Every year in Minnesota, there are lots of reasons property taxes can go up or down. This year there are even more, as homeowners and business people are learning when they open their proposed property tax statements.
County auditors across the state have been mailing out the notices, providing property taxpayers a first glimpse of what their tax bill will look like in 2012 and showing the effect of recent state tax law changes.
The numbers vary, generating relief for some and angering others.
Rural St. Louis County homeowner Rick Ebert didn't catch the break he was hoping for.
"Ours went up again this year," he said. "That means I've got to figure out where I'm going to come up with more money to pay my taxes."
“There's winners and losers, unfortunately.”Don Dicklich, St. Lous County auditor-treasurer
Ebert lives in Meadowlands Township northwest of Duluth. In 2011, he paid about $181 in township taxes. The statement shows that in 2012 Ebert's township tax will rise to about $227. A local school levy bumped his tax bill up another $154. In all, including St. Louis County taxes, the taxes on Ebert's home will go up by more than 25 percent.
Ebert is also a business owner. He operates Bridgeman's restaurant in Floodwood. Even though the city of Floodwood lowered its tax levy this year, Ebert's tax statement shows he'll have to pay 7.3 percent more in property taxes for the business.
Ebert's commercial property taxes have risen 36 percent since 2002, and he plans to attend a public truth-in-taxation meeting to tell local officials he's angry. Local governments are required to hold public hearings in the coming weeks before finalizing their 2012 budgets.
"I'm going to tell them if this continues, I'm not going to be able to run a business in town," Ebert said. "And I don't feel I'm alone with this either. I think there's other business owners who are in the same predicament I'm in."
The normally complicated Minnesota property tax system got even moreso when the state changed the tax law last summer as part of the deal that ended the state budget stalemate.
Under the old system, homeowners with homes worth $413,800 or less received a homestead tax credit that reduced their property tax. The state was then supposed to reimburse local governments for revenue lost as a result of the credit.
“If this continues, I'm not going to be able to run a business in town.”Rick Ebert, Floodwood business owner.
The new system eliminates the credit and creates a tax exclusion, which allows property owners to pay taxes on only a portion of their property's value.
But that raises less money for local governments. It causes some tax rates to rise just to bring in the same tax revenue cities received the previous year.
St. Louis County Auditor-Treasurer Don Dicklich said some property owners are seeing double-digit tax hikes as a result of the homestead credit change. He said outstate property is generally getting hit harder than property owners in the Twin Cities.
"Because they've got that more diversified and bigger tax base, larger tax capacity if you will, they're not being impacted as greatly," Dicklich said. "So it's just another example of how it hurts some people. There's winners and losers, unfortunately."
Tax increases for some property owners are being buffered by a drop in the assessed market value of their property. Andy Thienes of Blackduck opened his tax statement recently to find the estimated market value of the downtown restaurant he co-owns with his father dropped 9 percent.
"I was scared," Thienes said. "And when I saw it, I was actually relieved because it was different than what I was expecting. I was expecting a large increase and it wasn't there."
With the drop in taxable property value, the taxes on Thienes' business went up less than 2 percent.
The same thing happened to Thienes' rural Blackduck home. His tax statement shows the market value on that property dropped 15 percent. Even so, his taxes in 2012 will go up about 5 percent.
Other businesses weren't so lucky. Beltrami County officials say for commercial property that stayed the same in value, taxes went up around 15 percent in Blackduck. Thienes worries that those kinds of tax hikes will spell a faster decline of his hometown.
"You can't keep placing a higher burden of taxes on the business owners, especially when they're losing money or they're barely making it," Thienes said.
Officials in many Minnesota counties are preparing for what they expect could be a flood of calls from people who saw their taxes go up. Some counties even mailed explainer notes along with the tax statements.
Duane Ebbighausen, the assessor in Beltrami County, figures the impacts of tax changes are just beginning to sink in.
"We expect a lot of calls, and we're just going to have to explain the best we can what happened without trying to make it too complicated," Ebbighausen said. "But property tax in Minnesota is a confusing item."