Despite no rate hike, property taxes likely to increase

Article by: JIM ANDERSON , Star Tribune
Updated: September 5, 2011 - 11:13 PM

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Remember mill rates?

Whipper-snappers probably won't remember that in the olden days, property tax bills were based on the mill.

All you had to do was remember that a mill was one-tenth of a cent.

Multiply that by your property's assessed value and you get the property tax bill.

It seemed so simple, straightforward.

Things have gotten a lot more complicated -- even for local officials who know a lot about Minnesota property taxes.

Which is why one of the biggest decisions to come out of the donnybrook known as the 2011 legislative session seems to have slipped under the radar until very recently.

In one of the most significant changes to the state's property tax system in a decade, lawmakers ended the market value homestead credit that offers tax breaks to homes valued at less than $414,000.

They replaced it with what's called the "homestead market value exclusion."

Remember that term: market value exclusion. It's probably going to cost you money, as local officials setting their 2012 budgets are discovering.

There is an eye-glazing explanation for how the new formula works (here's a link, for you wonks: tinyurl.com/3rzr4yj), but it means that starting in 2012, each home contributes less to the tax base.

That means local governments have to raise tax rates to get the same amount of money.

The bottom line? It's a $261 million tax increase, before your local officials even started looking at next year's budget.

In an example offered by the Minnesota House Research Department, the tax on a $200,000 home goes up 4.2 percent, from $1,924 to $2,005.

In Washington County, taxes on a home valued at $250,000 would increase 4.4 percent, despite the county having proposed no increase in the levy for the second year in a row.

It's left to the locals to explain that, in this down-the-rabbithole world, they didn't raise your property taxes, but your property taxes are going up.

Jim Anderson • 651-925-5038