Homeowners ask why property valuations are up

Gordon Folkman
Gordon Folkman, director of the property tax division for the Minnesota Department of Revenue. "If you were to ask people which taxes they like the least, they'll always point to the property tax," he said. "Part of that is driven by the fact that it's a very complicated tax."
MPR Photo/Laura Yuen

If you've ever been to a truth-in-taxation hearing, you know how heated they can get. But last night's gathering in Ramsey County was a real show-stopper.

"I'm going to get really pissed in about 10 seconds if someone doesn't explain this to me."

Christopher Rocco of St. Paul is big enough to be a bodyguard. He's standing an inch from the county assessor, arguing that the valuation for his townhouse is too high.

According to the county, the value of Rocco's home is $120,000. But he says that can't be right. Seven of the 21 units in his complex are in foreclosure. "They're selling for $20,000 apiece. So if they're trying to tell me that they're going to tax me on a $120,000 home when everyone's property values is $20,000, I'm not going to stand for that."

Taxpayers wait
Taxpayers wait to speak to an appraiser at the Ramsey County truth-in-taxation hearing Thursday night. Many were wondering why their taxes were going up when their homes were worth less in the current housing slump.
MPR Photo/Laura Yuen

But he will have to stand for it, at least for the next tax year.

Homeowners who want to appeal their property valuations need to do so in the spring, not in December. By the time year-end truth-in-taxation hearings roll around, it's too late to make any changes for the following year's tax bills.

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"What we can do tonight is provide peace of mind or understanding. But most of the time, that's it," said Stephen Baker, the Ramsey County assessor.

Last spring, about 3,000 people contested their home values. Baker said that figure could double next year.

He said the economy has people concerned about controlling their expenses, including taxes. And that could explain why hundreds of people turned up at last night's hearing.

Stephen Baker
Ramsey County Assessor Stephen Baker explains property taxes to homeowners at the truth-in-taxation hearing.
MPR Photo/Laura Yuen

"I've been at the county eight years, and this is by far our biggest turnout."

But many residential property tax bills across the metro are actually falling, holding steady, or seeing slight increases. In Ramsey County, the owner of a typical home, valued at $183,000, would pay just an extra six-dollars in taxes next year.

Still, officials beyond Ramsey County are expecting more homeowners to challenge the values of their homes next spring for taxes payable in 2010.

Wayne Wolden, the mayor of Wadena in central Minnesota, said there is a sad irony to that scenario.

"It's sad when people take such pride in their homes and come to that meetings to say, 'You've got my home valued too high.' That should be your goal, to have your house value grow. This should be your nest egg. And we've got people arguing the value of their homes, simply in hopes of their taxes will go down."

But why would someone's home value increase in this troubled housing market?

"Assessors are working with a bit of a lag here," said Gordon Folkman.

Folkman directs the property tax division for the state's Revenue Department. He said the information that assessors used to determine home values for next year was actually collected in 2006 and 2007, before this year's economic meltdown.

Another reason why some people are seeing higher tax bills is because of the final phasing out of the limited-market value, which capped how much a property's taxable value could increase from one year to the next.

Folkman also points out that even if your home value does go down, it still doesn't mean you'll see a lower tax bill.

"The primary reason that property taxes change is that it's a function of a budget decision by cities, counties, school districts."

In other words, these agencies decide how much money they need to raise to balance their budgets -- and then they set their levies to collect that amount. As property values decline, jurisdictions can simply raise the tax rate to compensate for the lower values.

As far as how that tax will be distributed, it's not enough to know that your home value went down. Folkman said it is more important to know how your home value changed relative to other people's values in your city.

"Did my house or property go up more than my neighbors'? Did it go down? Did it go up as fast? How did it compare with the rest of the neighborhood? If your property values declined more or increased more, it would have a different impact on you," Folkman said.

Homeowners can thank commercial properties, which have been increasing in value, for taking on more of the tax burden as the value of residential properties have gone south.

So next year, if you're going to contest that your home value is too high, Folkman said it may work to your advantage in lowering your tax bill.

But if you are one of many homeowners successful in making that case, you each could end up paying the same share of the tax. And that would not result in a lower tax bill.