Because of the downturn in the state’s economy, the mayor of Stratton thinks that uncollectible taxes are likely to increase from 5 percent of total tax bills to 10 percent in the coming fiscal year. The total value of all of the properties in the town of Stratton is $ 300,000,000 and the approved budget is $ 3,500,000. Properties are assessed at their full value. A total of $ 5,000,000 worth of properties is exempt from taxation. To minimize tax increases in the coming fiscal year, the mayor and town council have decided to take $ 500,000 out of the town’s rainy- day fund (a reserve used to meet short-term budget shortfalls) and apply that money toward the coming year’s budget. How much does the town have to charge per $ 1,000 of assessed valuation to raise the needed $ 3.5 million? Show your calculations. You may round your answer to the nearest penny. Be sure to check your answer by multiplying the amount you propose billing by the expected tax-collections rate to show that the amount you expect to collect is enough to meet Stratton’s fiscal needs.
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