PROPERTY VALUES AND TAXES IN SOUTHEAST WISCONSIN

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2 PROPERTY VALUES AND TAXES IN SOUTHEAST WISCONSIN September 2016 Rob Henken, President Betsy Mueller, Intern Jeff Schmidt, Data & Technology Director Sponsored by:

3 Table of Contents Introduction... 3 Major Findings... 4 Methodology... 6 Property Values in Southeast Wisconsin... 8 Property values show highest growth since Residential property values continue modest growth... 9 Commercial values lead the region s growth Growth in manufacturing property values slows in Most of the region s municipalities see increased values, including Milwaukee Property Taxes in Southeast Wisconsin Tax levy collections show modest increase in Property tax rates decline for second consecutive year Little change in jurisdictional shares of overall levy Effects on Taxpayers Property tax bills grow as values increase Conclusion

4 Introduction This report is an annual Public Policy Forum publication that analyzes property values and property taxes within the seven-county southeast Wisconsin region. The report explores trends in property values an important indicator of the region s economic health and then examines the connection between those values and the property tax levies and rates of local governments and school districts. This year s report first examines recently-released 2016 regional data on equalized property values, breaking down the information by county and analyzing recent trends. Our analysis also contains information on 2015 property values, as those values were used to determine 2016 property tax rates and levies, which are the focus of the second part of the report. The discussion of 2016 values not only provides insight on the pace of economic growth in the region and how it differs among the seven counties, but also sheds light on how this year s property values might affect next year s tax rates. After presenting data on property values in the region, we next examine 2016 budgeted tax levies and tax rates in southeast Wisconsin. A particular focus is the extent to which local government and school district leaders are using the recent upswing in property values to capture more revenue to support their operations. We also offer observations on trends and policy implications. This year s analysis reveals good news regarding property values in the region. We find that for the third consecutive year, equalized property values increased in southeast Wisconsin, with this year's 3.2% growth the highest since the recession. This is also the first time in a decade that property values increased at a higher rate in the region than in the State of Wisconsin as a whole. With regard to property tax levies, we find that the region s overall gross levy also increased, with this year's 1.8% growth the highest since The region's aggregate property tax rate declined slightly, however, which means that the growth in property tax collections essentially was commensurate with the 2.0% growth in values experienced in In other words, local governments and school districts collectively captured the increased property tax payments created by the growth in value, but did not seek increases above that amount. Chart 1 shows the aggregate equalized property values, gross tax levy, and gross tax rate for southeast Wisconsin indexed to 100 in This chart illustrates the general inverse relationship between property values and property tax rates that has existed over the past decade. 3

5 Chart 1: Ten year southeast Wisconsin aggregate property valuation, aggregate gross tax rate, and aggregate gross tax levy, indexed to Equalized value Gross tax levy Gross tax rate Major Findings In 2016, aggregate equalized property values in southeast Wisconsin increased for the third consecutive year. This year's 3.2% rate of growth exceeds last year's 2.0% and is the highest since Also for the third consecutive year, every county in the region experienced an increase, led by Kenosha at 5.6%. Property value growth for the State of Wisconsin as a whole was 3.0%, making this the first year since 2006 that the region's growth exceeded that of the state. The City of Milwaukee experienced a robust 4.1% increase in equalized property values, its highest annual growth since This is only the second year since the onset of the recession that Milwaukee experienced year-to-year growth in equalized property values. Milwaukee was one of 124 municipalities in the region (out of a total of 147) that saw an increase in overall property values from 2015 to Residential values which comprise the greatest share of overall property values in the region also grew for the third consecutive year at 2.7%. Each of the seven counties in the region experienced growth in residential values, led again by Kenosha at 4.2%. Milwaukee experienced the smallest increase in residential property values at 1.3%, while the City of Milwaukee saw its residential values increase by 0.7%. Commercial property values continue to drive the region's overall growth, increasing by 4.7% and outpacing the 3.8% growth in commercial value experienced by the state as a whole. This year's growth rate is the highest since 2007; in fact, the region's total commercial property value now exceeds its pre-recession value. 4

