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Revenue neutral is when a taxing jurisdiction budgets the exact same amount of property tax revenue, in dollars, for the upcoming budget year as they did for the current year. For example if a taxing entity uses $1 million of property tax revenue in 2022, being revenue neutral means they plan to only use $1 million in 2023 as well.
If a taxing jurisdiction plans to use more property tax revenue in the next budget year compared to the current year, even $1 more, they would exceed revenue neutral and need to hold a public hearing.
The revenue neutral rate is the mill levy rate to generate the exact the same amount of property tax revenue as the year before, using the current tax year's total assessed valuation.
A jurisdiction does not only increase revenue to provide new services; they often need to increase property tax revenue to provide the same level of service as the year before.
While this new revenue neutral law (Senate Bill 13) is an important step for budget transparency, it does not take inflation into account. As property values are rising, so are the cost of goods and services.
To provide residents with the same (or better) level of service, it costs more. Taxing entities often "exceed revenue neutral" and use a modest increase in revenue to help pay for things like the increased cost of goods and/or services - like asphalt for streets, mowing services, and other community priorities.
If an entity were to stay revenue neutral every year, they would have to provide this year's services, with this year's prices, on last year's budget.
Property values significantly increased this past year due to the market, but your taxes would not increase by that same amount, as most entities lower the mill levy to help re-balance the "appraised value to collected property revenue" scale.
If an entity does need to increase the property revenues for the upcoming year, it should be by a modest amount compared to the increase in appraised property values.
In March 2021, the Kansas Legislature passed K.S.A. 79-2988, which requires Kansas County Clerks to send taxpayers notification of the revenue neutral rate (RNR) compared to the proposed rate for each taxing subdivisions. Taxing subdivisions are prohibited from levying an ad valorem property tax that exceeds the RNR without first holding a public hearing and passing a resolution.
Therefore, in August, an estimated tax notice will be mailed out by the County Clerk to all County property owners with information about property tax revenue and an estimated tax notice on behalf of all of their taxing subdivisions.
The notice will include:
This notice is not a bill and does not include information on special assessments that may be charged. It is solely a notice of whether your subdivisions plan to exceed the revenue neutral rate (RNR) for the upcoming budget.
Due to new law in place to promote transparency, we want to help property owners understand the notification they receive, as property owners are going to receive a fairly technical letter in the mail explaining each jurisdiction's intent (or non-intent) to exceed revenue neutral (use more property revenues than the year before).
(A) The revenue neutral rate of each taxing subdivision relevant to the taxpayer’s property.
(B) The proposed property tax revenue needed to fund the proposed budget of the taxing subdivision - if the taxing subdivision notified the county clerk of its proposed intent to exceed its revenue neutral rate.
(C) The proposed tax rate based upon the proposed budget and the current year’s total assessed valuation of the taxing subdivision - if the taxing subdivision notified the County Clerk of its proposed intent to exceed its revenue neutral rate.
(D) The tax rate and property tax of each taxing subdivision on the taxpayer’s property from the previous year’s tax statement.
(E) The appraised value and assessed value of the taxpayer’s property for the current year.
(F) The estimates of the tax for the current tax year on the taxpayer’s property based on the revenue neutral rate of each taxing subdivision and any proposed tax rates that exceed the revenue neutral rates.
(G) The difference between the estimates of tax based on the proposed tax rate and the revenue neutral rate on the taxpayer’s property described in subparagraph (F) for any taxing subdivision that has a proposed tax rate that exceeds its revenue neutral rate; and
(H) The date, time, and location of the public hearing of the taxing subdivision, if the taxing subdivision notified the county clerk of its proposed intent to exceed its revenue neutral rate.
Note: The taxpayer notification form is NOT a bill.