6. SR 12-05-1994 - Laserfiche WebLink

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, Properly tax Continued from page 1 a Average-value homes _ analysis of taxes on the aver- age-value homestead in each city shows that taxes increased by a median amount of $131.50 in the metro area cities, compared to $68 in the nonmetro cities. The tax increases in the metro cities ranged from $3 in Blaine to $421 in Min- netrista. (A verage- value home taxes decreased in seven metro cities: Andover, Anoka, Brooklyn Center, Coon Rapids, Maplewood, South St. Paul, Wayzata.) Tax increases in the nonmetro cities ranged from $10 in Albert Lea to $136 in Northfield. (Average-value home taxes remained the same in Austin and decreased in Hibbing.) On a percentage basis, the tax increases in the metro cities ranged from less than one percent in Blaine to 18 percent in Spring Lake Township in Scott County, with a median increase of 8.9 percent. In the nonmetro cities the increases ranged from 1.8 percent in Albert Lea to 27 percent in Virginia, with a median increase of9.7 percent. Part of the tax increases can be explained by increases in the value of property. In all but six of the metro communities, the value of the average homes on the tax rolls increased. The median increase among the 95 communities was 2.2 percent. The large percentage increase in Spring Lake Township was due to several factors, The tax capacity rate increased by nearly 11 percent, and voters in School District 719 approved an additional school levy that added another 4.5 percent to the tax bill. In addition to those increases, the average market value of homes in the township increased by 3.5 percent. As a percentage of the homes' average selling price, taxes ranged from one percent to just under two percent in the metro cities and from 0.9 percent to 1.35 percent in the nonmetro cities. Cities in the metro area with the highest taxes in 1994 on their average-value homes are (school district is listed in parentheses): North Oaks(621) $5,397; Orono(278) $4,805; Deep- haven(276) $4,802; Wayzata(284) $4,649; Shorewood(276) $4,130. Metro area communities with the lowest taxes in 1994 on average- value homes are: Linwood Township(831) $794; East Bethel(l5) $809; South St. PauJ(6) $882; Columbia Heights(l3) $897; and St. Paul Park(833) $902; Cities in the nonmetro area with the highest 1994 taxes on their aver- age-value homes are: Northfield(659) $1,306; Rochester (535) $1,108; Elk River(728) $1,093; North Mankato(77) $1,026; and Hutchinson(423) $979. Nonmetro communities with the lowest 1994 taxes on their average- value homes are: Hibbing(70 1) $411; Virginia(706) $511; Brainerd( 181) $515; Albert Lea(241) $552; and Bemidji(31) $553. These comparisons reflect both dif- ferences in home values and tax rates among communities. $90,000 homes A different analysis allows a com- parison of the tax bills of homes selling for the same price- $90,OOO-in different communities. The $90,000 selling price is adjust- ed to reflect how assessors in each community would likely value the home for taxation purposes, A dan- ger in using such a hypothetical home is that its value might be quite different from the actual value of Continued on page 6 How to figure 1994 homestead property taxes Calculating homestead taxes takes four basic steps. Estimated Market Value. First, one must know the market value of the home esti- mated by local assessors-their judgment of what the home would sell for in an arm's- length sale. The estimated market value for the aver- age-value home in the Citizens League/Min- nesota Taxpayers Association survey is the average of all homestead property in each community. For the hypothetical $90,000 home, market value is estimated USing a "sales ratio" -a number calculated by the state Department of Revenue to show the difference between the assessors' judg- ment of the value of property and the price for which homes are actually selling. In Andover, for example, the 1993 sales ratio-the most current availabl&-is 90.4 percent. In other words, studies show that homes that have sold recently in Andover were valued for tax purposes at 90.4 per- cent of their actual sales price. We apply t sales ratio to our hypothetical home es price of $90,000 to arrive at what we call the "assessor's market value": $90,000 x .904 = $81,360. That is the value at which the hypothetical home would likely be val- ued for tax purposes in Andover, based on Au ust 16 1994 recent assessment practices there. Tax Capacity. Second, one must know the home's tax capacity, or how much of the property's value is subject to taxation. The Legislature has determined that less of a home's value should be taxed than of a business or apartment building, for example. For taxes paid in 1994, one percent of the first $72,000 of a home's estimated market value is taxable. For home values over $72,000, two percent is taxable value. As an example, the tax capacity of a home with an estimated market value of $87,650 is determined as follows: Step 1: Multiply the first $72,000 by 1 per- cent = $720. Step 2: Multiply the difference between $87.650 and 872,000 ($15,650) by 2 per- cent = $313. Step 3: Add $720 + $313 = $1,033 = Tax Capacity. Tax Capacity Rates. Third, one must know the tax rates, which indicate how much the local units of govemment have decided to tax property. The tax capacity rates, formerly known as mill rates, are the result of dividing the amount of money local units need to raise by the value of their tax base. For every $100 of tax capacity, a 50 percent tax rate would raise $50, a 100 percent tax rate would raise $100, and so on. The total of the tax rates of each taxing jurisdiction-school, city, county, and mis- cellaneous jurisdictions like watershed dis- tricts-is applied to the home's tax capacity to determine the tax. In the example of a home with a tax capacity of $1,033, assume the total tax rate for its community is 107.22 percent. Multiplying the rate against the tax capacity gives the home- owner's tax of $1,108. If the homeowner qualifies for any of the property tax relief described below. the tax bill will be lowered. State-Paid Property Tax Relief. Fourth, . one must know how much property-tax relief, if arPf. one is eligible for. The state of Min- nesota provides this tax relief with revenues it collects from income and saJes taxes. Homeowners might qualify for either of two tax refunds. They must apply for the refunds; the refunds are not automatically included on tax statements. One is known as the "circuit breaker." It is available to homeowners whose property tax bills are MINNESOTA JOURNAL high relative to their income. Renters are also eligible to receive a renters' credit to relieve the tax burden they pay through rent. The Citizens League/Minnesota Tax. payers Association survey of home taxes does not include a calculation for a circuit- breaker refund, since it is dependent on income level. The second is called the special targeted property-tax refund. It is available to all homeowners, regardless of income, whose tax bills increased by more than 12 percent over 1993. The tax increase had to be at least $100. The refund pays 75 percent of the increase over $100 or 12 percent, whichever is greater, up to a maximum refund of $1,500. However, the refund is not available to homeowners whose tax bills increased due to physical improvements to their property. The Citizens League/Minnesota Taxpayers Association study assumes that all home- owners applied for the targeted refund and that none of the valuation increases resulted from improvements to the property. The state provides a variety of other forms of tax relief. A taconite homestead credit is available to homeowners on the Iron Range. The analysis included this credit for the tax estimates in Hibbing and Virginia.