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'Truth’ notices oversold Minneapolis tax increase

  • Article by: STEVE BRANDT
  • Star Tribune
  • November 27, 2011 - 3:56 PM

The good news is that the bad news for Minneapolis taxpayers may not be as bad as they've been led to expect.

Many city homeowners have complained that the preliminary tax notices they got in the mail appear to indicate that their taxes are going up, even while their home values appear to be going down.

But the school board isn't expected to set nearly as high a levy as indicated on those so-called truth-in-taxation statements. And the notices don't show the home's actual value for 2012, but rather the value adjusted downward to shield homeowners from some of the upward pressure on their property taxes.

Take a $264,500 home that held its taxable value. A proposed tax notice mailed this month projects an 8.1 percent increase on such a home's 2012 taxes. Despite the city and Hennepin County holding the line on their levies, a projected jump in school taxes makes up almost half of the $358.14 tax increase.

But that notice assumes a 9.5 percent increase in the school levy. The school district set its preliminary levy at the maximum allowable 9.5 percent increase because it lacked enough time after the summer special legislative session to analyze what it might need, according to Budget Director Sarah Snapp.

"Neither the superintendent nor the board has any appetite for increasing the burden on the Minneapolis taxpayer by 9.5 percent. It's not going to happen," Snapp said. "It will be significantly lower than that."

Just how much lower has yet to be determined. The board has to decide, for example, whether it will levy all of a $1.8 million increase allowed by an escalator clause approved in a 2008 referendum by voters, Snapp said. The escalator lets that levy rise with inflation and the number of school-age children in Minneapolis.

The district also is considering shifting how it pays for maintenance costs from a pay-as-you-go practice to bonding. That would save money in the short-term by spreading cost out into the future. But borrowing would eventually add interest costs, even at today's depressed interest rates.

The district also could dip into its relatively high operating reserves to absorb some costs, such as the $2 million it pays for unemployment insurance. But there's a downside to depleting those reserves.

The district's operating-fund surplus allowed it to weather shifts in state aid that forced many other districts to borrow short-term. So depleting it would leave the district more vulnerable to state and federal aid cuts, Snapp said. Drawing down the surplus also could limit the district's flexibility in meeting enrollment jumps that require adding classrooms.

Calculation changed

The notices give some taxpayers the idea their home's value has fallen when it may not have.

The taxable value shown for 2011 taxes is the home's estimated market value as established by the city assessor. But the taxable value shown for 2012 reflects a downward adjustment. Like the old homestead credit, that's designed to shield homeowners from higher taxes.

For example, one south Minneapolis home held its $257,500 market value from this year projected to next. But the taxable value for 2012 is $243,435 because some the home's value was shielded from taxation under the new form of homestead protection that helps moderate- to lower-value homes.

Excluding part of the tax base means that a higher tax rate is needed to raise the same amount of money. That falls mainly on rental and business properties, which don't get the exclusion. For example, an apartment building with a value that held at $326,000, typical of an older fourplex, would see its proposed tax bill jump by $543, or 8 percent.

The district will hold its required hearing on its proposed tax at Dec. 13 at 6 p.m. in the assembly room of district headquarters at 807 NE. Broadway. The board also will take comments on the levy when its Finance Committee meets at 5 p.m Dec. 6.

Steve Brandt • 612-673-4438

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