Officials attribute “tremendous shift” in tax base to state
By Kristen Miller
DASSEL, MN Dramatic increases in property taxes and decreasing values were undoubtedly a concern among Dassel residents and business owners during last Monday’s Truth in Taxation hearing.
Dassel City Administrator Myles McGrath attributed this increase to “a new dynamic” that was introduced this year by Gov. Mark Dayton and legislators that has “shifted the burden” to local taxpayers with the homestead market value exclusion. Therefore, some property owners will see their taxes increase considerably over last year, while others will see a decrease.
Because of this legislative change, 2012 will be an unusual and difficult year for cities and taxpayers, he said, particularly with confusing statements and the overall impact on the tax base from which governments can generate revenue.
McGrath explained that the exclusion removes the market value homestead credit, in which qualifying homeowners received a state tax credit on their property bill the past nine years. This credit reduced the amount of property tax they were required to pay.
In turn, the state was supposed to reimburse local governments, such as cities, counties, and school districts, the revenue lost as a result of the credit. However, the state has not lived up to that monetary obligation and only gave full reimbursement two out of the nine years, McGrath explained.
As a result, this created budget shortfalls to cities like Dassel, which had to absorb the loss in its budget.
The new formula is based on a sliding scale in which homesteads valued at less than $76,000 have 40 percent of their value excluded from taxes.
Property tax statements may show a change in the value, but won’t specify how much of that change is due to the new exclusion, McGrath explained. The next statement in the spring should be more specific, he added.
Though some homeowners may see a decrease in property taxes, the exclusion has resulted in a shift of tax base to commercial and business property taxes, he said.
Because lower-value homes were given exclusions, this would mean higher taxes for all other properties, McGrath explained.
The tax rate for the city of Dassel was at 52.77 percent in 2011. In 2012, that number has risen to 72.047 percent, according to McGrath.
The legislators didn’t do their homework on how the exclusion would impact the tax base, McGrath said, and everyone is going to see the shift in burden because of it.
He also doesn’t know how it will affect the future and whether or not the legislature will make changes to the exclusion formula.
Dassel has done its best, he said, to do its part by reducing its 2012 budget by $107,000 below 2011, despite unfunded state programs (local government aid) that has reduced its budget by $80,000-$120,000 each year. The city bases its budget around the state’s projected LGA payments.
“When the state doesn’t keep its promise, boy, it really makes it tough,” McGrath said.
Dassel resident Rob Duff approached the council and asked what the city was going to do to spur economic growth.
He suggested the city start thinking outside of the box and make some changes that could either generate revenue or reduce expenses.
The city has already cut the budget and delayed projects as much as it can, said Mayor Mike Scanlon.
The economic development authority was organized a few years ago, but Scanlon said there is limited space for commercial business.
The industrial park is currently full and the Miller Manufacturing building has been hard to sell, he said, though there is a long-term goal of developing an industrial park.
Duff recommended the council make it a top priority, and have it on its agenda for each meeting to discuss possible ideas.
Scanlon told Duff he would be more than happy to listen to any thoughts and ideas the public may have. “We continue to look at what we can do,” Scanlon said.
Commercial business owner Paul Haekenkamp shared his concern regarding the large increase he has seen on multiple properties he owns in the city of Dassel.
On one of his properties, he saw his taxes go up $4,800.
“That will kill economic growth,” he said. “It’s unsustainable. No business is going to come to town unless you give them a break.”
“By no means is the city passing the buck,” Scanlon said, explaining this is due to state legislative action. “Where is our wiggle room, is what we try to look at.”
He noted that the levy increased this year by 5 percent over last year’s levy, which had remained the same with no increase for the past four years.
“We can only do so much,” he said, explaining there are expenses when it comes to public safety and street maintenance.
“We are doing our best at keeping the levy as low as we can,” he said.
Scanlon suggested people contact their legislators to tell them how this change has affected them (see box for contact information).
“This is what happens, everything flows downhill . . . and gets dumped on us,” Scanlon said.
Dassel resident Dave Johnson was concerned with the drop in his property value and why that drop isn’t even throughout the city.
The inconsistency is due to the formula with the exclusion, which not everyone knows the effect of yet.
If it wasn’t for the exclusion, “We wouldn’t have this tremendous shift that has changed the landscape of how taxes are done,” McGrath said.
As far as home values, that would have to be discussed with Meeker County Assessor Bob Anderson. He can be reached at (320) 693-5205 or email@example.com.
Legislative contacts for the city of Dassel
State Senate District 18
75 Rev. Dr. Martin Luther King Jr. Blvd.
Capital Building, Room 301
St. Paul, MN 55155-1606
State Representative District 18B
571 State Office Building
100 Rev. Dr. Martin Luther King Jr. Blvd.
Capital Building, Room
St. Paul, MN 55155-1606
(651) 296-4344 or (800) 920-5861