Erlanger City Council discussed Tuesday how it can make tax adjustments after discovering a $49 million error in a personal property tax assessment.
While on a call with the Property Value Administration last week, the city found out that their 2023 personal property assessment was inaccurate because an unnamed business misclassified $49 million in inventory as in a warehouse instead of in transit.
Property taxes are broken down into several categories. The first and usually largest chunk of your tax bill is real property tax, sometimes referred to as real estate property tax. This is essentially a tax on everything you own that’s nailed down. For residents, this means houses and other real estate property. For businesses, this means office buildings and other buildings and facilities used to conduct business.
Tangible personal property, on the other hand, is another form of property that isn’t real estate. Depending on where you live, residents may not be taxed on personal property at all–this will vary by jurisdiction.
Depending on where you live, other tax-adjacent fees may apply.
How do property taxes work?
According to Mayor Jessica Fette, the Property Value Administration, known as the PVA, found out in May this year. However, the city wasn’t informed until they called to inquire about the drastic difference in their personal property assessment.
“Inventory in transit is not subject to the city tax rate, so unfortunately, this was communicated via a phone conversation with myself and the PVA,” Fette said. “That $49 million has been removed from our 2023 tax rolls and will not be in further tax rolls, so what that means is that the tax rate that we set last year was artificially lower than it should’ve been.”
Last year, the city set a tax rate of .198, which decreased from the year prior’s tax rate of .296. Fette said the city is taking the loss, not resetting the comp and tax rate, and getting additional revenue from businesses. The city is also facing an issue with the 2024 Personal Property Assessment’s certified rolls missing businesses, some of which are larger contributors.
When councilmember Jennifer Jasper-Lucas questioned Fette about the cost of the error, Fette said that the $49 million error would cost the city $97,000. The company affected by the error would get the $97,000 they are owed back from the city. When pressed about the issue and why they were finding the error, the PVA offered an apology and a promise to do better, Fette said.
“In reality, if we wouldn’t have had that $49 million added into our assessed value last year, the compensating rate would’ve been .243,” Fette said. “So it would’ve been a decrease from the previous year’s rate, not [as] substantial but accurate.”
Councilmember Rebecca Reckers asked if the city administration had asked questions about the drastic increase last year; Fette said they assumed it was because real estate value went up in Erlanger even though the error was in assessing inventory and finished goods. Fette said that moving forward, things were going to change, and the council needed to move swiftly on a new tax rate.
Jasper-Lucas said she was finding it hard to try and work toward a solution when she felt she couldn’t trust the data provided.
“It’s 2024 we’ve got to do better, I’m not saying that to anyone here, I’m saying that to the people who provide us this data,” she said. “It’s got to be a more automated system that we can trust the data [from]. I’m very disappointed.”
Reckers was not for increasing the taxes to balance out last year’s large decrease caused by the county’s error, while Councilman Tyson Hermes suggested raising taxes to the recommended tax rate of .247 to align with the original budget passed in June which was based on the faulty PVA information. In doing this the council would meet the revenue expected when they passed the budget. Councilwoman Vicki Kyle also suggested meeting in the middle of the two suggested rates.
By the end of the discussion, the council decided they weren’t focused on hitting the budget revenues. The current proposed tax rates are a .247 property tax rate and a .198 tangible tax rate.
The council has planned a special meeting on Aug. 27 to do a first reading of the new tax rate and a second reading at the council meeting on Sept. 3.