Personal Property Tax Changes
Update: The Urban County Council followed through with the Mayor’s recommendation not to make any changes to the Ad Valorem rates. First Reading of the rates will be placed on the September 3 Council Meeting.
On Tuesday, in the 3:00pm Work Session the Urban County Council will hear a presentation on the city’s Ad Valorem Tax options. Current options being considered by council are: 1) keeping the rate the same, 2) making a slight adjustment to keep the same amount of revenue, 3) increasing the rate by 4%, or, 4) increasing the rate by more than 4%.
Here’s what you need to know:
Ad Valorem taxes are essentially taxes on personal property, with assets like real estate, machinery & equipment, motor vehicles, boats, personal planes, or agricultural products.
State law dictates that the rate must be set within 45 days of the certification of the county’s property tax rolls, and that deadline is fast approaching.
Typically, this process would have already happened, but the tax deadline was extended due to the Coronavirus, pushing back that certification date to August 20.
While council has until October 3 to make any changes, the current internal schedule has set the date for a Second Reading and Public Hearing of any changes for September 15.
Fayette County’s Ad Valorem taxes go to the state (9.5%), FCPS (63.4%), LexTran (4.7%), LFUCG’s General Fund (6.3%), LFUCG’s Urban Services Fund (13.7%), and other agencies (2.5%).
Given the city’s dire financial position, the city is considering increases to the portions of the Ad Valorem tax that go to the General Fund and the Urban Services Fund.
General Fund changes: Up to a 4% increase.
A 4% increase to the General Fund allocation would result in a projected increase of $1.24 Million to the General Fund. The city’s projected deficit in two years is $23.6 Million.
For a house with a property value of $190,000, this would result in a $7.60 increase in property taxes across the year.
5/8ths of all General Fund Ad Valorem revenue goes to the Lexington Public Library.
Urban Services Fund changes: Up to a 4% increase. Alternatively, increasing to the actual cost of service.
The services provided by the Urban Services Fund include trash/recycling collection, street lights, street cleaning, and more. The taxes that pay for these services don’t cover the actual cost, so funds must be found elsewhere in the city budget.
A 4% increase to the Urban Services allocation would result in a projected increase of $1.38 Million to the Urban Services District Fund. This would result in a $15.01 increase in property taxes for a house with a $190,000 value.
If the rate was increased to cover the actual cost of the service, it would bring in an additional $4.56 Million to the Urban Services District Fund. This would result in a $39.14 increase in property taxes for a house with a $190,000 value.
If the council elected to increase the rate to cover the cost of services, it would be over a 4% increase. By state law, any increase over 4% would be subject to a voter recall within 50 days via a petition signed by 10% of voters in the last Presidential Election (13,632).