6 The aggregate gross property tax levy in southeast Wisconsin increased by 1.8%, which is the largest annual increase since Last year, the region's aggregate gross levy declined by 3.0%, largely because of legislation that shifted much of the responsibility for funding technical colleges away from the local property tax. Every county in the region saw an increase in its aggregate gross tax levy in 2016, with Racine experiencing the largest (4.7%) and Milwaukee the smallest (0.9%). Despite the increase in the amount of property tax collected, the aggregate property tax rate in Southeast Wisconsin declined slightly, from $22.63 per $1,000 of equalized value to $ This is the second year in a row that the aggregate property tax rate has decreased, although the decline is not as large as last year s. The property taxes levied by school districts remain the largest component of the annual property tax bill, accounting for 45.4% of the aggregate tax levy in southeast Wisconsin. Municipal governments are next at 27.9%. In 2016, the total amount of property taxes levied by school districts increased by $32 million (1.8%). To calculate an average tax bill in southeast Wisconsin, we apply the average residential property value in the region to the gross tax rate. The hypothetical average tax bill in the region increased by $53 (1.2%) to $4,351 in Still, because the average residential value remains well below its pre-recession peak, the region s hypothetical gross property tax bill for residents is $89 lower in 2016 than the $4,440 we calculated in

7 Methodology This report focuses on annual changes in property values, total property tax levies, and property tax rates in the seven-county southeast Wisconsin region. Municipal tax rates are based on the total value of all taxable property in each municipality, also known as the tax base. Because local assessors are responsible for determining the property values for their jurisdictions, total assessed value across municipalities and counties is not a uniform measure. To bring all values to a uniform level comparable across jurisdictions, the state equalizes assessed values by using tools such as market sales analysis, random appraisals, and local assessors reports. Equalized values, calculated yearly, are meant to reflect fair market value (the most probable selling price). Our analysis utilizes equalized values determined by the Wisconsin Department of Revenue (DOR) as of January 1, Total property value has two categories: real estate and personal property. Real estate makes up the overwhelming majority of the tax base and has eight classifications: residential, commercial, manufacturing, agricultural, undeveloped, agricultural forest, forest, and other. The three classifications analyzed in this report are residential, commercial, and manufacturing. Changes in property value are classified in three ways. Economic change refers to remodeling of existing properties or changes as a result of market conditions, such as during a recession. The other classifications include changes due to new construction and other changes. The other category includes technical corrections that were made to the value of the property, demolition or destruction of property, and changes in the exempt status or classification of property. New construction drives total value growth, as previously undeveloped parcels are used more intensively, generating a higher land utility and a higher value. This report also uses data from the Wisconsin Department of Revenue on municipal property tax levies and tax rates in the seven counties of southeast Wisconsin. The data are not fully audited and thus are considered preliminary. The tax levy is the amount of money that each taxing jurisdiction (county, municipality, school district, technical college district, tax increment finance district, special district and the state) expects to receive from property taxes. To calculate a tax rate (also known as a mill rate), each government divides the levy by the total property value (tax base) in its jurisdiction and multiplies the result by 1,000. This calculation allows property tax payments to be distributed evenly among taxpayers according to individual property values. Budgets for taxing jurisdictions for 2016 including property tax levies were adopted late in 2015, and 2015 property values therefore were used to determine 2016 rates. Consequently, we look at 2015 property values in this report when we are analyzing the 2016 levies, as this allows us to illustrate the connection between 2015 values and 2016 levies. As in last year s report, we received data on 2016 equalized values in mid-august and decided to include analysis of that data as well in light of its availability and significance. Because each property taxpayer lives within several taxing jurisdictions, we add the various tax rates together to arrive at the aggregate gross tax rate. It is important to note that in this report, when the gross tax rate or levy for a particular county is referenced, it does not refer to the rate or levy attributable to county government in that county, but to the aggregate total of all taxing jurisdictions in the county (including the county government). 6

