Sunday, January 27, 2008

Taxing Problem

The Milwaukee Journal Sentinel (Racine County section) has a comparison of area property tax rates. As it happens, I own property in both the highest taxed area, Racine, and the lowest taxed area, Wind Point. The difference is quite dramatic.

According to the MJS article, a property in Racine with a $150,000 fair market value will be taxed $3,166 while the same property in Wind Point will be taxed $2,077. Or, to put it another way, property taxes in Racine are 52% higher than Wind Point. Yes, 52% higher.

As my condo in Wind Point is worth in the neighborhood of $150,000, I save over a $1,000 year after year by living in Wind Point rather than Racine. Surely this will increase the value of my condo relative to a similar unit in Racine.

I have spoken to many elected officials in Racine over the years and the prevailing sentiment is that taxes make little or no difference when it comes to selecting a place to live or to open a business. This is pure nonsense. High taxes decrease the value of your investments, whether in homes or businesses. Over time, people grow tired of the high taxes, diminishing returns etc... and they move on. This is one of the factors in Racine's declining population.

It is sad that our elected leaders fail to understand that high taxes hurt Racine in general and property owners in particular.

8 comments:

Caledonication said...

the prevailing sentiment is that taxes make little or no difference when it comes to selecting a place to live or to open a business.

Complete nonsense.

We specifically did NOT look for a new house in Franklin because the property taxes were so absurd. We may not represent the "prevailiing sentiment", but I know from talking to friends that we were definitely not alone in our opinion.

Caledonia Unplugged said...

OK - are you seriously comparing Windpoint and Racine? Come on Denis, I'm going to have to take issue with this. NOT THAT I AM IN ANY WAY, SHAPE OR FORM DEFENDING RACINE AND THEIR LEVEL OF TAXATION!

Racine is a relatively old, urban community with a vast diversity of both cultures and income levels and a growing "inner city" and its associated problems.

Wind Point is as WASP, wealthy WASP that is, as the come. Built out, home to Wisconsin's richest resident (or at least until Sam's passing, may he rest in peace) is comprised almost exclusively of well-educated, prominent doctors, lawyers, etc. with the most expensive per capita real estate around and absolutely nothing to spend their money on - in fact I've often wondered why they even need Village Government.

But let's look at the chart and compare to another area - my area - the unsewered, unwatered area of Caledonia. I'm in the lowest taxed area of Caledonia ...but...if I had to do over again - I'd move into an area with sewer and water.

When you consider a $150,000 home is taxed $2201/annually - yet that $150,000 home will pay more than in the City of Racine. How you ask? $30,000 for a mound system (with a 20-year life expectancy), $200 every other year for suck-out, $5,000 for a well, (we're on our second), water treatment and supplies (on our third system and our water isn't as bad as many others because otherwise the water is completely unusable) probably at least another $5,000, damage and replacement costs to pipes, fixture, etc., let's say another $3,000+. Average that out over 20 years and you could say that "costs of services" (similar to infrastructure provided by and taxed by government in other areas) the unsewered areas of Caledonia would be in excess of $4,450. on a $150,000 home for the same services Racine provides for$3,100.

Just imagine if we had in inner city with crime problems requiring additional police. Yeap, Racine seems like a bargain to me right now.

It's all about perspective.

Actually, caledonication, when you consider the cost of providing your own infrastructure, the sewered areas of Franklin are cheaper anually than the unsewered areas of Caledonia.

Off my rant (and still wondering why my taxes for no infrastructure in Caledonia so high) I will agree with you that taxation does make a difference, particularly when opening a business.

But remember, elected officials don't run for office to lower taxes - they run to "make a difference." (kumbaya moment) Making a difference costs money.

Caledonication said...

CU, I’ll admit that you are obviously speaking from actual experience; I haven't even finished my house yet. I did some calculations regarding the cost of having city sewer/water when pricing mound/well costs.

Maybe I'm not following your numbers correctly, but here are my own observations using recent bids.

$15k - for a mound system that supports a four bedroom house.

$8k for a tankless well system.

$120-$200 to suck it out every 3-5 years.

I'm not sure where you get the $3k damage and replacement costs. Are you saying that after 20 years or during the 20 years? I'm also not sure where you get the $5k treatment costs. That seems kind of high to me, but feel free to educate me on the subject.

You didn’t mention the bills you receive from the city for pumping water to you and draining sewage away from you. Based on my bills in Oak Creek this adds up to a small fortune over 20 years.

If I recall, what I actually came up with was that having a mound/well was a little bit more expensive than having the city service, but not by much. On a personal note, I prefer well water, even if I need a filtration system. I just don’t like the idea of drinking other people’s poo water. I also believe that the chlorine added is bad for one’s health.

