# When Effective Tax Rates aren’t effective

The following example is provided for the benefit of those who may not be familiar with the Effective Tax Rate and how to use it in discussions with elected officials.

In spring 2016, the Williamson County Appraisal District (WCAD.org) sets the assessed value of a home at \$176,000.00.

Over the course of the summer, the Leander ISD Board of Trustees constructs a budget for the upcoming 2016-2017 fiscal year and adopts a tax rate of \$1.51187 per \$100 of assessed property value, and notifies the Williamson County Tax Assessor Collector (TAC) of the adopted rate. The TAC sends the homeowner a property tax notice (and the holder of any mortgage on the home) that includes a line item of \$2,660.89 for Leander ISD taxes due by January 31, 2017. (\$1.51187 X \$1760.00)

In spring 2017, the Williamson County Appraisal District (WCAD.org) sets the assessed value of the same home at \$194,000.00.  Over the course of the summer, the Leander ISD Board of Trustees constructs a budget for the upcoming 2017-2018 fiscal year and adopts a tax rate that will extract the same \$2,660.89 from the Leander homeowner as the 2016-2017 fiscal year. This is called the Effective Tax Rate.

To calculate the Effective Tax Rate, divide \$2,660.89 by \$1940.00. This results in an Effective Tax Rate of \$1.37159 per \$100 of assessed property value. Applying the ETR of \$1.37 to the new, increased valuation of \$194,000.00 generates the same amount of taxes as the previous year using the tax rate of \$1.51 applied against the \$176,000.00 valuation.

But the Leander ISD Board of Trustees did not adopt the Effective Tax Rate. They adopted the same \$1.51187 as the previous year resulting in \$3,014.67 school taxes for the homeowner, an increase of \$354.00.

In reality, the Leander ISD Board of Trustees repeatedly adopts a tax rate far above the Effective Tax Rate, resulting in higher property taxes for property owners (and eventual increases in rental fees for renters…their landlords must pass on the cost of the property tax). While the Leander ISD Board of Trustees and Superintendent can technically claim they have not raised the tax rate of \$1.51187 in many years, they will rarely address the fact they are choosing to adopt tax rates far above the Effective Tax Rate (the rate that produces the same amount of local and state funds per student as the preceding year).

The LISD Board of Trustee’s default is to continue a trajectory of expanding spending and increasing debt, then setting a tax rate year-after-year just below the Rollback Rate that would trigger a Tax Rate Ratification Election (TRE).

Although this example is for a specific home, the principle applies to the entire taxing jurisdiction of Leander ISD (~200 square miles, spanning Travis-Williamson County from River Run/Steiner Ranch to north of Leander). Bottom line, the Leander ISD Board of Trustees which you elect have the power to set a tax rate lower, equal to, or higher than the Effective Tax Rate.

Unfortunately, they have taken the course of least resistance and fallen into the status quo of annually adopting a higher rate, resulting in your escalating property taxes. Their mantra is to shift blame to the WCAD and market conditions when you complain rather than accept responsibility for setting your property tax rates higher than the Effective Tax Rates.

So don’t buy LISDs blame game on increasing property values. Home values are market-driven, with little any one individual or group of people can do to affect. Property tax rates are controllable, and that responsibility lies squarely on the shoulders of those elected to jurisdictions with taxing authority.

In the case of the school tax component, that is the Leander ISD Board of Trustees.

Note: The 2018 assessed value of that same home will likely be \$214,000.00. If the property owner does not protest (resulting in no reduction in assessed value) and the LISD Board of Trustees again adopt a tax rate of \$1.51187 per \$100 valuation, the Leander ISD tax component that homeowner will be required to pay by January 31, 2019 will be \$3,235.40 (this is in addition to the property taxes that will be owed to the City of Leander, Williamson county, ACC, and the Upper Brushy Creek WCID). This amounts to a 22% increase in Leander ISD property taxes in just two years.