When property owners receive their ‘Notice of Proposed Property Tax Rates for 2012’ in the mail next week, there might be a collective gasp heard ‘round the county.
The reason? Some property owners are going to see dramatic increases in the amount of tax they will have to pony up next year.
“Higher valued homes in our larger cities are going to see a pretty sizable increase,” Faribault County Auditor John Thompson says. “But, the ones getting the biggest hits are the commercial property owners, as well as owners of rental houses and apartment buildings.”
Homes in the $100,000 value range in Blue Earth, Wells and Winnebago will see an increase of 15 to 20 percent, Thompson says. “Homes in the $30,000 to $60,000 range will see just a small increase,” he says. “Plus, homes in the county’s smaller towns will see only a minor raise, if any at all.”
The culprit causing the tax hike is not just the local governments increasing their property tax levies, the auditor says.
“The state has done away with the Market Value Homestead Credit (MVHC),” Thompson explains. “The bill to kill it was passed by the Legislature as a part of the plan to balance the state’s budget deficit.”
Some property owners received a homestead credit on their taxes in the past. The state then reimbursed the counties and the cities that credited amount – or at least, that was the intention.
“They (the state) were not very good taxpayers,” Thompson says. “For eight of the last 10 years, the cities and counties never got the full MVHC amount reimbursed, as promised. It was really bad the last couple of years.”
The loss of the credit will be shared by local taxpayers but will especially hit owners of commercial and rental property.
In fact, an estimate by Blue Earth City Administrator Kathy Bailey shows that a commercial/industrial property in the city – valued at $1 million – could see an increase in their city share of property tax of $4,621.35 or a whopping 31.82 percent increase.
“That figure is what we have been told it will be, if the City Council keeps their levy increase at 11 percent, and with the increase from the state due to the cut in MVHC,” Bailey explains.
Mayor Rob Hammond Jr., says he does not expect the city will keep the levy increase at the 11 percent that was proposed in September.
“I am hoping we are going to be able to cut it to zero, with no increase,” Hammond says. “I think the most it will be is three percent.”
Even if the Blue Earth City Council passes a budget with no levy increase, that $1 million commercial/industrial business will see an 18.71 percent hike in their property taxes (or $2,717.42) just due to the city’s loss of MVHC.
Cities, counties and school districts set their proposed budgets and levy increases in September. Then in December they have to set their actual levy increases. They can lower the proposed number, but cannot raise it.
However, it is this proposed number that is going to appear on the statement residents will soon receive. Included will be the taxes for the county, city or township and school district.
In the Blue Earth Area School District, Thompson says taxpayers will see a bump due to the big heating/air conditioning project at the elementary/middle school.
“Some folks are going to see an awful big hike,” Thompson says. “Owners of higher priced homes, apartments and businesses. Farmers will see a hike too, but that will mainly be due to increased value of the land.”
Thompson says the county contracts with an independent firm to send out the tax notices.
“They need to have them out by Nov. 23,” Thompson says. “But, most years they get them out a few days before that.”