The mill rate is a type of tax rate. The “mill” doesn’t refer to grinding into flour; rather it means one-thousandth, as in the word “millimeter”. Thus a mill rate of 30 means 30/1000, or in other words a tax rate of .03 or 3% (not 30% of course!).
Definition: the mill rate is the rate at which property values must be taxed in order to cover a municipality’s tax bill. Here’s how this works, using Redding as our example.
First, there is the tax bill; if the Referendum passes, then the total taxes the town must raise to cover the budget is currently given as $48,688,556.
Then, there is the total combined value of assessed property values, called the Net Grand List. That total amount is $1,550,912,552. We’ll say a little more later about that number, but for now the indicated link gives a breakdown of properties that are assessed for tax purposes (residential, commercial, motor vehicle, etc.).
You get the mill rate by dividing total taxes by the total combined assessed property values. Well, that’s almost correct: you have to figure in that not everyone is going to pay all their taxes for this year. But recent history suggests that a 99% tax collection rate for Redding is reasonable. And so the formula is
- Mill rate = (total taxes) / (.99 times Net Grand List).
We get (.99) times 1,550,912,552 = 1,535,403,426, and so the mill rate is 48,688,556 divided by 1,535,403,426, which is .0031711 (rounding up at the last decimal place). That means the calculated mill rate is 31.711. The mill rate that the BOF approved is 31.72. Last year it was 29.62.
Some people may say or think that going from 29.62 to 31.72, a jump of 7.1%, means that taxes are being increased by 7.1%. That would be false. The tax increase is from $47,577,482 to $48,688,556, which is a 2.34% increase.
The discrepancy between the two figures (7.1 versus 2.34) is accounted for by the change in the Net Grand List between this year and last; this change is the result of the 2017 revaluation, which brought the Net Grand List down, from $1,622,853,113 to $1,550,912,552, a drop of 4.43%. The smaller the Net Grand List, the larger the mill rate must be to make up the difference. But in terms of actual tax dollars, the rise is 2.34%.
By State law, the Net Grand List is adjusted every five years. The approaching budget year (July 1, 2018 to June 30, 2019) happens to be at the beginning of the 5-year cycle, during which the Net Grand List will remain fixed at $1.55 billion. Thus, next year the change in mill rate will accurately reflect the change in taxes to be raised.
Finally, let us emphasize that mill rates all by themselves don’t tell you much about typical house property bills. This is well illustrated by the following table (click here for larger fonts): .
Compare this post.