Boone County Fiscal court through its new initiative to fund the 911 dispatch center by placing a “dwellings tax” on all apartments could wind up taking money from the schools. If you are not familiar with the “dwellings tax” let me explain. Boone County Fiscal court is going to vote for a tax that will put a $90 per unit per year tax on apartments on each parcel. So, if
someone has let’s say 100 units on one property then that apartment owner will be responsible for a $9,000 tax, in addition to all the taxes and fees they already pay. This is an astronomical number and for now popular opinion is to put it on the backs of landlords because they are perceived as rich and the general population does not care about them; however, if they do pass this then there will be some unintended consequences that could affect the schools in a major way.
I know you are probably scratching your head at this point at how could the new 911 tax being put on landlords possibly affect the local school system. It’s not as complicated as it sounds and I’ll explain it. Larger apartment communities get their value primarily from how much income they produce. If the same 100-unit apartment complex has a new $9000 per year tax bill assessed to it then the income is impacted, thus dropping the value. Just how much value can a loss of $9,000 per year cost an apartment owner? Honestly quite more than you think.
Income producing properties often trade on what is referred to as CAP rates. Simply stated a CAP rate is rate of return on a real estate investment property based on the amount of income the property produces. Typically, properties that are in great locations and easy to run have lower CAP rates, meaning investors pay more for them and make lower returns whereas consequently properties with higher CAP rates typically are in not as good areas and investors take on greater risk for the potential to earn higher returns. Now that you understand what a CAP rate is you can begin to understand how this will impact our area.
Properties in Boone County trade (meaning this is what they sell for) on a CAP rate of around 7, which is on the lower side given the property here is stable and in decent areas. So, when you lower the property income by $9,000 and factor in that it should be valued on a 7 cap you are consequently lowering the value of that same property by just over $128,000. Now it may not sound like much and it certainly isn’t off setting but you have to ask yourself is it fair to steal anything from our local schools, which in reality is a large part of why our property values are what they are, in order to pay for a 911 system that you knew 20 years ago needed replaced and let’s not forget to mention you already have been subsidizing it for $2,000,000 a year and still continue to have a surplus budget. It’s not like the County is in a tight financial position and unable to pay for this without raising taxes yet our elected officials would rather increase fees and taxes and take money from schools, libraries and other areas that rely and depend on their revenues to thrive and succeed.