessed value is the taxable value of a property. In Nassau County, the assessed value of a home is 1/4 percent (.0025) of the market value, as determined by the county assessor's office. It is expressed as a dollar value.
The tax levy is the total amount of property taxes raised (or "levied") annually by the board of education.
Property classes are different types of properties which are taxed at different rates. There are four property classes in Nassau County: Class 1 is for single-family homes; Class 2 is for apartments and condominiums; Class 3 is for utility company properties; and Class 4 is for commercial properties such as factories, offices and stores.
The tax rate is used to calculate how much property owners pay in taxes. Though expressed as a dollar amount, it is a mathematical coefficient and does not represent any actual monetary value. For each of the four classes of property within each jurisdication, there is a different tax rate. In other words, the tax rate for Class 1 homeowners in Roslyn is different from the tax rate for Class 4 property owners. Furthermore, the tax rate for Class 1 homeowners in Roslyn is different from the tax rate for Class 1 property owners in other school districts.
The adjusted base proportion is the percentage of overall property taxes paid by property owners in each of the four classes of property.
Residents can find the assessed valuation of their homes, and other information about their property valuation, at the website of the Nassau County Department of Assessment.
The Roslyn School District has created an online, interactive Property Tax Calculator to enable homeowners to determine their actual school taxes.