Read More Than the Bottom Line on Your Proposed Taxes 2021 Statement
Last week, I received in the mail the “Proposed Property Tax Statement” payable in 2021 for my home in Duluth. There wasn’t anything unique about this correspondence. What was unique was that given the pandemic I actually took the time to read more than just the bottom line. Sure, my property taxes will most likely be higher again next year…by about 3%. But it’s how that increase was achieved that got my attention.
To be clear the bottom line on this Proposal includes every local taxing authority’s assessments combined. These authorities include the county, city, town/township, school district, special district, tax increment, and fiscal disparity to name a few. Within the special taxing district are things like the Parks and Rec assessment, and Solid Waste assessment, but not limited to these depending on where you live in the county, plus a state general fund property tax. Just keeping track of these little special taxes that are classified as assessed on your property is a task by itself. For example, the road tax that both the county and the city of Duluth collect is actually a sales tax. But if you live in the city, residents pay the same tax twice: a half-cent to the city and a half-cent to the county.
The ‘Proposed Taxes 2021’ contains a lot of significant information and data. For example, if you are really interested in what our local government is really doing you can attend the Budget Hearings. There are four (4). The county hosts two, one in the north and another in the south, and one each for the city/town and your local school district. If you have never attended one of these meetings, you should. But be prepared, the presentation is comprehensive and overwhelming. Each government gets money from what seems like everywhere with considerably less than half coming from property taxes. Following the money is difficult. The presentation lasts up-words of an hour with you being allowed to ask questions at the end. You are likely to want to know why your taxes went up by $150. Your elected official cannot answer that question. They can only tell you what each department will be spending next year and compare it to last year’s spending. They will also mention that it is the other taxing authorities that were the largest contributors to your increase. As you leave each meeting you will be equipped with papers and information that means absolutely nothing as far as your taxes are concerned. Still, if you actually review the data on your ‘Proposed Taxes 2021’ statement you will find the answers you seek.
In my case, the value of my property was increased. That increase was based on the increased market value of the recent homes sold in my neighborhood over the last year or so. Sales prices of these homes were much higher than the Estimated Market Value (EMV) listed on the tax statements. Therefore the market value of the entire neighborhood is assumed by the assessor’s office to be higher. There is no consideration of the homeowner’s ability to pay. This lack of consideration extends itself throughout the formula for determining the Taxable Market Value. Taxable Market Value is the net value of the Estimated Marked Value minus the Homestead Exclusion (HE). The concept seems to be that as the value of your neighborhood increases as a homeowner you require less exclusion (homestead credit). In my case, the EMV went up $11,000 while the HE went down by $1000. Thus, the Taxable Market Value is $12,000 higher than last year. The higher the taxable Value the more taxes must be paid. According to my statement, it looks like each government gets its fair share of dollars generated by the increased Taxable Market Value.
There are several other salient points that should be made about these statements. First, for the past few years, the amount one owes has been rounded to the dollar. Not likely the nearest dollar because that could cost the governments. So who gets the rounding? Given the large number of parcels in the county, there is a lot of extra money being collected by this new math. Next, it is likely that your Proposed Taxes 2021 statement is different than mine. The Minnesota property tax code is one of the most complicated in the country. The bottom line is that none of the local governments are allowed to collect more money than they report that they need for the next year when they submit their budgets each December.
Finally, the timing of these statements is designed to leave the reader with little or no recourse but to read them and weep. There is no question that the system of gathering the data from each unit of government and matching it to the homeowner is complicated. The data, however, is ready and available in mid-September when the preliminary budget must be filed with the state. Preliminary budgets represent the maximum financial needs of each unit of government. Thus, the Proposed Taxes 2021 statement represents the maximum tax you will have to pay. You could pay less but you will not be required to pay more in 2021. But the statement distribution does not occur until after the annual November elections.
A long time ago, lawmakers noticed that if voters saw their Proposed Tax statements before the election that voters would be more likely to change their vote based on these statements. Of course, Proposed Tax statements do not represent the body of work performed over the course of a 2 to 4-year term in office. But seeing these statements before the election does cause the voter to be motivated to reflect and perhaps to research before voting. Should voters consider changing this back? It is certainly worthy of a debate. Can the change be made? Not likely! Even at the local level, it appears difficult for elected officials to give up the power once they get it. Just look at how long our city councilors or our county commissioners remain in office on average. And it is their vote that is needed to changes policy.