Commissioner of Taxes Craig Bolio has released the December 1 education tax rate letter which forecasts the education tax yields for resident homeowners and the non-homestead tax rate for the upcoming fiscal year (FY) 2024. Using specific calculations required in State law, the Agency of Education, Department of Taxes, Department of Finance and Management, and Joint Fiscal Office collaborate to project the yields and rate based on these statutory assumptions.
One of the most significant factors impacting the forecast this year is a substantial projected surplus of more than $63 million in the Education Fund leftover from FY23. Statute mandates that the forecast use the entire surplus to reduce the projected property tax rates, which means if a portion of the surplus is used for other purposes the rates will be different than projected. The Governor is recommending the Legislature apply all this year’s surplus to reducing property tax rates in FY24.
The forecasted FY24 homestead yield is $15,479 compared to $13,314 for FY23 (the current property tax year). The forecasted FY24 income yield is $17,600 compared to $15,948 for FY23. The average equalized homestead tax rate is forecasted to decrease by 7 cents compared to FY23. The statewide base non-homestead tax rate is forecasted to decrease by 8 cents. However, the equalized average rates are only one piece of the property tax formula, and volatility in the Common Level of Appraisal (CLA), coupled with higher-than-normal projected education spending, means actual tax bills will look very different than the projected equalized rates.
The CLA is a mechanism that helps ensure uniform property values across the state. When fair market property values increase in a town, it decreases the town’s CLA, which causes the town’s tax rate on bills to increase. Given the rapid appreciation in real estate values over the recent period, the CLA is expected to go down in many communities which means actual tax rates in those towns could be much higher than the forecasted statewide rate. As a result, average property tax bills are projected to increase by 3.7% even if the full surplus were used to reduce property tax rates in FY24.
“The substantial reduction in the Common Level of Appraisal remains a significant factor in calculating property tax rates for many communities around our state,” said Commissioner Bolio. “Vermonters should understand that there is more to the story than the equalized rates forecasted by this letter.”
Additional resources for understanding education tax rates and the Common Level of Appraisal are available on the department’s website at http://tax.vermont.gov/property-owners/understanding-property-taxes/education-tax-rates and from the Vermont school boards association at http://www.vtvsba.org.