8 Also, the net tax rate that determines each taxpayer s tax bill differs from the gross rate in that the net rate results from subtracting the state tax credit from the gross tax rate. Taxpayers can determine their individual payment by dividing their property value by 1,000 and multiplying the resulting number by the net tax rate. The report presents a hypothetical regional and county aggregated gross tax rate calculated by summing each municipality s gross tax rate into a rate for southeast Wisconsin, or for a county, as a whole. Finally, while it is important to note that the property tax is the most prominent revenue-raising tool available to local governments and school districts, it is not the only tool. Local governments also make use of a variety of fees on items ranging from garbage pick-up to snow removal, and most school districts employ student fees for various activities. Also, some counties in the region have implemented a 0.5% county sales tax, while others have not. This report does not address trends in local government and school district fee collections or county sales tax collections. Consequently, it should not be used to evaluate overall local government revenue trends. 7

9 Property Values in Southeast Wisconsin Property values show highest growth since 2007 Property values in southeast Wisconsin continue to rebound from the depths of the recent economic recession, as aggregate property values in the region increased by 3.2% to $179.1 billion in This is the third consecutive year that property values have increased, and the 3.2% rate of growth is higher than the previous year s rate of 2%. In fact, as shown in Chart 2, this year's growth rate is the highest since Also, this is the first year since 2006 in which the region's growth exceeded that of the state. The state as a whole experienced a 3% increase in property values from 2015 to Chart 2: Annual change in aggregate property values in Southeast Wisconsin and state 8% 6% 4% 2% 0% -2% -4% -6% Southeast Wisconsin State of Wisconsin Chart 3 shows the change in property values for each of the seven counties in the region. We see that for the third consecutive year, all counties experienced an increase in property value. Kenosha again had the largest rate of growth at 5.6%. Milwaukee, Walworth, Washington, and Waukesha counties saw their values grow at a faster rate than the previous year, with Milwaukee showing the largest increase (2.8% in 2016 as compared to last year's 0.7%).Both Ozaukee and Racine counties experienced a slowdown in growth, and Racine had the smallest increase in the region at 1.9%. 8

10 Chart 3: Annual change in aggregate property values, by county 6% 5.6% % 4% 3% 2.8% 3.2% 3.6% 3.5% 2% 1.9% 2.0% 1% 0% Kenosha Milwaukee Ozaukee Racine Walworth Washington Waukesha Residential property values continue modest growth Residential property makes up the largest portion of total property values in southeast Wisconsin at 73.4%. As shown in Chart 4, residential values suffered the most of the major property sectors in the aftermath of the recession, and their plunge drove the decline in total values in the region. More recently, growth has resumed in all three sectors, with commercial values showing the highest rate of growth. Chart 4: Residential, commercial, and manufacturing property values ( ) $160,000,000,000 $140,000,000,000 $120,000,000,000 $100,000,000,000 $80,000,000,000 $60,000,000,000 $40,000,000,000 $20,000,000,000 $ Residential Commercial Manufacturing 9

11 Chart 5 provides a more detailed glimpse of the trend in residential property values in southeast Wisconsin. We see that the 2.7% rate of growth in residential values in 2016 is the highest since 2007, though residential growth in the region still lags the 2.9% rate of growth for the state as a whole. Chart 5: Annual change in residential property values in southeast Wisconsin and state 8% 6% SE WI State 4% 2% 0% -2% -4% -6% -8% When broken down by county, as shown in Chart 6, we see that every county in the region experienced an increase in residential property values, and all but one county saw a larger rate of growth than the previous year. The exception was Ozaukee, which saw the largest increase last year at 3.7%, but which experienced a smaller increase of 2.6% this year. Kenosha experienced the largest increase in residential values at 4.2%, as compared to 2.3% the previous year. Milwaukee experienced the smallest increase in residential property values at 1.3%, but that is a higher rate than the previous year s growth rate of 0.7%. 10

12 Chart 6: Annual change in residential property values, by county 5.0% % 4.2% 3.9% 3.5% 3.0% 2.6% 2.2% 2.3% 2.0% 1.3% 1.0% 0.0% Kenosha Milwaukee Ozaukee Racine Walworth Washington Waukesha Chart 7 shows that while residential property values in the region have resumed a trend of modest annual growth, total residential values still do not come close to their pre-recession levels. In fact, residential property values in southeast Wisconsin in 2016 still are 11% lower than their 2008 peak (the counties that are furthest behind their 2008 peaks are Milwaukee, with values that are 18% lower; and Kenosha, with values that are 17% lower). Meanwhile, the upward trend continued for the state, with statewide residential values in 2016 now surpassing their 2008 peak. Chart 7: Percent change in residential property values since 2008 in southeast Wisconsin and state 5% SE WI State 0% -5% -10% -15% -20%

