After calculating taxes based on assessed values, the total tax is compared to real market value.
Under state law, if that rate exceeds $10 per $1,000 of real market value for general government and $5 per $1,000 of real market value for education services, the amount is reduced until the rate limitation prescribed by the law is achieved.
In Sweet Home, a home with an assessed value of $100,000 carries a property tax of $2,249.96 based on a tax rate of $22.4996 per $1,000 of assessed value.
That tax rate includes general obligation bonds, which are outside the limits. For simplicity’s sake, the following example does not consider them.
If its real market value were also $100,000, the property tax bill would be decreased to $1,000 for general government and $500 for education, a total of $1,500. That effect is called property tax compression. If the home had an assessed value of $100,000 and a real market value of $200,000, there would be no compression at all and the full tax bill would be imposed. A real market value of $200,000 will allow a property tax bill of up to $3,000.
Decreasing assessed values decreases tax revenue in general, while decreasing real market values can contribute to compression unless the assessed value falls commensurately.
In Sweet Home, real market values have fallen faster than assessed values, closing the gap between them and increasing compression.
General obligation bond levies are outside the limitation; and local option levies, such as those used by the Sweet Home Police Department, Sweet Home Public Library and Linn County Sheriff’s Office would be reduced before permanent tax rates, such as the Sweet Home Cemetery District and its tax rate of 21.66 cents per $1,000. Should the Cemetery District pass its proposed local option levy on Nov. 8, the new levy would be subject to compression first, along with all other local option levies.