Tax Levy
The total amount of property tax revenue a city authorizes to collect in a given year, calculated by applying the mill rate to the total assessed value of all taxable property.
How It Works
The tax levy is the product of the city's mill rate and the aggregate assessed value of all taxable property within city limits, minus exemptions (homestead, senior, veteran, charitable) authorized by state law and city ordinance. The levy is set through the annual budget adoption process: the city council determines the total dollar amount needed, and the mill rate is then calculated by dividing the levy by the total assessed value (adjusted for collection rate). Many states impose levy limits that restrict year-over-year growth in the total levy regardless of property value appreciation. Examples include Massachusetts Proposition 2½ (1980), which caps levy growth at 2.5% plus new growth; Michigan's Headlee Amendment (1978) with rollbacks; Illinois PTELL (Property Tax Extension Limitation Law) capping growth at lesser of 5% or CPI; and New York State's 2% property tax cap (2011). These limits constrain city revenue growth even when the tax base is expanding, forcing cities to seek voter approval through referenda to exceed the cap, a common occurrence for school districts and rarer for municipalities. Levy limits create a structural tension: expenses such as pensions (growing 5-8% annually in many cities), health care, and wages often outpace capped property tax growth, producing chronic structural pressure. Under Illinois PTELL, Chicago's debt service levy is separate from the capped operating levy, allowing the city to continue bonding while operating revenue is constrained. The growth rate of the tax levy is a key input to the 10% trend direction factor of the CitySpend Fiscal Health Score.
Related Terms
- Property Tax, A tax levied on real estate (land and buildings) based on assessed value. Property taxes are the single largest revenue source for most U.S. city governments.
- Mill Rate (Millage Rate), The property tax rate expressed as dollars per $1,000 of assessed property value. One mill equals $1 of tax per $1,000 of assessed value.
- Assessed Value, The value assigned to a property by a government assessor for the purpose of calculating property taxes, which may differ from market value.
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About This Definition
This definition is part of the CitySpend Municipal Finance Glossary, 59 terms explaining how city governments fund and manage public services. All definitions are written in plain language for taxpayers, journalists, students, and municipal bond investors.