As homes worth $1 million receive tax breaks, Decatur Schools lose $2 million
When voters overwhelmingly approved new tax breaks for seniors back in November, City Schools of Decatur predicted it would cost the school system $1.2 million in revenue.
But the true cost turned out to be $2 million, an $800,000 difference, Superintendent David Dude said. There are two homes in the city worth more than $1 million that are taking advantage of the tax break and saving more than $11,000 a year, Dude said.
What remains to be seen is whether keeping seniors in their homes will also slow Decatur’s surging enrollment growth. CSD leaders hope fewer seniors leaving Decatur will mean less families moving into those houses and an overall cost savings for CSD because it will be cheaper than the cost of educating students.
The tax break has a sunset provision, and the School Board will have to vote to renew it. It was put in place in case the number of seniors taking advantage of it cut too deeply into the school system’s revenue.
Dude said there are a large number of seniors taking advantage of the exemption. He said under an older exemption that was in place, seniors saw a tax savings of $18.66 a year because the exemption removed $1,000 of a home’s assessed value.
“That’s not a lot of money to get people to do their exemption,” Dude said. “There were people who were qualified to take the exemption and didn’t do it until this came around.”
The new tax break is considerably more generous. It expands the Decatur school homestead tax exemption to seniors 65 and older, saving seniors $993 on every $100,000 of their home’s value. That is translating into a really sweet deal for at least two property owners who have homes worth $1.2 million are more. These homeowners are saving more than $11,000 on taxes each year, according to information provided by CSD. Dude said there are 1,169 parcels taking advantage of the tax break, with an average home value of $358,958.
Dude said part of the reason so many people are participating is the city automatically gave people taking the old exemption the new exemption.
“I don’t want people to think is the automatic conclusion is someone in a million house went to save money on taxes,” he said. “There’s no way to know that.”
For reasons Dude can’t explain, the value of the homes eligible for the tax breaks shot up by 25 percent.
“I don’t know what that means for the overall tax digest,” Dude told the School Board at its recent meeting. “[CSD Finance Director Susan Hurst] and I looked at that again and again. How is a 25 percent increase possible? I’ve reviewed the numbers again and again and could not find an error.”
Here is the presentation about the impact of the tax break that Dude gave at the April 11 School Board meeting …
Dude said the $2 million loss in revenue won’t significantly affect the school system’s budget, nothing the system is very conservative about how it estimates revenues.
Decaturish asked School Board Chair Annie Caiola whether giving a tax break to someone living in a $1 million home was what the board had in mind when it pushed for the exemption.
“Was it the goal that we would give people without kids an $11,0000 tax savings? No that was not the goal,” Caiola said. “The goal was to help all seniors age in place and slow enrollment growth. Will there be a handful of outliers who obtain tax savings? Yes, certainly we knew that would be a consequence of this. It’s not materially significant to the overall purpose of the tax exemption.
“Keep in mind if a person who got $11,000 tax savings, if they were to sell their house a family with at least two children it costs us more than $10,000 per kid to educate that family.”
She said she personally knows of some seniors who are choosing not to take advantage of the exemption.
And if it does become a problem, the sunset provision is there to give the School Board an out, she said.
“The risk of Decatur becoming a haven for retired people was not a risk we determined to be substantial,” Caiola said. “We believe the benefits of the exemption far outweigh the risks. The exemption has a five year sunset on it … If there are more seniors than we can afford, we’ll rewrite the exemption.”