Total local government property tax levies are proposed to increase 5.2 percent; cities' proposed increase is 6.8 percent.
(Published Nov 20, 2017)
The Minnesota Department of Revenue (DOR) recently released the annual report on proposed property taxes for 2018 city budgets. The proposed levies set by local governments earlier this fall are used to compute the proposed tax statements that are sent to property owners in November.
Except under limited circumstances, final certified property tax levies cannot exceed the proposed levy amount. Permissible exceptions to increase the final levy over the proposed levy include increases approved by voters after the proposed levy was set, levies for judgments, and certain levies for natural disasters.
According to the DOR, proposed levies for all cities are an increase in 2018 of 6.8 percent, or $151.9 million, over the certified 2017 levies. For comparison, for taxes payable in 2017, cities initially proposed a statewide increase of 6.2 percent. That amount was later reduced to an increase of 5.5 percent when final 2017 tax levies were set. The average certified levy increase for cities over the past three years is 4.7 percent.
Impact on individual taxes varies
Increases in property tax levies do not automatically result in increased taxes to individual property owners. Changes in the valuation of individual properties, newly constructed properties, and other factors can result in tax changes that are either greater or less than the levy increase proposed by taxing entities (city, county, school, etc.) in a particular geographic area.
A short video designed to help city residents better understand the local property tax system is available from The League of Minnesota Cities. City officials are encouraged to post this video, titled Special Delivery: City Services and Your Property Taxes on city websites, show the video at truth-in-taxation meetings and other public gatherings, and share it via social media.
State programs and city property tax levels
Changes in state aid for recipient cities can also impact city property tax levels, the local government aid (LGA) appropriation for the 2018 distribution increased by $15 million, or 2.9 percent, statewide. The Legislature also appropriated $8 million to the Small Cities Assistance Account (for cities under 5,000 in population) for local roads. When 2018 proposed levies and 2018 LGA is combined, the average total increase statewide is 6 percent.
St. Paul ROW changes
The overall increase in city property taxes is impacted by a budget change in the City of St. Paul. Beginning in 2018, the city will shift nearly $22 million in revenues that were formerly raised through the city’s right-of-way (ROW) maintenance assessment to the property tax.
This decision was in response to a Minnesota Supreme Court ruling that overturned the city’s ROW maintenance assessment program. When this increase is factored out of the overall city levy increase, the total statewide increase for cities is approximately 5.8 percent.
Changes from 2017
The table below reflects the proposed 2018 property tax levies and change from 2017 certified amounts for all property tax authorities.
The reduction in the state property tax levy is due to tax relief provided in the 2017 special session tax bill. The bill eliminated the annual inflationary increase in the state property tax levy and also exempted the first $100,000 of commercial and industrial property value from the state general levy, but also reduced the levy to prevent shifts of the state tax to larger businesses.
According to the report, 173 cities, or 20 percent of all cities, either froze or reduced their proposed 2018 property tax levy. Another 272 cities, or 32 percent, proposed levy increases between 0 and five percent.
Cities with proposed increases between 5 and 10 percent totaled 283, or 33 percent of all cities. A total of 125 cities, or 15 percent, proposed increases in excess of 10 percent.
Cities will finalize their levy amounts by the end of the calendar year. The DOR will release a report on final property tax levies sometime in February or March.
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