Property tax fun, Part II: Inflation

My buddy, night editor Jaime DeLage asked the other day after the last tax story ran how many mills would have to be cut for a taxpayer's tax bill at exactly the same level it was last year. I thought a better question was how to keep the tax bill within the inflation rate. After all, the cost of government can't defy inflation so you have to give them that.

Well, after about four hours of head scratching, I figured out the spreadsheet. So here it is. As with last time, you'll need Excel 97 or an Excel viewer.

What this spreadsheet does is allow you to enter your assessed property value from 2005 and this year's assessed value. You can change the mill rate cut until your tax bill is only as high as inflation and no higher.

Actually, I probably should have called this the "Fantasy Tax Cut Calculator." Check out at the bottom of the spreadsheet how many mills each local government entity would have to cut to meet the goal and you'll soon find out why.

My colleague Paulette Tobin had a story Tuesday about the school district's budget. District officials already said they'll be running in the red by more than $1 million for the 2005-2006 school year.

Update 9:15 p.m., 5/15/06: Mayor Mike Brown and finance director John Schmisek tried to set me straight tonight, in the nicest way possible.

They said inflation is a good benchmark but it's not the only one because, as the city grows, the budget has to grow faster than inflation.

"Inflation will only pay for what you're doing now," he said. "You have to plan for growth."

I know Schmisek told me this when I interviewed him but I completely overlooked it. Now that I've had a chance to look at my spreadsheet again, I remember why.

I was looking at the individual tax bill rather than the city budget as a whole. Schmisek's right. The budget would have to grow faster than inflation to account for new growth. But in looking at the individual tax bill, you have to assume that new growth would pay for itself.

That's because the bill reflects your property's payment for city services. It's like you're paying for, say, lawn service. It doesn't matter how big the lawn service company's budget is, only how much you pay for your service. If the company adds new customers, they pay for their own service. You don't pay for their service. Theoretically, therefore, your bill should be measured against inflation because the cost to provide you with service must go up as wages, fuel and other costs go up.