13 Commercial values lead the region s growth In 2016, commercial property values comprise 23.1% of the total property value in southeast Wisconsin. As shown in Chart 8, commercial values exhibited strong growth; the 4.7% increase (to $41.3 billion) was the highest since 2007 and exceeded the 2.7% growth rate of residential values by two percentage points. For the state as a whole, commercial property values grew for the fourth consecutive year, although the state experienced a smaller increase (3.8%) than the region. Chart 8: Annual change in commercial property values in southeast Wisconsin and state 8% SE WI State 6% 4.7% 4% 2.9% 2.9% 3.8% 2% 0% -2% -4% Chart 9 shows that commercial property values in southeast Wisconsin now have fully recovered and surpassed their pre-recession peak from Commercial property values in the state as a whole passed that point a year ago. Chart 9: Percent change in commercial property values since 2009 in the region and state 6% 4% 2% 0% -2% -4% -6% -8% SE WI State -10%

14 The increase in commercial property values differed greatly by county, as shown in Chart 10. Although all seven counties experienced an increase in commercial property values, four counties (Milwaukee, Ozaukee, Walworth, and Waukesha) experienced an increased rate of growth from the previous year, while three counties (Kenosha, Racine, and Washington) experienced a slowdown in growth. Chart 10: Annual change in commercial property values, by county 12% 10.8% % 8% 7.7% 7.7% 6% 4% 2% 0% 2.3% 5.6% 3.6% 5.8% 1.1% 0.4% 5.0% 1.5% 1.4% 3.9% -2% -4% Kenosha Milwaukee Ozaukee Racine -2.8% Walworth Washington Waukesha Kenosha and Ozaukee Counties led the region with 7.7% increases. For Ozaukee, this was an improvement over the 3.6% growth rate experienced the previous year, while for Kenosha it represented a slowdown from the previous year's 10.8% increase. On the opposite end of the spectrum, Walworth experienced only a 0.4% increase in commercial property values. This comes after Walworth was the only county to experience a decrease in commercial property values in Growth in manufacturing property values slows in 2016 Manufacturing property values account for 2.7% of the total property value in southeast Wisconsin with a total value of $4.8 billion. They grew for the fourth consecutive year in 2016, but this year's 2.6% growth rate is lower than the 3.8% experienced in 2015, as shown in Chart 11. The state as a whole experienced its fifth consecutive year of manufacturing property value growth at 2.7%, although it also experienced a slower rate of growth than the previous year. 13

15 Chart 11: Annual change in manufacturing property values in southeast Wisconsin and state 6% SE WI State 4% 3.8% 3.2% 2.7% 2.6% 2% 0% -2% -4%

16 As shown in Chart 12, all seven counties saw an increase in the value of their manufacturing property value for the second consecutive year. Kenosha, which had the largest increase in 2015 (14.3%), experienced a much smaller increase of just 2.1% in Waukesha had the lowest rate of manufacturing value growth at 1.9%, while Ozaukee experienced the largest increase at 6.0%. Chart 12. Annual change in manufacturing property values, by county 16% 14% 12% 14.3% % 8% 6% 4% 2% 0% 2.1% 2.4% 1.6% 6.9% 6.0% 2.3% 4.2% 0.4% 7.3% 2.5% 2.4% 2.7% 1.9% -2% -4% -6% Kenosha Milwaukee Ozaukee Racine Walworth Washington Waukesha Most of the region s municipalities see increased values, including Milwaukee Taking a look at property values from a municipal perspective, we see in Chart 13 that 124 of the region's 147 municipalities experienced an increase in overall property values in 2015 the most in a single year since Leading the way were the Village of Pleasant Prairie in Kenosha at 10.5% and the Village of Lannon in Waukesha at 10%. Among cities in the region, the highest annual increases occurred in Hartford (6.0%). Brookfield (5.1%), and Pewaukee (4.9%). The Town of Yorkville in Racine had the largest decline in property values in the region at 4.3%, followed by the Town of Richmond in Walworth at 3.8% and the City of St. Francis in Milwaukee at 3.6%. 15

