The following data are for the town of Paragon (Paragon is required to produce a

Question

The following data are for the town of Paragon (Paragon is required to produce a balanced budget) in the fiscal year ending June 30, 2009:

• Budgeted town expenditures: $15,000,000.00 • Estimated non-property tax revenues: $11,000,000.00

• Appraised value of property: $200,000,000.00 • Total exemptions for the elderly: $8,000,000.00

• Assessment ratio: 60%

A. The statutory property tax rate does Paragon need to adopt to balance their 2009 budget is ___________%. P.S. Please round your answer to 2 decimal places, e.g. 2.75 % Suppose that properties in Paragon are not reassessed for tax year 2010, but new construction increases the total appraised value of the town’s taxable property by 2 percent. Furthermore, assume that non-property tax revenue is estimated to be $10 million for the FY ending 2010 (i.e., $1,000,000 lower than FY09) and that budgeted expenditures are estimated to $16,000,000.00.

B. The property tax bill that the Johnson family would face in 2010 is $____________. Note: Please provide the numerical answer without the dollar sign and the comma sign (i.e. 1,000). Also, round your answer to 2 decimal places.

Explanation / Answer

A. If Paragon has to present a balanced budget, total tax revenue from property =

Budgeted town expenditure - non property tax revenue = $15,000,000 - $11,000,000 = $4,000,000

Let property taxrate be x%. Then $200,000,000 * x% - $8,000,000 (Exemptions) = $4,000,000

x = 6% (Answer)

B. If Paragon has to present a balanced budget, total tax revenue from property =

Budgeted town expenditure - non property tax revenue = $16,000,000 - $10,000,000 = $6,000,000

Let property taxrate be x%. Then $204,000,000 * x% - $8,000,000 (Exemptions) = $6,000,000

x = 6.86%. Data given in question is insufficient to determine the anwer, we should have the property value of Johnson family. Multiply that with 6.86% to get the answer.

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