County: State budget deal shifts costs to local property taxes

The notices are required under state law to inform property owners of their upcoming property tax based on proposed tax levies of the local taxing authorities, which include the county, cities, schools and special taxing districts.

County commissioners and staff recently discussed the complicated change and wondered how they would explain what happened to taxpayers. In the end, they agreed to issue a statement to local media.

“It’s going to be very confusing,” said Auditor Bob Peterson. “This is going to affect our friends, relatives and neighbors. And the situation is very difficult to explain. We are going to get calls.”

Commissioner Mike Hanson said he’d start conversations with concerned property owners with an explanation of where the change originated — the Minnesota Legislature.

At issue is the elimination of a homestead market value credit, an aid paid by the state to the local units of government to reduce the taxes on homestead properties.

The HMVC was replaced with a homestead market value exclusion. The exclusion reduces the market value for taxable purposes of homestead property.

The change in programs has resulted in a large reduction of the local tax base and a resulting cost shift to property owners while saving the state budget $261 million.

“Most will see tax increases for 2012 even if local taxing authorities did not increase their tax levy,” says the county statement.

County commissioners and staff call the elimination of the homestead market value credit a part of “the closed-door budget deal” reached in July by Gov. Mark Dayton and GOP legislative leaders to end the state government shutdown.

“This will hurt a lot of people,” said Commissioner Wade Pavleck as the board and staff discussed how to provide information about the change and how it came about to local taxpayers.

Collectively for Koochiching County, a cut of more than $700,000 in local tax levies and budgets would have to occur “to make the property owner whole for this state decision to balance their budget. This is not the fix for the public of Koochiching County,” said the statement.

The statement says that some state legislative leaders will say the protection of the taxpayer is with the local units of government, which could have cut their tax levies to assist the property owners through this program change

“However, the state did not provide any relief from state mandated services to be delivered at the local level or give local units of government the due process of the legislative session to review what impact this would have on providing essential services at the local level,” says the statement.

“Rarely is it beneficial to play a blame game when faced with difficult issues,” the statement continues. “However, there is merit to providing accurate information to the taxpayers that the cause of their tax increase is a result of the state’s action, not the local units of government.

“It would have been far more honest and fair to all property owners if the governor and GOP-controlled Legislature had simply axed the homestead credit and accepted full responsibility for raising local taxes. But instead, they left the local units of government holding the bag to inform property owners that their taxes increased due to a state budget deal.”

The following governments would have needed to make the following cuts to their 2012 budgets to make up for the elimination of the market value homestead credit:

• Koochiching County: $431,654

• Big Falls: $1,928

• International Falls: $259,985

• Littlefork: $18,938

• Mizpah: $432

• Northome: $6,434

• Ranier: $4,871

Total within Koochiching: $724,242