Currently, there is a 5 percent cap on property tax increases. That means if a home or business increases in value by 15 percent in a given year, the property value cannot go up the full amount. Instead, property value will only increase by 5 percent annually until it reaches the fair market value. Many people misunderstand this law and believe their taxes automatically go up by 5 percent.
When a property is sold, the new owner automatically is taxed at the full fair market value.
SQ 758 would further restrict that annual increase by lowering the amount the tax can go up each year to 3 percent instead of 5 percent.
The purpose of this restriction is to protect property owners from large, sudden increases in property taxes.
“People, if their value is going up, are not surprised, but the increase is steady each year,” Tinsley said.
Restricting ad valorem collections further could have some serious implications for entities depending on that revenue source, however. In addition to impact to the schools, the restriction could affect the recent bond measure passed by the city of Norman.
“When they figure those bonds, they look at the values in the county,” Tinsley said.
If the new cap limit is approved, the reduction in what can be collected might force a higher millage.
Millages, the tax levy in various counties, cities and school districts are determined in a number of ways and are not set by the county assessor’s office. The assessors only determine the values of properties then apply the appropriate levy.
In Cleveland County, about 70 percent of property tax supports schools and is determined by the state legislature, Tinsley said.
When schools or cities pass general revenue bonds to be paid by ad valorem, those become part of the sinking fund. Judgments against an entity as a result of a law suit can also be collected from property taxes through the sinking fund levy, Tinsley said.