Caledonia Unplugged said...

cal - I'm surprised at the low estimate for your mound. Ours cost that 20 years ago and we have only two people - hope you're getting a quality system. Our system is just holding on - we're trying to baby it so we don't have to replace it.

Anyway, you'll need pump out every three years - mandatory by county law - or more often depending on your usage.

Damages - Because of the horrible ground water in this area and the amount of salt needed to treat the water (and possibly thousands extra for iron curtain) - We regularly replace heavily used fawcets (every 3-5 years) shorter life span for water heater, clothes washer, dishwasher (hint- if you're installing one make sure it's stainless and buy a stainless washing machine if possible - the others (particularly any rubber parts in the dishwasher) will be eaten up within a couple years) and there's also damage to , toilets, sinks, etc. - buy stainless wherever possible.

Damages continued - fortunately my husband is handy with a power auger and has regularly kept the lines in and out of the house clear, but we've still had some rather large plumbing bills.

Of course, our home is older - you may not experience these pipe problems for 20-30 years.

Other suggestions: don't buy any type of fixtures that have a finish - keep to chrome or nickel. Regularly remove water from toilet tank and clean out the rust and mineral buildup.

Regularly shock the well, regularly drain water heater to remove minerals.

Again, because my husband is handy. we've avoided needing an expensive plumber for many of the problems the water has caused or we'd be way over the amounts I've listed.

Which reminds me, I forgot to include the cost of the salt pellets - we go through them like candy.

We're on our third softener, third drinking water system (reverse osmosis is the only one that will remove salt from the softener water). We also have a pre-filter at the point of the well entry.

Our basement is almost unusable because most of the space is devoted to systems to overcome the water problems - another fact of life around here.

Look for softener that includes rust removal if iron is a problem (it is for most in this area.)

Hope some of this helps, but as you'll see, living in this area may have slightly lower taxes, but with the time and money we've spent over the years because of the ground water - I'd rather pay the taxes for infrastructure and avoid all the hassle.

And I'm still wondering why my taxes are higher than Denis' when he has services and I don't!

Good luck!

Sorry Denis, didn't mean to hijack your thread, but most are under the impression Caledonia's taxes are low - when you consider the above - they're worst than Racine's.

Denis Navratil said...

Calunp, I realize that a Racine/Wind Point comparison is not apples to apples and I figured someone would point that out. So you are correct.... but, then again, so what. If someone is moving in to the area and sees that one area has property taxes 52% higher than the neighboring suburb, I think that will be one important factor. If the other factors are high crime and unemployment in the higher taxed area, then Racine becomes an even tougher sell. Whatever the reasons for the higher level of taxation is to a large degree irrelevant to the home buyer. "I want to move to Racine to help pay for the lifetime benefits for the retired city workers now living in Florida" is not a sentiment you will likely find among those buying homes in Racine or elsewhere. So Racine is at a disadvantage but they refuse to admit it much less do anything about it.

Caledonia Unplugged said...

But Denis, the cost of the home is relevant. If you can buy a home for $150,000, or less, in a relatively decent neighborhood, i.e., West Racine, but to own one in Wind Point you need at least $250,000 minimum, it'll take 100 years to nullify the difference in taxes. I understand you have a condo, but I'm talking home ownership. What's the average cost of a home in Wind Point as compared to Racine?

As well, there are very few properties available in Wind Point. It's not only not an apples to apples comparison, it's not even an apples to pumpkins comparison (sorry couldn't think of a better word.) ;^)

Now if you want to compare residential property taxes in Wind Point with Mequon, Cedarburg, etc. that'd be interesting.

Or compare Racine with Waukegan, Kenosha, or even Burlington.

Most people (talk with realtors about this) unless the taxes are way out of line, want a home they'll love, a neighborhood in which they'll feel safe and an area with good schools.

I don't think Racine's tax rates are as much a preventitive as crime, a growing, unsafe inner city and poor schools.

Now if you're talking about business location, that's completely another subject.

But there is no business in Wind Point, so again, how do make any kind of comparison?

Denis Navratil said...

Calunp, I didn't say that home prices are irrelevant. The reason for the high or low tax rate is irrelevant to the buyer. Not the fact of high or low taxes, but the reason for them. Home prices are very relevant and you are correct, a home in Racine that sells for $150,000 might cost $250,000 in Wind Point, but part of the reason for that is that taxes are lower in Wind Point. But anyway, Racine is not without its advantages, and this is one reason why I purchased a commercial property there. The price was low. I think an accurate marketing strategy for Racine might be to say, "We, the government in Racine have screwed things up so bad over the last fifty years that we now have the lowest priced housing around." Turn that into a catchy tune and first time home buyers will flock to Racine!

Urban Pioneer said...

Denis I'm going to try to score the tune to go with your new slogan. I'll subit it to the DRC and the Mayor when It's done. Da-da-da-...da da te da.. I will give U credit for the lyrics, though.