Rollback Rates 101
What is a rollback rate?
When City Council is setting the property tax rate, or millage rate, for the year, you’ll often hear the term “rollback" rate. When the total digest of taxable property is prepared, Georgia law requires that a rollback millage rate must be calculated that will produce the same total revenue on the current year’s digest that last year’s millage rate would have produced had no reassessments occurred.
How is the rollback rate calculated?
First, we’ll start with the “tax digest”: this is total amount of taxable property in the City of Savannah. The value of the tax digest can go up or down, based on inflation’s impact on property values and growth in the digest through development. If property values increase, the value of the digest goes up. If new taxable properties are built, the value of the digest increases.
It’s important to note that Savannah City Council doesn’t have any role in determining property values and City Council cannot influence the value of the digest. The Chatham County Board of Assessors sets the fair market value of all properties in Savannah and that determines the value of the total digest. Entirely separate from the tax digest is the property tax rate or millage rate, which is set by City Council. The millage rate is the amount of tax dollars the City can levy for every $1,000 of property’s assessed value (1 mill = $1 tax per $1,000 of assessed value). By state law, the “assessed value” of a property is 40% of the fair market value.
Let’s say the value of our tax digest is $10 million in Example Year 1 and the millage rate is 15. To find out how much property tax revenue that would generate, the City of Savannah would calculate:
(10,000,000 x 40%) x (15/1000) = $60,000
In Example Year 2, let’s say, due to higher reassessments of existing property, the value of the tax digest increases to $15 million and we keep the millage rate at 15. Now when the City calculates how much property tax revenue will be generated, it looks like this:
(15,000,000 x 40%) x (15/1000) = $90,000
Without raising the property tax rate, or millage rate, the increase in the digest’s value would create an additional $30,000 in property tax revenue for the City. Here enters the Property Tax Payer’s Bill of Rights, signed into law in 1999 in Georgia. When increases of existing property values in the digest would increase property tax revenue, this state law requires the calculation of a rollback rate which is the rate that would keep property tax revenue at the same amount as the year prior, to offset any inflationary increases in the digest.
That math looks like this for our example:
(15,000,000 x 40%) x (X/1000) = $60,000
In this equation, X = 10, so the rollback rate would 10 mills.
If City Council would like to consider keeping the millage rate the same in Example Year 2 as it was in Example Year 1, rather than adopt the rollback rate, state law requires the City to advertise this consideration as a tax increase.
More questions about your City property taxes?
- Visit our in-depth Frequently Asked Questions
- City’s Property Tax Unit Phone: (912) 651-6455