17 Chart 13: Count of municipalities with increasing property values The City of Milwaukee experienced good news in 2016, with property values rising 4.1%. This is the largest annual increase since a 5.5% increase in Since 2009, Milwaukee has seen only one other annual increase in equalized property values a 0.2% increase experienced in It should be noted that while overall property value growth was strong, residential values in the City of Milwaukee increased by only 0.7%. The City of Milwaukee's equalized value of $27 billion comprises about 15% of the region's total equalized value. 16

18 Property Taxes in Southeast Wisconsin Tax levy collections show modest increase in 2016 Our analysis of regional property tax levy trends examines tax levies adopted late in 2015 for the 2016 budget year. In 2016, the aggregate gross property tax levy in southeast Wisconsin increased by $68.7 million (1.8%) to $3.9 billion. In 2015, the region's aggregate gross levy declined by 3.0%, in large measure because of legislative action adopted that year that shifted much of the responsibility for funding technical colleges away from the local property tax. Also in contrast to 2015, when every county in the region experienced a decrease in its aggregate gross tax levy, every county saw an increase in Chart 14 shows that Racine experienced the largest increase at 4.7%, while Milwaukee experienced the smallest, at 0.9%. In the City of Milwaukee, budgeted gross property tax levy collections decreased by 0.2%. Chart 14: Annual change in aggregate gross tax levy, by county 6.0% 4.0% 2.0% 3.5% 0.9% 2.4% 4.7% 1.7% 1.9% 1.6% 0.0% -2.0% -4.0% -6.0% -8.0% Kenosha Milwaukee Ozaukee Racine Walworth Washington Waukesha This year marks the first since 2011 that each of the seven counties in the region saw an increase in its aggregate gross tax levy. Moreover, the region's collective increase of 1.8% is the largest since 2010, when the southeast Wisconsin counties collectively experienced a 3.9% increase. It is important to note, however, that while this year's increase would appear to be substantial from the perspective of a five-year trend analysis, the average annual aggregate gross tax levy increase from 2004 through 2009 was 4.6%. The fact that a 1.8% regional aggregate gross tax levy increase now might be viewed as being on the "high" side, whereas annual increases in the previous decade typically exceeded 4%, likely can be explained by a variety of factors. One is the strict property tax limits for both local governments and school districts that have been adopted in annual State of Wisconsin budgets since Another may be the comparatively slow growth of inflation and property values in recent years, which have discouraged elected officials from raising property taxes in amounts that exceed those levels even if they had capacity to do so within state-imposed caps. 17

19 Property tax rates decline for second consecutive year When viewing trends in property tax levies, it is also important to consider what is happening with property tax rates. Ostensibly, if property values are growing, then local governments and school districts should be able to enjoy some growth in their overall levies without having to increase the overall rate. Conversely, if property values are falling, then rates need to be increased in an equivalent manner just to maintain the same amount of tax levy collections. In 2016, the aggregate property tax rate in Southeast Wisconsin declined slightly, from $22.63 per $1,000 of equalized value to $ This is the second year in a row that the aggregate property tax rate has decreased, as shown in Chart 15, although the decline in 2016 is far smaller than last year s. Chart 15: Ten-year hypothetical aggregate gross tax rate in Southeast Wisconsin $30.00 $25.00 $20.00 $18.81 $19.34 $20.36 $21.58 $22.04 $23.42 $23.93 $22.63 $22.60 $18.78 $15.00 $10.00 $5.00 $ The property tax rate for the region provides additional context with which to view the 1.8% increase in its aggregate gross levy. The slight decline in the rate indicates that for 2016, taxing bodies essentially collected the increased property tax levy that naturally resulted from the region's 2% growth in property value in 2015, but did not levy taxes at a level that exceeded that growth. Chart 16 shows the aggregate gross tax rate for each of the southeast Wisconsin counties. The swings in 2016 were smaller than the previous year, with no county experiencing more than a three percentage point change in either direction. Milwaukee continues to maintain the highest gross tax rate in the region, but experienced growth of only $0.09 per $1,000 of equalized value (less than four tenths of one percent). Racine experienced the largest increase at 2.7% to $24.05 per $1,000 of equalized value. 18

