Proposed property tax levies for 2010 increase by average of 3.5 percent statewide

Saint Paul, MN – November 19, 2009 – (RealEstateRama) — Property tax levies will increase an average of 3.5 percent statewide if proposed local tax levies are adopted later this year, the Minnesota Department of Revenue announced today. This compares to last year’s increase of 5.6 percent and an average increase of 6.9 percent during the past three years.

“Minnesota’s property tax cap, combined with the impact of the global recession, has kept levy increases relatively modest,” said Minnesota Revenue Commissioner Ward Einess. “It’s clear that the property tax cap has imposed some fiscal discipline on local government spending, even after many jurisdictions experienced reductions in local government aid this year.”

The property tax cap proposed and signed into law by Governor Pawlenty in 2008 limits property tax increases by counties and cities with populations over 2,500 to the lesser of inflation or 3.9 percent. This year, the cap is 0.8 percent. Special levies for debt, public safety and certain other costs are not subject to the cap.

The proposed increase is based on maximum levy amounts proposed by local governments in advance of annual Truth-in-Taxation hearings, which begin next week. If those hearings result in a decrease in proposed levies, the projected growth will be even smaller.

“Taxpayers can further influence local decisions about their property taxes by attending their Truth-in-Taxation hearings,” Einess added.

If the proposed levies were approved, local property taxes would increase in 2010 by $272 million statewide. However, local jurisdictions have historically reduced their levies by $20 million to $60 million statewide after these hearings.In 2009, the proposed local property tax increase was $476 million statewide, but the final property tax levies were reduced $67 million following the Truth-in-Taxation hearings.

Levy increases will vary by community and by property type due to differences in budget and tax decisions that affect school, city, county, town and special districts.

Average increases
Proposed average levy changes by jurisdiction type are shown below:

Estimated property tax levy increases by jurisdiction
Payable 2009 actual to Payable 2010 proposed

Cities
5.4% ($94.8 million)

School districts
3.2% ($68 million)

Counties
3.2% ($81.7 million)

Townships
2.1% ($4.3 million)

Special taxing districts
6.4% ($18.5 million)

Statewide business property tax
0.6% ($4.7 million)

TOTAL LEVY INCREASE
3.5% ($272 million)

City and county increases

Statewide, cities proposed an average levy increase of 5.4 percent, up from last year’s actual increase of 4.3 percent after local hearings. This compares to an average of 6.9 percent over the last three years.

Just over half of all cities have proposed a levy increase of less than 5 percent – including 227 cities (27 percent) that proposed no change or a levy decrease. Cities with populations over 2,500 proposed an increase of 5.4 percent, compared with a 5.7 percent increase proposed by smaller cities not subject to the property tax cap.

Statewide, counties proposed an average levy increase of 3.2 percent, down from the actual 5.7 percent increase last year. This compares to an average of 6.4 percent over the last three years.

Six counties proposed a levy lower than the previous year. Scott has the biggest dollar decline at $777,000. Murray has the biggest percent decline at -8.1 percent. Nine additional counties proposed no change in their levy, including Dakota, Chisago and Redwood counties.

Highest increases in cities with over 50,000 population

Minneapolis
12%

Duluth
11.26%

Brooklyn Park
9.16%

Rochester
6.78%

St. Paul
6%

Lowest increases in cities with over 50,000 population

Plymouth
-0.55%

Blaine
-0.02%

Burnsville
0.03%

Coon Rapids
0.69%

St. Cloud
1.17%

Sampling of proposed county increases

Hennepin County
4.95%

Ramsey County
2.75%

St. Louis County
1.30%

Differences in the relative growth in market values will affect the distribution of levies across property types. For example, tax increases on homesteads will be lower in jurisdictions where homestead market values decrease more than values of other types of property.

Final tax amounts will be determined following Truth-in-Taxation hearings, which are required in all jurisdictions with populations over 500 that are proposing increases higher than inflation (0.8%).

The time and location of the hearings can be found on property owners’ Truth-in-Taxation notice. Counties mailed these documents to property owners in November, and are required to publish hearing information in local newspapers.

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Contact:
Kit Borgman, Minnesota Department of Revenue
651-556-6397
email: kit.borgman (at) state.mn (dot) us

For questions about individual income tax, please contact:
email: indinctax (at) state.mn (dot) us
or call (651) 296-3781 or 1-800-652-9094