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Special District White Paper <br /> Constitutional Permanent Tax Rate Limit <br /> New districts are required to have a voter - approved permanent maximum property tax rate limit <br /> prior to levying any operating property taxes. Once adopted, this limitation is applied to the <br /> individual district, apart from the total general government tax rate limit imposed on a property. <br /> Once approved by the voters a permanent maximum property tax rate limit may not be exceeded <br /> although a district is permitted to actually levy less without affecting the permanent rate limit. The <br /> permanent rate limit also may not be changed after being adopted, and therefore must be set at a <br /> level that will be adequate for the district's expected services. <br /> Principal Act Tax Revenue Limitations <br /> Most types of special districts have specified in their principal Act a maximum annual amount of <br /> property tax revenue they may legally collect. This amount is usually expressed as a percentage of <br /> the real market value of taxable property within the special district. Note that this limitation is <br /> independent from the general government constitutional limitation and the voter - approved <br /> permanent rate limitation for each district. Principal Act limits are always expressed as a percentage <br /> of the real market value (RMV) of taxable property within the district. This must be converted to a <br /> rate per assessed value (AV) because property taxes are levied on AV under the constitutional <br /> limitations described above. <br /> General Obligation debt - related property tax levies are outside the constitutional limitations but are ,..4 <br /> within the district's principal Act limitations unless otherwise specified in the principal Act. Some <br /> districts have a separate limitation on total outstanding general obligation debt. <br /> Property Value Volatility Limitations <br /> Notwithstanding the permanent maximum tax rate on assessed value, the rate the taxing <br /> jurisdiction actually levies within the permanent rate, and the collection rate, the amount of tax <br /> revenue that is actually collected may be limited by the real market value of taxable property. Real <br /> market values may increase or decrease with swings in the economy. In the late 1990's real market <br /> values have risen faster than assessed value, creating a gap between real market value and <br /> assessed value. But if a major economic recession were to occur then real market value could drop <br /> significantly, as occurred in the economic recession in the 1980's. In such a case real market <br /> property value reductions could impact both the amount collected under a particular tax rate and the <br /> maximum amount of revenue that a special district is legally allowed to collect. <br /> Assessed value is not reduced, under the constitutional language, even if real market value falls. <br /> Should real market value drop below the level of assessed value, the Constitution provides that the <br /> lower of the two will be used to calculate a property's taxes. A constant rate applied to lower <br /> property values would generate reduced revenue. Also, since the total taxable value of property <br /> within the district would decrease, and the amount of property taxes that could be legally collected <br /> under maximum revenue amount limitations in a district's principal Act would be reduced. <br /> Special Districts Paper - Final 11- 8 -01.doc Page 14 of 41 <br /> City Council Agenda page 38 <br />