First Things First: Reappraisals & the Certified Tax Rate

Currently, we reappraise every four years in Nashville.* The Assessor’s staff goes out and sets averages for how much property values have changed for different types of property. The value of all property is then adjusted based on these averages. Because of the mass nature of appraisals, your individual assessment might not have matched the market value for your individual home. For this (and other) reason(s), every owner is given a chance to appeal their property’s value.

Everyone who owns property should have received a reappraisal notice in the mail a little over a month ago. Along with that notice, everyone should have been provided with instructions for how to appeal their valuation if they felt it was in error. The appeals process is handled by our Assessor’s Office, and her office’s information, along with more specific information about reappraisals, can be found here.

After all property is mass reappraised, the tax rate is automatically adjusted under state law so that we do not take in more money after appraisal than before. Practically, this means that any property for which the value increased less than the countywide average would see a lower tax bill. Conversely, any property for which the value increased more than the countywide average would see a higher tax bill.

Our countywide average in Davidson County was 45% this cycle, and our certified rates have been tentatively set for 1.995 and 2.222. As you can see here, my back-of-the-napkin math** shows how taxes would change monthly and annually at most home values under the current certified rate.

Now, as an aside, you may be thinking, isn’t the current rate 2.922 in the GSD and 3.254 in the USD? Why would the new certified rates for the USD and GSD be closer together than the old numbers? Well, when we were originally formed, many of the services provided in the USD, such as fire service and sewer, did not exist in the GSD. Our old rate differential was based on this outdated model of services provided, and our new structure has been updated to reflect our recent study on actual service allocations. You can read that GSD/USD study here. Practically, this also means that any tax increase will hit the GSD harder than the USD, and you can see the result of this when looking at all my charts.

*The point of this newsletter edition is not to talk about whether appraisals every 4 years is a good idea or bad idea, but I would note that I believe a more frequent appraisal process would be beneficial to all Nashvillians - more on this to come in future newsletters.

**All numbers in links in this newsletter were created in Excel. There may be some imperfect rounding within the spreadsheet because of how it is set up. I believe I have caught any formula errors and typos, but please let me know if you find an error so that I can correct it.

Certified Tax Rate v. Proposed Tax Increase

Historically, following almost all mass reappraisals, we adjust the tax rate above the certified rate. The reason for this adjustment is twofold: (1) We have used reappraisal years to adjust for inflation; and (2) Because of the appeals process and the naturally imperfect nature of mass reappraisals, we actually typically collect less money after reappraisals than before, which affects our ability to maintain consistent services. If you’re curious, we historically adjust the certified rate up about 20%, though many years it is less and some years it is more.

The Mayor’s budget is proposing a tax rate of 2.782 in the GSD and 2.814 in the USD, which is a blended adjustment of about 26%, though it is closer to 21% in the USD and 31% in the GSD because of the aforementioned GSD/USD shift.

To figure out what the proposed rate means for your home,* the equation is (New Tax Value x 0.25) x (Certified Rate / 100). You can also skip the math and approximate your proposed payments using this cheat sheet, which looks at various scenarios for homes at various price points previously under and up to $1,000,000.

As you can see in that cheat sheet, essentially everyone would be paying more in taxes under this proposed rate. Notably, with an average home value in the mid-$400,000s in Nashville,** a majority of residents would be paying what works out to being at or more than $50 a month.

Why do I think increases that exceed $50 a month are notable? For many reasons, but mostly because (a) it isn’t uncommon for homeowner insurance and/or HOA assessments to increase by $30-40 a month under current underwriting stressors, so increases in mortgage payments of less than $50 a month are not totally uncommon even outside of taxes; (b) that’s right around 1% of the post-tax monthly income for our average household income in Davidson County; and (c) $50 is a little more than the amount our government thinks it should cost to feed one person for a week. It is not a perfect cutoff for where everyone will feel something, but it is a point where most everyone will notice and many will feel it.

*For commercial property, my spreadsheet won’t work. You can run the calculation by using the following equation: (New Tax Value x 0.4) x (Certified Rate / 100).

**I’ve got actual data on my list of “open items” as a question I’ve already posed to the Assessor. For now, I’m using Zillow’s number.

Where Does This Leave Me Today?

