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Special District White Paper — Draft for Internal Review <br /> new permanent operating tax rate or special levies without causing significant additional <br /> revenue compression. (Appendix B provides additional details.) <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 is a limitation applying 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 <br /> exceeded, although a district is permitted to actually levy Tess without affecting the maximum <br /> rate limit. The maximum rate limit also may not be changed after being adopted so it needs to <br /> be set at a level that will be adequate for the districts expected services. <br /> Principal Act Tax Revenue Limitations <br /> Most types of special districts have a maximum annual amount of property tax revenue they <br /> may legally collect specified in their principal Act. This amount is usually expressed as a <br /> percentage of the real market aloe of taxable property within the special district. Note that this <br /> limitation is independ nt fr_om the general government cor stitutional limitation? and the voter - <br /> approved permanent a�timm'tak rate limitation fbr each district. Prinpipal Act limits are always <br /> expressed as a perce to a of tie et /al&e (FOAM) of taxable rroperty within the district. <br /> This must be convert t9 a tat 9er a va/ue (AV) because property taxes are levied on <br /> AV under the constitu ions) IJ'mitatione described above\ <br /> GO debt - related prop •rty taxievies are putsi plie the constitutional Iimita ions, but are within the <br /> district's principal Act limitations unless otherwise specified in the principal Act. Some districts <br /> 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. <br /> Real market values may increase or decrease with swings in the economy. In the late 1990s <br /> real market values have risen faster than assessed value, creating a gap between real market <br /> value and assessed value. But if a major economic recession were to occur then real market <br /> value could drop significantly, as occurred in the economic recession in the 1980s. In such a <br /> case real market property value reductions could impact both the amount collected under a <br /> particular tax rate and the maximum amount of revenue that a special district is legally allowed <br /> to collect. <br /> X ` Assessed value is not reduced, under the constitutional language, even if real market value <br /> falls. Should real market value drop below the level of assessed value, the Constitution provides <br /> that the lower of the two will be used to calculate a property's taxes. A constant rate applied to <br /> lower property values would generate reduced revenue. Also, since the total taxable value of <br /> property within the district would decrease, and the amount of property taxes that could be <br /> legally collected under maximum revenue amount limitations in a district's principal Act would be <br /> reduced. <br /> Draft #5 Page 14 10/24/01 <br />