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Reasons (14) Why Property Taxes Vary From Year to Year ASSOCIATION OF 11' "T(fll~ LOCAL GOVERNMENT AID (LGA): A state government revenue shaxing program for cities with low property wealth or high service burdens that is intended to provide an alternative to the property tax. CATEGORICAL AID: Aid given to a local unit of government to be used only for a specific purpose. r l.l1~ ~Rn lUliS VARY YEAR lO YEAR LOCAL SALES TAX: A local tax, authorized by the state, levied on the sale of goods and services to be used for specific purposes by the local government. " CLASS RATES: The percent of market value set by state law that establishes the property's tax capacity subject to the property tax. "Property Tax Refund CIRCUIT BREAKER: See WHY LOCAL TAX RATE The tax rate usually expressed as a percentage of tax capacity, used to determine the property tax due on a property. COUNTY PROGRAM AID: State propertytax reliefaid to counties, distributed with a formula based on needs (households on foodstamps, age of the population, number of serious crimes) and tax base equalization for counties with smaller tax bases. property what estimate of MARKET VALUE: An assessor's would be worth if it were sold. MARKET VALUE AGRICULTURE CREDIT: A state credit to reduce the property tax paid by agricultural homesteads to the local taxing jurisdiction. K- MARKET VALUE HOMESTEAD CREDIT: A state credit to reduce the property tax paid by a residential homestead to the local taxing jurisdiction. EDUCATION AID: The total amount of state dollars paid for 12 education. This aid is paid to the school districts. FISCAL DISPARITIES: A program intheTwin Cities metropolitan area and on the iron range in which a portion of the commer_cial and industrial property value of each city and township is contributed to a tax base sharing pool. Each city and township then receives a distribution of property value from the pool based on market value and population in each city. THE MARKET VALUE OF A PROPERTY MAY CHANGE. east once every five years and a sales ratio study is assess similarly to like properties. If not, the that would affect the taxable value of a Each parcel of property is assessed at is done to determine if the property Commissioner of Revenue may issue an 'order' .1.. PROPERTY TAX: A tax levied on any kind of property. PROPERTY TAX REFUND: A partial property tax refund prograe for those who have property taxes out of proportion with their income. This program is available to homeowners and renters. GENERAL PURPOSE AID: Aid given to units of governmentto be used at their own discretion. Examples are Local Government Aid and County Program Aid. parcel HIGHWAY AID Motor fuels tax and license tab money the state distributes to counties, cities and townships for highways and bridges. market value. made to a property generally Increases its Additions and improvement SALES RATIO STUDY: A study conducted by the Department of Revenue of open market property sales, which is then compared to local assessments to ensure that local assessments adequately reflect the market. HOMESTEAD: A residence occupied by the owner THE MARKET VALUE OF OTHER PROPERTIES IN YOUR TAXING DISTRICT MAY CHANGE, SHIFTING TAXES FROM ONE PROPERTY TO ANOTHER. 2.. STATE GENERAL PROPERTY TAX: A state-imposed property tax on commercial, industrial, and seasonal recreational properties. ncome of of income mposition of a tax, associated with the property INDIVIDUAL INCOME TAX: A state tax on the residents and non-residents with Minnesota sources that is deposited into the state general fund LEVY: The tax. STATE SALES TAX: A state tax (6.5%) levied on the sale of goods and services that is deposited into the state general fund. ncrease or the average ess than II also change. If the market value of a property Increases more or decrease in a taxing district, the taxes on that property wi The valuation of property based on mafket on which property taxes are determined. TAX CAPACITY: value and class rates, LEVY LIMIT: Theamounta local unitofgovernmentis permitted to levy for specific services under state law. affect the district's tax ncreases the tax base and wi New construction In a taxing district rate. November 2006 LIMITED MARKET VALUE: A state imposed limit on property value increases for the purpose of calculating property taxes. THE STATE GENERAL PROPERTY TAX MAY CHANGE. The state legislature directly applies a State General Property Tax to commercial/industria and season/recreational property classes. J.. League of Minnesota Cities Cities promoting excellence ASSOCIATION OF MINNESOTA COUNTIES www.lmnc.or www.mnmsba.or www.mncounties.or ,.. Water lines, curb and gutter, and street improvements that directly beneftt your property may be funded, in whole or in part, through a special assessment that is added to your tax biB SPECIAL ASSESSMENTS MAY BE ADDED TO YOUR PROPERTY TAX BILL - 14 OTHER STATE LAW CHANGES MAY ADJUST THE TAX ... BASE. Fiscal disparities, personal property taxes on utility properties, limited market value, and tax increment ftnancing are example of laws that affect property taxes. B.. A SPECIAL DISTRICT'S BUDGET AND LEVY MAY CHANGE. Special districts such as the Metropolitan Council, hospital districts, drainage districts, etc. set levies to balance their budgets. A change in class money. watershed districts, rates Local school districts set education, etc. wi 13 THE STATE LEGISLATURE MAY HAVE CHANGED THE .. PORTION OF THE TAX BASE PAID BY DIFFERENT TYPES OF PROPERTIES. require a change in the tax rate to raise the same amount of 7.. levies The legislature determines basic funding levels for K-12 education and mandates services that schools must perform. On average, approximately seventy percent of school costs are paid by the state. for purposes including safe school and community While direct aid and revenue from the federal government to local governments has declined greatly in recent years, federal revenue continues to be a key portion of the local government revenue stream and that revenue stream may have changed. THE SCHOOL DISTRICT'S BUDGET AND LEVY MAY · CHANGE. Each year the state legislature reviews and adjusts the level of funding for a variety of aids provided to local governments including local Government Aid and County Program Aid. The formulas for how aid is determined and distributed among local governments may have changed. 6. s. . THE COUNTY BUDGET AND LEVY MAY CHANGE. Each March, townships set the levy and budget for the next year. Each year, counties review the needs and wants of their citizens and how to meet those discretionary needs and wants. In addition, also included in the county budget is non- discretionary spending which is required by state and federal mandates and court decisions and orders. As much as sixty to eighty-ftve percent of the county expenditures are used to deHver mandated services. 1. ~.' AID AND REVENUE FROM THE STATE AND FEDERAL ... 4, GOVERNMENTS MAY HAVE CHANGED. 11 FEDERAL AND , , . .. CHANGED. Both the state and federal governments require local governments to provide certain services and follow certain rules. These mandates often require an increase in the cost and level of service deHvery. THE TOWNSHIP BUDGET AND LEVY MAY CHANGE. Each year. cities review the needs and wants oftheir citizens and how to meet those needs and wants. This is called 'discretionary spending' in the city budget. Also included in the budget is non-discretionary spenqing which is required by state and federal mandates and court decisions and orders. ST ATE Referendum levies may be spread on the market value or the tax capacity of a property depending on process and type of referendum levy. MANDATES MAY HAVE THE CITY BUDGET AND LEVY MAY CHANGE. J^.. VOTERS MAY HAVE APPROVED A SCHOOL, CITY I V.. TOWNSHIP , COUNTY, OR SPECIAL DISTRICT REfERENDUM local referendums may be held for local government construction projects. excess operating levies for schools or many other purposes.