May 11, 2017 1 · – Agricultural land can be a major portion of NTC ... 200,000 -1,111 1,049 -62...

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Property Taxes:

From Levy Certification to Individual Tax Statement

Shelby McQuay – Ehlers

Andrea Uhl – Ehlers

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May 11, 2017

Property Taxes

Overview

• District officials are sometimes

expected to explain property taxes

in detail:

– At school board meetings

– At Truth in Taxation hearings

– In phone calls with “excited” taxpayers

• Public expects simple answers,

but….…it’s not simple

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Property Taxes

Overview

• Today’s session will focus on:

– Property tax basics

– Computing individual parcel values

– Calculating school taxes

– Breaking down various taxing decisions

on property owners & school district

revenues

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Minnesota School District Property Taxes -

Key Steps in the Process & Who Does What

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Minnesota School District Property Taxes -

Key Steps in the Process & When

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March/April

Summer 2017

September 2017

Nov/Dec 2017

December 28, 2017

May 2018

October 2018

January 1, 2017

Taxpayers receive valuation notices for Pay 2018

Levy Setting Process

District adopts proposed 2017 Pay 2018 Levy &

Certifies it to Auditor

Counties send TNT Notices

TNT Hearings Held

Final property tax levy adopted by board & certified

to home county auditor

1st Half Property Taxes Due

2nd Half Property Taxes Due

Assessment Date

Property Taxes

Four Measures of Property Value

• Estimated Market Value (EMV)

• Taxable Market Value (TMV)

• Referendum Market Value (RMV)

• Net Tax Capacity (NTC & ANTC)

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3

Property Taxes

Measures of Property Value

• Estimated Market Value (EMV)

– Starting point for other measures of property value

– Assessor’s estimate of true market value

• Taxable Market Value (TMV)

– Value used to calculate taxes

– May be less than EMV due to various limitations and exclusions

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Property Taxes


• Taxable Market Value Limitations and Exclusions

– Market Value Exclusion

– Green Acres

– This Old House

– This Old Business

– Platted Vacant Land Exclusion

– Border City Development Zone Exception

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Property Taxes

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Computation of Taxable Market Value

Residential Homestead Property – 4 Examples

A. Estimated Market Value (EMV)

1. Value up to $76,000 50,000 76,000 76,000 76,0002. Value in Excess of $76,000 0 24,000 124,000 337,800

3. Total (1 + 2) 50,000 100,000 200,000 413,800

B. Computation of Homestead Exclusion

1. Exclusion on Value up to $76,000 (A.1 * 40%) 20,000 30,400 30,400 30,400

(Lessor of $30,400 or (A.2 * 9%)) 0 2,160 11,160 30,400

3. Homestead Exclusion (Greater of 0 or (1 - 2)) 20,000 28,240 19,240 0

C. Taxable Market Value (B.1 - B.2) 30,000 71,760 180,760 413,800

2. Reduction Base on Value > $76,000

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Property Taxes


• Net Tax Capacity (NTC)

– Basis for calculating most taxes

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NTC TMV Class Rate

• Adjusted Net Tax Capacity (ANTC)

– Basis for calculating aid

ANTC NTC

Sales Ratio

Property Taxes

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Subject to

RMV Tax

Residential Homestead

First $500,000 1.00% Yes No

Over $500,000 1.25% Yes No

Blind/Disabled Homestead

Agricultural or nonagricultural

First $50,000

Commercial Seasonal Residential Recreational – used less than 250 days a

First $600,000 0.50% Yes,at 50% of TMV No

$600,001 - $2,300,000 1.00% Yes No

Over $2,300,000 1.25% Yes Yes

Agricultural Homestead House, Garage, One Acre

First $500,000 1.00% Yes No

Over $500,000 1.25% Yes No

Remainder of Farm

First $2,050,000 0.50% No No

Over $2,050,000 1.00% No No

2b Non-homestead Agricultural Land 1.00% No No

2c Managed Forest Land 0.65% No No

Class Rate Table for Minnesota Property Taxes Payable in 2017

1b

0 .45% Yes, at 45% of TMV No

Class Description

NTC

Class

Subject to

State Tax

1a

1c

2a

Property Taxes

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Commercial-Industrial and Public Utility

First $150,000 1.50% Yes Yes

Over $150,000 2.00% Yes Yes

Rental Housing

Four or more units

Residential Non-homestead

1 to 3 units that does not qualify for class 4bb

4b(3) Agricultural Non-homestead containing more than one residence but fewer

than four along with the acre(s) and garage(s) 1.25% Yes No

Residential Non-homestead - Single unit or Single House, Garage and First

Acre on agricultural non-homestead land

First $500,000 1.00% Yes No

Over $500,000 1.25% Yes No

Seasonal Residential Recreational Commercial

First $500,000 1.00% Yes Yes

Over $500,000 1.25% Yes Yes

Seasonal Residential Recreational Non-Commercial

First $76,000 1.00% No Yes-40%

$76,000-500,000 1.00% No Yes

Over $500,000 1.25% No Yes

4d Qualifying Low Income Rental Housing 0.75% Yes, at 75% of TMV No

Class Rate Table for Minnesota Property Taxes Payable in 2017, continued3a

4a

1.25%

4c(1)

