Minnesota Cities Magazine
More from Mar-Apr 2017 issue

Ask LMC: How Is Property Value Determined for Property Taxes?

Property tax illustration: toy house and calculatorProperty Taxes
Q: Our city often gets questions from residents about the assessed market value of their property. Can you tell me how assessors determine a property’s value for property taxes? That information will help me answer their questions.
LMC: Assessors have to determine the total value of the land plus structures for each parcel. The market value of each property is determined by Jan. 2 of the year prior to the year in which taxes on that property are due. In other words, market values for taxes payable in 2017 were actually set in January 2016. Property owners receive notice of the market value from the assessor in March of each year.

There are three methods that assessors use to do their work: cost method, income method, and sales comparison method. A state Department of Revenue report describes the cost method as one that estimates the value of the land as if it were vacant, and then adds the depreciated cost of the improvements to arrive at an estimate of value. The income method considers the income or rent that a property may be expected to produce to determine the value. It is most commonly used for income-producing properties and would likely not be used for residential homesteads. The sales comparison method estimates the value of a parcel by looking at the sales prices of comparable properties that have sold in the same market. This is the method that is used most often for property tax purposes.

Property owners can appeal the valuation if they are unable to resolve concerns directly with the assessor. Homeowners and others can attend a meeting of the Local Board of Appeal and Equalization. Details for doing so are available on the resident’s valuation notice.

Human Resources
Q: How do I determine whether someone the city hires should be an employee or independent contractor?
LMC: The Department of Labor guidance refers to a multi-factorial “economic realities” test, which focuses on whether the worker is economically dependent on the employer or is in business for him- or herself. This determination can have far-reaching financial ramifications for the city, including workers’ compensation liability, unemployment insurance penalties, Fair Labor Standards Act obligations, pension and insurance benefits, and more. For more details, see the LMC information memo at www.lmc.org/contractor.

Concrete pipesLoss Control
Q: How can we keep large amounts of materials for a construction project secure in the public works yard?
LMC: The first step to determine the security controls needed for the location selected starts with considering the type of materials being stored and how easy it is to transport the material. Large sections of concrete pipe are difficult to load and have a limited resale market. On the other hand, spools of copper wire and building materials can be quickly loaded into a pick-up truck and resold or used by unscrupulous contractors.

There is not any one method or control that can prevent all theft, but there are some common strategies. This could range from some simple steps of providing adequate lighting to more elaborate controls such as fencing and 24-hour surveillance. One of the simplest ways to prevent theft is to consider the timing of material delivery. The longer materials are being stored in the open, the more susceptible they are to theft or vandalism. Whenever possible, use a just-in-time delivery process, which limits how long the materials will be sitting in the open. Any high-value materials should be delivered only when someone is present to receive and secure them.

Lawful Gambling
Q: What is a local gambling fund?
LMC: A city can by ordinance require organizations to contribute up to 10 percent per year of their net profits derived from lawful gambling to a fund administered by the city. A report must be submitted by the city to the Minnesota Gambling Control Board by March 15 of each year.

The city may only disburse the funds for charitable contributions. Therefore, although a city may not require direct payments from a gambling organization to any city department, a city can establish a fund and disburse the proceeds of that fund to a city department for lawful purposes. No direct contributions or payments of gambling money may be made to a law enforcement or prosecutorial agency. Learn more at www.lmc.org/gambling.

Got questions for LMC? Send your questions to choffacker@lmc.org.

Read the Mar-Apr issue of Minnesota Cities magazine

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