State Releases Proposed Property Tax Levies for Local Governments

Proposed local government levies are an increase of about 2 percent over 2013 final levies.
(Published Nov 25, 2013)

A new Minnesota Department of Revenue (DOR) report reveals that local governments have collectively proposed a property tax increase for 2014 of $152.9 million, which is an increase of 2.04 percent over the certified 2013 levies.

The DOR report on the proposed pay 2014 property tax levies for cities, counties, townships, school districts, and special taxing districts was released on Nov. 12.

The table below shows the 2014 proposed levies by type of local unit of government.

2014 Proposed Tax Levies table

The proposed levies are not final. Under state law, each city must set a proposed property tax levy by Sept. 15. This levy figure is then used to prepare the parcel-specific proposed tax notices distributed to property owners in November.

Except for limited purposes, such as judgments or levies approved by voters after the proposed levy was set, a city cannot certify a final levy that exceeds the proposed levy, but a city can reduce its levy when the final levies are certified before the end of the year. For example, last year the aggregate proposed levy increase for all cities was 3.1 percent. The final levy increase was reduced to an increase of 2.2 percent. The table below shows the recent changes from preliminary levies to final levies.

Changes from Preliminary to Final Levies table

Since the release of the data, there has been considerable attention paid to the proposed levies because of the 2013 Legislature's decisions to increase the funding for local government aid (LGA) and county program aid, to pass the new township aid program, and to provide a sales tax exemption for cities and counties (see related article).

Criticism of the preliminary levy increases is based in part on property tax estimates prepared by the House Research Department, which predicted that levies would decline by roughly $9.5 million from the 2013 certified levies. This number assumes that half of the increase in LGA and half of the savings from the sales tax exemption would be used to reduce property taxes. The analysis also includes a modest amount of inflation. The value of these types of estimates is limited.

Most notably, the assumptions do not account for the fact that cities have delayed making capital purchases or performing important projects during the recession. These projects cannot be delayed indefinitely, and cities are beginning to rebuild roads and replace outdated equipment as the economy improves. Wages have remained relatively flat for a number of years, and both state and local government salaries will increase to adjust for years that saw artificially low levy increases.

Finally, the LGA increases passed in 2013 did not fully restore all of the LGA cuts that had been made over the past decade. And data collected by cities and counties indicates that the actual savings from the sales tax exemption may be lower than projected.

Taking all of this into account, the preliminary levy increases represent modest revenue growth, especially in light of the slower-than-anticipated recovery from the recession.

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