How can taxes be going up when the value of property has gone down? Residents are asking that question and more as their tax notices arrive in the mail.
Hennepin County's preliminary property tax notices went out in the mail last week, on Nov. 15, and by noon the next day, the calls -- perplexed, angry, annoyed, anxious -- were already coming in to the county's taxpayer services offices.
The question most often heard: Why are my taxes going up when the value of my property has dropped and the county is proposing budget cuts?
The main answer this year has to do with the state's replacing of its property tax credit with a homestead market value exclusion that's raising tax rates, said Scott Loomer, Hennepin County's property tax manager.
With the county's annual Truth-in-Taxation hearing for taxpayers slated for 6 p.m. Tuesday in the County Board room on the 24th floor of the Government Center in downtown Minneapolis, here's a quick primer on what to expect.
Isn't Hennepin County cutting spending for next year?
That's the plan. In September, the county administration recommended a 2012 spending plan of $1.56 billion, about $50 million less than this year's budget. The property tax levy proposed to help pay for it is $668.4 million, about $1 million less than the taxes collected this year. Operating and capital budgets also have been slashed.
Explain the changes that the state made in figuring property taxes.
Easier said than done, but here's how Loomer does it: Under the old system, the state offered a credit that helped taxpayers with homesteaded residences valued below $414,000 pay their tax bill. The state's tax credits to homeowners this year amounted to $540 million.
That's been replaced with an exclusion -- that is, a portion of the value of your home is excluded from taxes. But that also has the effect of decreasing the tax base, which increases the tax rate. So taxpayers now are taking up the slack that the state used to cover. Most of the burden is shifted to commercial and industrial properties and higher-valued homesteads, but even the owners of properties that get the exclusion will pay a higher tax rate.
What else affects my tax bill?
Tax notices don't just stop with the county portion. They also include city and school district assessments, which are determined by those jurisdictions. Higher taxes by one arm of government can cancel out fiscal restraint by another.
When will the whole thing get settled?
Soon, per state requirements to approve next year's budget before the end of this year. After the Truth-in-Taxation hearing -- the last chance for taxpayers to weigh in publicly -- the County Board will spend a couple of days next week tweaking the budget. The board is scheduled to cast its final vote on the tax levy and the budget on Dec. 13.
Kevin Duchschere • 612-673-4455