20 Chart 16: Aggregate gross tax rates, by county $30.00 $28.64 $25.13 $25.00 $24.05 $20.00 $17.84 $19.55 $17.42 $17.73 $15.00 $10.00 $5.00 $0.00 Kenosha Milwaukee Ozaukee Racine Walworth Washington Waukesha Little change in jurisdictional shares of overall levy As in previous years, school district levies continue to account for the largest share of residents tax bills in southeast Wisconsin. As shown in Chart 17, the shares of each jurisdiction remained largely the same in 2016; in fact, no jurisdiction saw its share change by more than one percentage point.this contrasts with 2015, when the share of technical colleges decreased from 7% to 3.7% because of state legislation passed in 2014 that increased state aids to technical colleges while requiring a corresponding decrease in property tax levy support. Chart 17: Aggregate tax levy breakdown among taxing jurisdictions in Southeast Wisconsin, % 27.9% 16.0% 3.7% 3.7% 2.6% 0.8% School District Municipal TIF Tech College Special District State

21 Millions When we look at the actual dollars allocated to each jurisdiction, we can see that each has increased. School districts saw the largest monetary increase (nearly $32 million), but this only amounted to a 1.8% increase in the total property taxes collected by school districts. Tax Incremental Finance (TIF) districts showed the highest percentage increase, at 5.9% (about $8 million). On the other end of the spectrum, county levies increased by the smallest amount at about 1% (just over $500,000). Chart 18 shows the amount that each type of jurisdiction contributes to southeast Wisconsin s total aggregate property tax levy of $3.9 billion. Chart 18: Aggregate tax levy breakdown among taxing jurisdictions in southeast Wisconsin, $2,000 $1,800 $1,600 $1,751 $1,783 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 $1,092 $1,075 $624 $618 $144 $149 $101 $142 $141 $98 $29 $29 School District Municipal Tech College TIF Special District State

22 Effects on Taxpayers Property tax bills grow as values increase The property tax bill charged to an individual property owner reflects the aggregate of the tax levies of the various taxing districts, which are then applied via the property tax rate to the property s assessed value. Annual changes to property tax bills received by property owners, therefore, reflect not only the levying decisions of government bodies and changes in the property tax rate, but also any change in the assessed value of the owner s home or business. While this dynamic prevents us from being able to assess impacts on individual property owners (as we do not know how the value of individual properties changed), we can illustrate the connection between values, levies, and rates by calculating changes to an average hypothetical tax bill for a resident of each county in southeast Wisconsin and for the region as a whole. Below, we do so by using average 2015 residential equalized values, and applying 2016 aggregate gross tax rates to those amounts. In 2015, the average residential property value in southeast Wisconsin increased by 1.4% to $192,535. Ozaukee and Waukesha had the highest average residential property values at $279,719 and $277,372 respectively. Milwaukee continued to have the lowest average residential property value, at $147,252. Each of the seven counties saw an increase in its residential property value from 2014 to Table 1 shows the hypothetical gross tax bill for every county in southeast Wisconsin and for the region as a whole for the past three years. It shows that the hypothetical tax bill for residents in each of the seven counties increased in This reflects the fact that increased property values generally outweighed the impact of modest changes (either up or down) in each county s property tax rate to produce a higher average hypothetical property tax bill. For the region as a whole, the hypothetical tax bill increased by $53, or 1.2%. The hypothetical tax bill still is lower than in 2014, however, which is the year before the hypothetical tax bill was substantially lowered by the change to the technical college funding paradigm. Table 1. Average property values, aggregate gross tax rates, and hypothetical gross tax bills 2014 Averages 2015 Averages 2016 Averages Value* Rate Bill Value* Rate Bill Value* Rate Bill Kenosha Co $149,416 $27.01 $4,036 $153,145 $25.44 $3,897 $157,100 $25.13 $3,948 Milwaukee Co $144,174 $29.64 $4,273 $146,514 $28.53 $4,180 $147,252 $28.64 $4,217 Ozaukee Co $259,690 $19.44 $5,048 $270,099 $18.06 $4,878 $279,719 $17.84 $4,989 Racine Co $145,659 $24.80 $3,612 $147,655 $23.43 $3,459 $149,329 $24.05 $3,592 Walworth Co $210,617 $20.08 $4,230 $209,693 $19.35 $4,058 $211,532 $19.55 $4,135 Washington Co $198,904 $19.27 $3,833 $205,998 $17.59 $3,624 $211,129 $17.42 $3,677 Waukesha Co $260,361 $19.28 $5,020 $270,084 $17.87 $4,826 $277,372 $17.73 $4,918 SE WI $184,497 $23.93 $4,416 $189,952 $22.63 $4,298 $192,535 $22.60 $4,351 * The average residential value cited for each year actually represents the average value from the previous year, as the previous year's value is multiplied by the current year's rate to derive the current year's tax bill. In other words, the values listed under the 2016 averages are 2015 values. 21

