By Bob Klemenhagen
MnSF property tax/income security committee

Property taxes continue to increase year after year at a rate much faster that homeowner income. Despite likely property tax increases projected for 2007 in the double-digit range, it's hard to get anyone's attention. Both major political parties announced that property taxes were their No. 1 priority for the last legislative session.  However, it ended with no action or even a plan.

The Senior Federation has proposed two possible homestead property tax reform solutions, HF0992/SF1560 and HF2469/SF2279, that base taxation on ability to pay. However, it has been a constant struggle with legislators to get them to even hear our long-term solutions. In the last session, neither the House nor the Senate tax committees would hold a hearing on these bills, despite being authored by leaders in both parties. Rather, both parties have chosen to propose short-term relief solutions that are certainly, at best, band-aid, short-term solutions to problems demanding long-term fixes.

Minnesota's legislators say cities, counties and school districts are the reason for property tax increases. Cities, counties and school districts say legislators are the principal reason for property tax increases. The truth may lie somewhere in between. Clarity and transparency are needed. The relationship between state and local governments be reestablished so they work together on solutions instead of pointing fingers at each other.

Minnesota statute defines how property tax must be calculated and allocated by cities and counties. It requires that the starting point for calculating property tax is the estimated market value. Yet EMV is a subjective guess, at best. Additionally, EMV of different property classes (e.g., homes, commercial/industrial, etc.) are calculated differently, resulting in apple and orange valuations. 

Commercial and industrial property valuations are often based on income generated, which is never the case for home valuation. Recent commercial and industrial EMV has been relatively flat while home EMVs have increased dramatically.  The property tax burden, as a result, has shifted from commercial and industrial property to homes.

The limited market value (LMV) program designed to protect homeowners from big property tax increases resulting from rapidly increasing valuations, ends up shifting such tax increases to other property owners not experiencing such valuation increases. The state helps refund and deferral programs, but the cost of these programs is getting out of hand and clearly demonstrates the need for property tax reform, not relief.  The current market-based program is broken beyond repair.

Minnesota requires cities and counties to pay sales tax on items they purchase. Thus, because this sales tax is paid by cities and counties, it must be included in their tax levy and thus is a part of the property tax assessed to and paid by all property owners. As you know, sales tax finances state services and not local services. Thus, to this extent, property taxes finances state versus local services.

Minnesota requires that homeowners be given a homestead tax credit, but since 2003, the state has failed to pay 102 cities for this credit. So these cities have had to increase their tax levy to give homeowners this credit.

In past years, Minnesota has reduced local government aid (LGA) to communities and instigated a corresponding property tax increase to maintain existing services.

Finally, while some state school funding was restored last year, it is far from restoring prior year cuts. School districts have had to ask for referendum levies just to maintain essential services.

If you, as a homeowner, care about your property taxes, take action. The Minnesota Senior Federation has long held the position that our property tax system needs to be reformed. The homeowner property tax system must be fair, understandable and assessed accurately on a consistent, uniform and objective basis. It should be based on a homeowner's ability to pay versus the ever-increasing and subjective market value of a home. The property tax system should encourage homeownership and home maintenance - not force homeowners out of their homes.

If you agree with the Senior Federation's position, then vote your convictions in the upcoming election. Find out where the governor and the legislators stand on property tax reform versus short-term relief. Attend one of the candidate forums the Minnesota Senior Federation will sponsor this fall.

If you do not agree with the estimated market value on your home, meet with your assessor. If you believe there are problems with your city, county or school district budget, participate in budget meetings. Do not wait until the November truth-in-taxation hearings to voice your concern, participate now.

If you care about property tax increases, act. If you do not act, don't complain; it's as simple as that.