4c(12)

No

4b(1)

1.25% Yes No

4bb

Yes

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Property Taxes


• Referendum Market Value (RMV)

– Used to spread referendum, equity and transition levies

– RMV is equal to EMV, except for:

– Seasonal recreational residential property (cabins)

– Agricultural property – RMV equals the EMV of the house garage, and

one acre of land; RMV of other land and buildings is 0

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Property Taxes

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Example Calculations of Tax Capacity

Residential Homestead Property

A. Estimated Market Value (EMV)

1. Value up to $76,000 76,0002. Value in Excess of $76,000 24,000

3. Total (1 + 2) 100,000


1. Exclusion on Value up to $76,000 (A.1 * 40%) 30,400

(Lessor of $30,400 or (A.2 * 9%)) 2,160

3. Homestead Exclusion (Greater of 0 or (1 - 2)) 28,240

C. Taxable Market Value (B.1 - B.2) 71,760


D. Computation of Tax Capacity

1. Value up to $500,000 (1.00%) 718

2. Value in Excess of $500,000 (1.25%) 0

3. Total (1 + 2) 718

76,000674,000

750,000

30,400

30,400

0

750,000

5,000

3,125

8,125

Property Taxes

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Commercial-Industrial Property

A. Estimated Market Value (EMV) 100,000

B. Computation of Homestead Exclusion 0

C. Taxable Market Value (TMV = EMV) 100,000

D. Computation of Tax Capacity1. Value up to $150,000 (1.5%) 1,5002. Value in Excess of $150,000 (2.00%) 03. Total (1 + 2) 1,500

750,000

0

750,000

2,25012,00014,250

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Property Taxes

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Agricultural Homestead HGA

Land &

Buldings

A. Estimated Market Value (EMV) 2,500,0001. Value up to $76,000 76,0002. Value in Excess of $76,000 24,000

3. Total (1 + 2) 100,000 2,500,000


1. Exclusion on Value up to $76,000 (A.1 * 40%) 30,400

(Lessor of $30,400 or (A.2 * 9%)) 2,160

3. Homestead Exclusion (Greater of 0 or (1 - 2)) 28,240

C. Taxable Market Value 71,760 2,500,000

D. Computation of Tax Capacity

1. Value up to $500,000 (1.0%) 718 0

2. Value in Excess of $500,000 (1.25%) 0 0

3. Total (1 + 2) 718 0

E. Computation of Agricultural Tax Capacity

1. Value up to $2,050,000 (0.5%) 10,250

2. Value in Excess of $2,050,000 (1.0%) 4,500

3. Total (1 + 2) 14,750


15,468

Total Tax Capacity

Property Taxes

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Property Taxes

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Agricultural Non - Homestead

A. Estimated Market Value (EMV) 100,000 750,000

B. Computation of Homestead Exclusion 0 0

C. Taxable Market Value (TMV = EMV) 100,000 750,000

D. Computation of Tax Capacity (1.0%) 1,000 7,500

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Property Taxes

Tax Rate Determination Value

• Also called “taxable net tax capacity”

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TRDV 𝑝𝑟𝑜𝑝𝑒𝑟𝑡𝑖𝑒𝑠

𝑛

𝑥=1

Power

line tax

capacity

Fiscal

Disparities

Contribution Captured

portion of

TIF

Property Taxes

Fiscal Disparities

• Applied to commercial-industrial (C-I) property in the 7

county metro area since 1971

– Separate fiscal disparities program for the Iron Range that works

the same way

– Designed to share the tax benefits of new C-I property

throughout a larger area

– A highly complex program the makes property taxes in affected

area much harder to explain

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Property Taxes

Tax Increment Financing (TIF)

• TIF is an economic development tool used by Cities and other local authorities – Complex rules and restrictions

– City or county creates TIF district and adopts TIF plan

– During term of plan:

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Captured

Tax

Capacity

Current

Tax

Capacity

Original Tax

Capacity

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Property Taxes

Tax Increment Financing (Cont.)

• Captured tax capacity not included in aggregate total of

NTC or TRDV

• School districts do collect referendum levies (and other

RMV levies) for property in TIF district

• TIF has no impact on school district revenues other than

the Capital Projects Levy

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Property Taxes

District Total Net Tax Capacity

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NTC TRDV

Fiscal

Disparities

Distribution

• For school districts outside the 7

county metro area and the Iron

Range, this is the same as Tax

Rate Determination Value

Property Taxes

Computation of Initial Tax Rates

• NTC Tax Rates

• RMV Tax Rates

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𝑁𝑇𝐶 𝑇𝑎𝑥 𝑅𝑎𝑡𝑒 =𝐶𝑒𝑟𝑡𝑖𝑓𝑖𝑒𝑑 𝑁𝑇𝐶 𝐿𝑒𝑣𝑖𝑒𝑠 − 𝐹𝐷 𝐷𝑖𝑠𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛

