STERLING — The actual property tax rate in Sterling could decrease by nearly 6% next year, city officials say.

The announcement came during a Sterling City Council meeting Monday evening, when the City Council approved a tax levy estimate for the city. The Truth in Taxation law requires the city to prepare a tax levy estimate before adopting the tax levy for the upcoming fiscal year. The estimate determines whether the projected levy extension is at least 5% or higher than the actual levy extension from the previous year. If it is, then the city must hold a public hearing.

How it works

A property tax levy is the money a local government intends to collect from property taxes in its jurisdiction during a given year. Tax levies are calculated by determining the amount a city needs to pay for public services and how much is available to them through various revenue streams. The difference is made up in property taxes, which is the tax levy.

Local assessors determine the assessed value of all properties in a city’s jurisdiction. Once a tax levy is set, local governments apply a tax rate to the assessed value of all those properties.

Sterling’s property tax levy

Sterling’s initial tax levy estimate for 2024 is $6,139,584, which is an increase of $289,190, or 4.94%, so no public hearing is required. Although the city expects to collect an extra 4.94% in tax levies over last year, the actual property tax is estimated to decrease by 5.91% for 2025. The 4.94% collection increase is due to the city’s Equalized Assessed Value growth.

“If your assessed evaluation hasn’t changed, your city portion of the property tax bill would go down 5.9%,” City Manager Scott Schumard said. “Now if an assessor comes by and reassesses your home at a higher value, that will change things.”

A city’s EAV is one-third of the total value of all taxable properties in its jurisdiction after equalization adjustments have been made to reflect market conditions, fluctuations in property value and discrepancies in property assessments. EAV growth reflects the overall increase in those property values and any new construction that brings additional property tax revenue.

Sterling’s EAV is expected to increase approximately 5.46% or $10,860,385. If levy rates remain the same, the city will collect 5.46% more in property taxes. However, certain taxes are legally capped at a specific amount that can be collected and may only increase if property values rise. As a result, some levies already at the maximum rate last year were decreased to remain under the 5% overall levy increase.

Sterling’s tax levy estimate is not final and can still be changed before facing final approval in December.

Pension funds

To guarantee a source of funding, pensions are not subject to state levy rate caps. Traditionally, pension funds’ tax levies increase faster than EAV growth and inflation. In 2022, Sterling issued pension bonds to improve funding and reduce future property tax burdens on pension funding costs over the long run.

Sterling’s actuary reports suggest the city can start lowering its pension contributions, although it will now have to make bond payments, with the expectation of an increase in long-term savings. As a result, the actuary recommended the city decrease its contribution to the Police Pension Fund by $513,105 and lower its contribution to the Fire Pension Fund by $359,122. Those pension levies were determined by adding the recommended contribution amount to the pension bond payment equally split between the two funds.

Last year, the pension levies were estimated because pension bond proceeds were still being invested, making it hard to predict the exact impact on the funds. The total levy increase for fire and police pensions is 4.52%, which meets the city’s actuarial requirements while staying under 5%.