Part 2: Why property taxes change


In 2011, the Legislature repealed the Homestead Residential Market Value Credit and replaced it with a new program called the Homestead Market Value Exclusion.

What this means in simple terms is that despite efforts by local governments to freeze spending, homeowners are still going to see a tax increase.These changes happen for a number of reasons but generally because: the value of homes and homes in the area change in value; The spending of cities, townships, counties, schools and special taxing districts and referendums have an impact on property tax views; And the actions of our state and federal lawmakers and courts cause changes.



 


In 2011, the Legislature repealed the Homestead Residential Market Value Credit and replaced it with a new program called the Homestead Market Value Exclusion.
What this means in simple terms is that despite efforts by local governments to freeze spending, homeowners are still going to see a tax increase.
These changes happen for a number of reasons but generally because: the value of homes and homes in the area change in value; The spending of cities, townships, counties, schools and special taxing districts and referendums have an impact on property tax views; And the actions of our state and federal lawmakers and courts cause changes.

The 14 reasons property taxes go up or down.

The League of Minnesota Cities, the Association of Minnesota Counties and Minnesota School Boards produced a video in 2006, to help homeowners understand property taxes. That video is available for viewing via a link on the Brown County web site at www.co.brown.mn.us. The link can be accessed by clicking on the Tax Info link under Latest News and Updates at the right hand side of the screen.
Most notably, the change impacting current property taxes is the mandate set by our state lawmakers called the Homestead Market Value Exclusion.
According to Jean Prochniak, Brown County Assistant Auditor-Treasurer, only two communities in Brown County had an overall market value decrease - Hanska and Springfield.
Taxable market value is determined by a variety of laws, Prochniak explained. The most recognizable to local taxpayers being the Plat law, Green Acres, Vets Exclusion and the 2012 new law - Market Value Exclusion.
“Brown County is fortunate to have a strong agricultural base which increased the tax base for our townships,” Prochniak said. “The cities suffer the greatest loss because the majority of  the exclusions are based on homestead property and the high concentration of homesteads are within our cities.”
According to Prochniak, tax capacity is calculated on the taxable market value. “It makes sense that the tax capacity has dropped significantly in our cities,”?she said.

Rate calculations

Local taxing districts certify their budgets to the county on an annual basis. A levy is the budget amount a city or county has set based on the changing needs and wants of local residents.
Rate calculation, Prochniak said, for the most part, is a simple process. It is the levy divided by the tax capacity that generates the rate. If a tax capacity has dropped and levies stayed exactly the same, Prochniak explained, rates would inevitably increase.
The taxable market value is determined by the application of a variety of tax laws that excludes all or a portion of the market value from taxation. Under the new Market Value Exclusion law homeowners with a market value of $76,000 or less will receive an exclusion equal to 40% of their value.  
Homeowners with values over the $76,000 will have the amount of the exclusion reduced by 9% on the value over the $76,000.
Prochniak said that with this new law, a residential homeowner might get the impression that the new tax law would have a positive affect on their property tax due to the exclusion. However, because the exclusion affects the tax base of both the city the county and the schools, the rates for these taxing districts will increase. The majority of residential homesteads are within the cities, so that line of the property tax statement will see the most significant increases.
“Because tax capacity is calculated on the taxable market value, it would make sense that the tax capacity has dropped significantly in our cities,” Prochniak said.
“Even though the tax capacity for the parcel was reduced, the rate for the county increased due to the loss of taxable market value,”  she added.
Prochniak explained that homeowners with a value of $76,000 or less will probably not see any major impacts because they are eligible for the full market value exclusion. However, she cautioned, homestead properties in excess of $76,000 are subject to a 9 percent reduction for the value over the $76,000.
“Our commercial properties will see significant increases in their taxes on the city line of the tax statement,” she added.