𝑇𝑅𝐷𝑉

𝑅𝑀𝑉 𝑇𝑎𝑥 𝑅𝑎𝑡𝑒 =𝐶𝑒𝑟𝑡𝑖𝑓𝑖𝑒𝑑 𝑅𝑀𝑉 𝐿𝑒𝑣𝑖𝑒𝑠 − 𝐹𝐷 𝐷𝑖𝑠𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛

𝑅𝑀𝑉

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Property Taxes

Computation of Gross Tax

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Gross

School

Tax

Taxable

Net Tax

Capacity

Total

Referendum

Market Value

NTC

Rate

RMV

Rate

Property Taxes

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Property Taxes

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Property Taxes

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Property Taxes

Market Value Credits

• Agricultural Homestead Market Value Credit

– Credit equal to 0.3% of the first $115,000 of taxable market value

excluding the HGA

– Plus 0.1% of TMV in excess of $115,000

– Maximum credit of $490

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Property Taxes

• Tax bases vary by district, most notably in Greater MN

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Source: Willette, Rural Legislative Forum, Mankato 2016

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Property Taxes

• Various property types have been growing at different rates

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Property Taxes

• More farms can mean more tax base per pupil

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Property Taxes

• School Building Bond Credit (Ag2School Credit)

– Proposed credit to farmers on school debt levies

– Paid for with state dollars, not shifted to other properties

– Currently in conference committee

• Governor @ 40%

• House @ 50%

• Senate @ 40%

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Property Taxes

• Example: Agricultural Area District

– Agricultural land is not included in the RMV tax base (except

HGA)

– Agricultural land can be a major portion of NTC

– Residential Homestead can be much bigger portion of RMV than

NTC

– Not many voters per acre

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Property Taxes

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Example: Agricultural Area District

*Totals do not include TIF and Fiscal Disparities adjustments

Market ValuePercent of

Total

Referendum

Market Value

Percent of

TotalNet Tax Capacity*

Percent of

Total

Total 460,083,215 65,304,175 3,797,587

Residential Homestead 25,546,996 5.6% 25,380,456 38.9% 194,116 5.1%

Other Residential 4,702,480 1.0% 4,702,480 7.2% 50,071 1.3%

Commercial / Industrial 22,025,233 4.8% 22,025,233 33.7% 433,381 11.4%

Agricultural 407,430,306 88.6% 13,196,006 20.2% 3,116,237 82.1%

Seasonal Recreational 378,200 0.1% - 0.0% 3,782 0.1%

Property Taxes

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Description Reduce Referendum

by $1,500 Bond Issue Net

per Pupil Unit $19.400 Million Change

Estimated Tax Rates for

Proposed Questions NTC Tax Rate: 58.05% 58.05%

RMV Tax Rate: -0.556% -0.556%

Estimated

Type of Property Market Value

50,000 -278 174 -104

Residential 70,000 -389 244 -145

Homestead 80,000 -444 290 -154

100,000 -556 417 -139

200,000 -1,111 1,049 -62

Commercial/ 50,000 -278 435 157

Industrial 100,000 -556 871 315

Agricultural 600,000 -556 1,868 1,312

Homestead 800,000 -556 2,448 1,892

1,000,000 -556 3,029 2,473

Agricultural 2,000 0.00 11.61 11.61

Non-Homestead 2,500 0.00 14.51 14.51

(dollars per acre) 3,000 0.00 17.42 17.42

Estimated Change in Taxes*

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Minnesota Homestead Credit “Circuit Breaker” Refund

• Existed since 1970s

• Available to all owners of homestead property both residential and agricultural (refund on agricultural homestead property is based on taxes paid only on HGA)

• For 2016 taxes, annual household income must be less than $108,660 for homeowners and $58,880 for renters (income limit is higher if you have dependents)

• Refund is sliding scale, based on total property taxes and income

• Maximum refund is $2,660 for homeowners and $2,060 for renters

• Especially helpful to those with lower incomes

• Fill out state tax form M1PR

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Special Property Tax Refund

• Available for all homestead property, both residential and

agricultural (refund on agricultural homestead property is

based on taxes paid only on HGA) with a gross tax

increase of at least 12% and $100 over prior year

• Refund is 60% of amount by which tax increase exceeds

greater of 12% or $100, up to a maximum of $1,000

• No income limits

• Fill out state tax form M1PR

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Senior Citizen Property Tax Deferral

• Allows people 65 years of age or older with household income of $60,000 or less to defer a portion of property taxes on their home

• Taxes paid in any year limited to 3% of household income for year before entering deferral program; this amount does not change in future years

• Additional taxes deferred, not forgiven

• State charges interest up to 5% per year on deferred taxes and attaches a lien to property

• Deferred property taxes plus accrued interest must be paid when home is sold or homeowner(s) dies

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(651) 697-8542

[email protected]

Andrea Uhl

Financial Specialist

(651) 697-8548

[email protected]

Shelby McQuay

Municipal Advisor

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May 11, 2017 1 · – Agricultural land can be a major portion of NTC ... 200,000 -1,111 1,049 -62...

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Transcript of May 11, 2017 1 · – Agricultural land can be a major portion of NTC ... 200,000 -1,111 1,049 -62...