By Jennifer Kotila
HOWARD LAKE, MN The city of Howard Lake is planning a 3 percent levy increase, and many residents have approached City Administrator Kelly Hinnenkamp with questions regarding their property tax statements, she told the city council at Tuesday’s Truth in Taxation hearing.
Residents are seeing anywhere from a 10 percent decrease to a 50 percent increase in their property taxes this year, Hinnenkamp added.
She explained that property taxes are based on a complicated formula, and there are a lot of moving pieces to it.
The piece that the city of Howard Lake is in control of is the levy, but when the state or county changes something, it shifts the tax burden, Hinnenkamp explained.
This year, the state government replaced the homestead tax credit with the homestead market value exclusion, which is the reason for the unusual changes in residents’ property taxes, Hinnenkamp said.
Several residents and business owners spoke at the hearing about the changes they saw in their taxes.
On his 2012 property taxes, Vern Kleve, who owns commercial property in Howard Lake, saw an increase of 23 percent, he said.
He noted that Hinnenkamp had explained to him the shift of the homestead credit, which placed the burden on commercial properties.
“People other than residential saw double-digit increases,” Kleve said.
Although Kleve’s immediate thought was the only way to adjust the increased burden on commercial properties was to decrease the levy, that would be too complicated, he said.
He explained that if the levy was reduced by 10 percent, there would still be a 10 percent increase in most commercial property taxes.
“You’d just be decreasing the increase,” Kleve said.
Therefore, he suggested leaving the levy the way it is, with a 3 percent increase, but giving commercial properties a 10 percent decrease in the form of a check (rebate) or credit on their water bill.
Council Member Pete Zimmerman noted that the property taxes make up the levy, so if the city were to refund commercial properties, the budget would still have to be cut somewhere.
“Yes, but commercial properties can’t take the double-digit increase,” Kleve said.
It would be difficult to figure out the amount of 10 percent, and it could end up being a significant amount, Hinnenkamp said.
She added that a refund would only be a short-term solution, and if the shift remains next year, property taxes would not be going down.
Howard Lake resident Rod Werner’s taxes increased by 20 percent, up $630 from last year, he said.
Werner owns non-homestead residential property, Hinnenkamp noted, which is why he saw the increase.
Homestead properties valued up to $440,000 were granted an exclusion of a portion of their property taxes, leaving a $30,000 to $40,000 gap between their taxable and non-taxable property, Hinnenkamp explained.
If the levy were a pie, each of the taxpayers in Howard Lake would be a little sliver of the pie, Hinnenkamp explained.
The piece of the pie for those who do not qualify for the homestead exclusion got a little bigger this year, but it did not increase the total amount levied, Hinnenkamp said.
“Your portion may be bigger, but (the city) still gets the same amount,” Zimmerman added.
Daryl Stenberg, who owns property in Howard Lake, asked the council if it had considered 10 percent cuts across the budget.
It was noted that the 2012 budget is 6 percent lower than the 2011 budget.
The council did not consider cuts across the entire budget, because that is not the process it uses to figure out its budget, Zimmerman said.
“I feel the budget is conservative, there is no fluff in our budget,” Zimmerman said, noting that the budget is a working document that is always changing.
Stenberg pointed out the administrative portion of the budget, which is approximately $250,000, wondering if any cuts were considered in that area.
That amount is the entire budget for the administrative department, not just for salaries, noted Zimmerman, and it had not been considered to cut it.
Mayor Rick Lammers noted that the council has always been conservative with the budget.
“This will force me to raise my rents. I believe you can look at the budget and make cuts across the board,” Stenberg said.
Ralph Diers told the council that his taxes went up $1,000, but he couldn’t raise the rents in this economy, so he would have to eat the cost.
Larry Miller informed the council that he lives on Imhoff Avenue and since 2004, his taxes have risen $2,300.
“It’s going to be a consideration if I can retire here,” Miller said, noting he was very concerned and hoped something could be done.
Hinnenkamp explained that the increase in property taxes is not exclusive to Howard Lake, but surrounding communities are dealing with similar issues.
The only thing taxpayers can do is to talk to their state legislators, who are responsible for the shifted tax burden statewide, Hinnenkamp noted.
During budget discussions at a council workshop after the meeting, cutting the budget was discussed.
However, there is a fear that local government aid (LGA) could be cut from the state budget.
“You have to cover yourself and go with the 3 percent increase, because if something happens like LGA being cut, and the levy goes up 12 percent, you’ll have a revolution on your hands,” Kleve said.
It was decided to leave the budget where it is, with a 3 percent levy increase over the 2011 levy.
State legislators for Howard Lake
State Representative Dean Urdahl
571 State Office Building
100 Rev. Dr. Martin Luther King Jr. Blvd.
Saint Paul, Minnesota 55155
(651) 296-4344 or (800) 920-5861
State Senator Scott Newman
75 Rev. Dr. Martin Luther King Jr. Blvd.
Capitol Building, Room 301
St. Paul, MN 55155-1606