How Levies Work

When the citizens of Butler Township approve a levy, that levy is set at a certain dollar amount and by law is not permitted to increase with a growth in property valuation, either because property values are reassessed at a higher value or as a result of new construction in the township. As an example, if the voters approved a 1 mill fire levy in 1990 and that 1 mill produced $200,000 based on a total property valuation of 250 million dollars, in the year 2010, if the valuation of the township increases to 1 billion dollars, that 1 mill would still produce only $200,000. Maintaining that fixed dollar amount over time for a levy is accomplished through a process that effectively reduces the millage rate over time. As in the example above, though property values may increase over a 20-year period from 250 million to 1 billion dollars, the effective millage rate is reduced from 1 mill to .25 mills.

With the limit placed on the amount of revenue a levy will generate, it is critical that the trustees perform an annual review of each levy to determine its sufficiency in meeting the revenue requirements of the department to which it applies. If expenditures are projected to exceed revenues, the trustees will make a determination regarding the type of action to be taken to maintain funding levels in accordance with the provisions of this policy.

Types of Levies

Generally there are three types of levies used by the township to generate revenue that is used to provide service to citizens of the township:

New Levy – As the name implies, a new levy involves adding additional millage to that which is currently being collected by the township.

Renewal Levy – In certain situations, either because of state law limitations or the specific requirements of the levy, a levy may be only adopted for a certain length of time (e.g. 5 years). Upon its scheduled termination, if a renewal levy is not placed on the ballot for reauthorization by the voters, it expires and all revenue produced by that levy will cease. A renewed renewal levy will produce the same amount of revenue as it did when it was originally adopted, not from the date the renewal is voted on by the electorate.

Replacement Levy – A replacement levy is used to replace an existing or series of existing levies. To replace a series of levies, they must all be of the same fund. In most instances, a replacement levy is used to capture new assessed property values, mostly as a result of new construction. The replacement levy does not need to be the same millage as the levy being replaced (e.g. if the existing levy is 5 mills, the replacement levy could be 4.5 mills or 6.5 mills). The amount of a replacement levy is usually determined by calculating the total assessed property value of the township, establishing the department’s revenue requirements projected over the next 5 years and then determining how many mills will be needed to generate that amount of revenue.