Revenue Neutral Rate

Revenue Neutral Rate (RNR): The tax rate for the current tax year that would generate the same property tax revenue as levied the previous tax year using the current tax year’s total assessed valuation.

RNR = (Prior Year Ad Valorem Revenue / Current Year Estimated Valuation) x 1,000

Example:

  • Total Estimated Assessed Valuation for 2025 = $155,000,000
  • Ad Valorem Revenue = $8,000,000
  • RNR = ($8,000,000/$155,000,000) x 1000 = 51.61

Limitations:

Taxing subdivisions cannot adopt a budget with an estimated (proposed) levy that exceeds the RNR. In other words, taxing subdivisions cannot adopt a budget with more ad valorem (property) tax dollars than in the prior year.

RNR Example (EXAMPLE ONLY):

The City of McPherson received the following information on June 15th from the county clerk.

2025 Proposed Budget:

  • Total Estimated Assessed Valuation for 2025 = $155,000,000
  • Proposed Tax Rate = 51.61
  • Ad Valorem Tax Revenue = $8,000,000

2025 Final Budget:

  • Final Total Assessed Valuation = $150,000,000
  • Final Tax Rate = 53.333
  • Amount of Ad Valorem Tax Revenue = $8,000,000

The result of the final November tax valuation determines the Final tax rate set for taxpayers. If the final assessed valuation is reduced due to contested appraisal values from residential taxpayers, the result will result in a higher final tax rate in November.  For determining budgets, municipalities use the County Clerk’s June valuation. Once the mill levy is set in July, the municipality may not increase taxes, hence why the mill levies increases in certain year – however the tax dollars collected will not.