Tax season might be nearing its frantic end, but Minneapolis homeowners only recently learned of the new property taxes they'll be required to pay in 2016. And unfortunately, the short window to appeal has already closed. Homeowners had only until March 27 to file an application to appeal the city's assessed value of their property.
And as I wrote a few weeks ago, many homeowners in what are considered more distressed neighborhoods might be paying a disproportionate share of property taxes, especially as the city is behind on property taxes and trying to play catch up as home values rise.
The city has a complicated system of determining market value of homes, which includes eliminating most sales of "distressed properties", mostly foreclosures, before designating average market values in a neighborhood. By tossing these out, I noted, the city unfairly places a tax burden on homeowners in distressed neighborhoods, since their taxable market values don't reflect every real sale.
Patrick Todd, a city assessor with the City of Minneapolis Assessor's Office, says the city does consider each sale to determine taxable market value, but admits it's only through a single letter requesting the opportunity to consider the sale.
"We are the only one [in Minnesota] that does this," he says. "By the fact that we do our mailing, we think we are considering every sale."
So what does that attempt to consider every sale look like? New owners of a recently purchased home in Minneapolis receive a letter, which asks if someone from the city can come out and visit their home to assess its market value. And that's the rub: the inspection is "requested," not required, and very few follow through.
Todd says he doesn't know the exact number of respondents to the letter, but he does allow that they are "pretty low," and he says that they were even lower during the foreclosure crisis a few years ago.
In other words, even without exact figures, it's safe to say that the majority of foreclosures are still thrown out, since the city hasn't been able to determine if the sale is "representative of the market."
So it's not quite true that every sale is considered, just because a letter requesting to be invited into one's home is sent. For one thing, new owners of a foreclosed, lower-cost property summoning the city into their home to determine their home's actual taxable value is like telling a barista you want to pay four times more for your cup of coffee because of all the labor that went into turning those berries into beans.
For some neighborhoods still suffering from foreclosures, that can mean as much as 30 percent of sales aren't taken into consideration when determining fair market value.
What's more, some homeowners in distressed neighborhoods saw their assessed values jump in one year by more than 25 percent, though the market doesn't reflect that. Sales prices, on average, were up about 8.5 percent from the previous year.
Todd says that's because the city is playing "catch-up." Right now, homes need to be in the 90 to 95 percent ratio of actual market value.
"Our assessment is much lower than what the market is," Todd says. "We have to move our value up in certain neighborhoods to reach that Department of Revenue ratio of 90 to 95 percent."
Todd says that for now, in an effort to play catch-up, the city's target is around 97 percent ratio of assessed value, which means 50 percent are paying less than 97 percent, and 50 percent are paying more than 97 percent.
Which also means, considering how many foreclosures are tossed out, homeowners in lower-income neighborhoods like Jordan, McKinley, Central, East Phillips, Camden, Powderhorn, etc. are among the 50 percent paying more than 97 percent.
If you haven't filed an appeal yet, there's always next year. Put it on your calendar: March 15.