Many homeowners to get smaller property tax bill in 2013by Curtis Gilbert, Minnesota Public Radio
ST. PAUL, Minn. — When Jake Sieg became Lac Qui Parle County auditor five years ago, farmland in the area sold for $1,000 an acre or $1,500 at best.
Today that same land regularly sells for $5,000 an acre and some parcels have fetched as much as $9,000 an acre.
"The big question is: Where is it going to stop?" Sieg said of rising property values. "From what we understand, as long as commodity prices stay strong, they're going to keep on increasing."
Thanks to the agricultural boom, in many rural counties farms make up an increasing share of the tax base. That is one reason many Minnesota homeowners will see smaller property tax bills next year.
The tax break isn't coming because of a change in state policy or newfound efficiency in local governments. Instead, tax bills are falling because the property tax burden is shifting onto farms and businesses.
That's music to the ears of Alice Ferdinand, who over the last 10 years saw the value of her south Minneapolis home skyrocket, then plummet. During that same period, her property taxes went only one direction.
"Taxes have always gone up," Ferdinand said. "One year, there was a 12-percent increase. One year it was almost 17 percent."
Ferdinand was stunned to learn that, next year, her taxes are expected to fall. But she isn't complaining.
"I'm very happy," she said. "Never turn down money that reduces the bills you have to pay."
Ferdinand's tax break won't be huge. She'll likely save about 2 percent , or about $60 dollars, estimates Ken Rowe, administrative manager in Hennepin County's property tax division.
Most of the county's other homeowners also can expect lower tax bills, he said.
"I think that most owners of homestead property are going to be pleasantly surprised," Rowe said. "I think that there are a lot of commercial, and non-homestead and apartment owners that are not going to be quite as pleasantly surprised by what they see on their tax bills."
SHIFTING THE TAX BURDEN
The overall tax burden isn't diminishing. Instead, it's shifting because some sectors of the real estate market fared better than others in the annual tax assessments.
"Homestead property is continuing a decline," Rowe said, "whereas commercial property has kind of stabilized in value."
Property tax officials throughout the seven-county Twin Cities metro area report a similar trend, and they also expect the tax burden to shift from homeowners to people who own other types of property.
The effect on homeowners will be the same: they'll pay less in property taxes; other land owners will pay more.
That's unusual, said Steve Hinze, who tracks property tax trends for the non-partisan House Research department at the state Legislature. His data show only one year in the last 10 when the average property tax burden on homeowners dropped.
"In the early part of this decade, home values tended to be rising at particularly fast rates," Hinze said. "So homes really were tending to take on more than their share just because of that.
"In the last four years or so, when home values have been stagnant or falling, the state has been in budgetary trouble and has really pulled back aids to cause local governments to have to levy more," he said. "So even though home values have fallen off, in most years homes have still seen an increase in taxes on average."
Hinze is quick to note that even next year plenty of homeowners will still see a tax hike.
Those lucky enough to live in a neighborhood where homes values did better than average may see a bigger tax bill next year. Also, in places where the city, school district and county raised their levies significantly, such actions could result in tax hikes for everyone who lives there.
But based on the data currently available, Hinze's research suggests most homeowners will be relieved when they open their Truth in Taxation notices next month.
The property tax burden on Minnesota homeowners has risen sharply over the past decade, but next year the Legislature's House research department predicts they will see some modest relief. There has been only one year in the past ten when the amount of property taxes paid by homeowners across the state has dropped. View larger version of this chart
Graph by Robert Boos, Minnesota Public Radio
- Morning Edition, 10/03/2012, 7:20 a.m.