Frankly, it leaves me with one fairly simple question and one very complex question:

• Given the massive increases we’ve seen in the cost of living in Nashville, specifically over the past several years, can residents afford this scale of increase?

• If Nashvillians cannot afford this scale of increase, where does that leave our budget?

I think the answer to the first question is probably no. I just don’t think most people who live in the GSD and whose house was valued at $250,000 four years ago can today afford to spend, on average, almost $58 more per month (or almost $700 annually). And that’s just the average - half of all residents saw a greater than average increase in their value. To add some insult to injury, because commercial property is not increasing in value as quickly as residential property, I suspect the increase in tax burden is more likely to be felt by residents, not businesses.*

But if most people cannot afford large increases in their property tax, what does a decrease in rate mean for our City’s budget? By way of background, this year’s budget is growing by about $500,000,000 to account for inflationary pressures, requested services, reserve needs, and limited federal funding. We cannot just ignore all these needs, but at a minimum, I think we have to narrowly tailor our proposed budget growth and examine future alternative funding sources.

I think we have to be incredibly selective of where we decide to grow our budget. Some of these calls will be easier than others. For example, a more modest growth in personnel may better align with what we see as our actual hiring capability. But not all decisions will be easy. If we want to get down the overall number of households spending $50 or more per month (especially for homes valued at less than half the median home value), then the reality is we are looking to cut between $94,000,000 and $188,000,000 from our budget. That kind of money isn’t easily plucked from a city government, which has to be a government of first response, last resort, and everything in between.

I think we have to be realistic about what alternative funding sources make sense so we are better prepared in the long run to tackle revenue issues in a more equitable way. For example, we have not touched the wheel tax in many, many years, despite the actual cost to get tags going down (because of changes in emissions rules) and voters’ overwhelming support of transit alternatives. Because all vehicles, not just homes, pay the wheel tax, adding back the $9 per vehicle we stopped paying a few years back plus putting the wheel tax on a more inflationary-based cycle would help bring in additional revenues without the burden falling just on individual residents. I also believe we have to be realistic about where private funding makes sense and be better at making those strategic connections. These are longer term solutions that we have to start working on today.

*I have requested more specific details on the breakdown between commercial and residential property and am still waiting on it. But both my fairly thorough spot check and the actual market suggest residential is up and should be up more than commercial.

My Next Steps

My next step is pretty straightforward: I am digging into the budget.*

I’m asking uncomfortable and hard questions of our Metro departments, while hoping those departments know my questions are not meant to imply they aren’t doing great, necessary work. I’m running alternate scenarios of various tax rates so I can see how they affect different home values. I’m backing various tax rates into our projected revenue to see how they affect potential cuts in our budget’s growth.

I am also listening to you. I would encourage anyone with thoughts about the budget to share those with me and anyone else on council who you think should hear from you. Please know that I read all emails, but due to the volume of emails on the budget, I may not respond immediately (especially if it is an open item that takes time to play out, understand, and research or will be directly addressed in a newsletter). To reach me, you can reply to this email or email me at [email protected].

I will also be in touch through this newsletter through the budget process with updates.

*For those who wondered where I was during last week’s hearings, my kids had the flu the last two weeks (somehow managing each to get sick the very day the last one was better!), so I’ve been digging in like any working parent with a sick household - remotely.

News Around Town & Helpful Links

Public calendar notices can be found here.

You can find the brush pickup schedule here.

Updates to the Housing & Infrastructure Study are available here.

For fastest repairs and attention, please submit all maintenance requests into Hub Nashville.

NES is working to replace old streetlights with new ones. Until that process is complete, please report streetlight outages here.

Side Notes

Between council business, Maycember (as those of us with kids call the end of the school year), and the kids’ flu, I am a little behind in my reading. I recently finished North Woods and The Wedding People. Next on my list are Yearbook and Notes to John. What are you reading and enjoying this summer, and are you using the Library’s Libby app?

A Final Note about Newsletters

This newsletter isn’t free to send, which is why it has been absent for a while. However, given the importance of budget conversations, I did not feel this was an expense that could be spared.

I’d really like to send more newsletters, but that takes more money. To help support these newsletters, please donate to my campaign fund (which pays for my newsletter service, as well as campaign items).

And as always, please reach out to me should you need anything, want to see anything in the newsletter, or otherwise have any comments or questions!