23 With regard to individual counties, we see that despite having two of the three lowest tax rates, Ozaukee ($4,989) and Waukesha ($4,918) have (by far) the highest hypothetical gross tax bills. This finding reflects the higher average residential values in each county. For the 11 th consecutive year, Racine had the lowest tax bill in the region, at $3,592, though the hypothetical average tax bill in Racine did grow by $133 in 2016 (3.8%). Chart 19 shows the trend in the average tax bill, hypothetical gross tax rate, and average residential property value for the region indexed to 100 in 2008 (the year in which the economic recession took hold). The chart shows the effect that the average residential values and gross tax rate have on the gross tax bill. While the property tax rate is 20% higher than at the start of the period, the fact that the average residential value remains well below its pre-recession peak means that the region s hypothetical gross property tax bill is lower than it was in 2008 ($4,351 in 2016 as compared to $4,440 in 2008). Chart 19: Southeast Wisconsin hypothetical average tax bill, gross tax rate, and property value indexed to Ave. property value Gross tax rate Gross tax bill

24 Conclusion This year s analysis of property values and taxes shows that the region has returned to an economic paradigm in which modest growth in property values can be expected. That, in turn, provides local officials with wherewithal to enjoy modest growth in property tax levies without necessitating an increase in property tax rates. Under such a paradigm which is supported by strict state-imposed limits on local government and school district levies taxpayers should not expect unreasonable increases in their property tax bills, as those increases generally should be commensurate with the increase in the value of their property. Other good news in this year's analysis is the 4.1% growth in property values in the City of Milwaukee the largest annual increase in nearly a decade which was coupled with a small (0.2%) decline in the property tax levy paid by City taxpayers and only a minimal (0.4%) increase in the property tax rate. Kenosha officials and citizens also received good news, as overall property values grew 5.6%, and commercial values grew a whopping 10.8%, likely reflecting the extent to which that county is benefiting from new development and economic growth tied to its proximity to both metro Milwaukee and metro Chicago. On the negative side, the growth in residential values in the region continues to lag growth in the value of commercial properties and residential growth in the state as a whole. Milwaukee and the City of Milwaukee, in particular, continue to see slow growth in residential values (1.3% and 0.7% in 2016 respectively). Nevertheless, for the second consecutive year, the overall message to taxpayers and citizens conveyed by our analysis of property values and taxes in southeast Wisconsin is positive. Not only was the regional tax rate down slightly for 2016, but 2016 property values showed an even bigger increase than the year before, signaling the potential for another rate reduction in The news may not be as good for many financially-challenged local governments and school districts, which are restricted in their ability to increase annual property tax collections by levy limits and by the political realities associated with modest growth in residential values. Yet, even limited growth in property values is a vast improvement from the four successive annual declines from , and such growth does provide capacity to realize some increase in collections without increasing property tax rates. 23