Banked capacity Q&A

What is banked capacity?

Beginning in 1986, the Legislature allowed local governments to levy less than the maximum increase in property taxes allowed under law without losing the ability to levy higher taxes later if necessary.  This provision encouraged districts to levy only what they needed rather than the maximum allowable.  Prior to that, districts that took less than the maximum, at that point 6 percent annually, permanently lost some of their levying capacity.  Therefore, districts tended to use it or lose it.  The banked capacity concept allowed districts to be more fiscally conservative without being penalized.

Here's an example of banked capacity for a city that is not annexed to a fire or library district:

2014 Assessed valuation (AV) for 2015 tax year $100,000,000
2015 Tax year maximum statutory levy rate, per thousand dollars assessed value $3.375
2015 Tax year maximum statutory levy amount $337,500
2015 Tax year maximum allowable levy $315,789
2015 Tax year amount levied by the district $300,000
2015 Tax year banked capacity ($315,789 - $300,000) $15,789

If a district uses its banked capacity, how will that affect my taxes?

The effect on the tax bill for an individual property depends on a number of factors, including the value of the property.  The amount of tax paid to the district using the banked capacity may rise, but there could be corresponding reductions in the levies of other districts.  This is because state law limits overall property tax rates applied to individual properties.  The amount of property tax that you will pay depends on the value of your property in relationship to the total assessed value of property in the tax district.