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Baxter residents can expect property taxes to increase in 2023

The Baxter City Council met in a workshop Tuesday, Nov. 15 to discuss the budget further.

Baxter City Council and staff sit around a long table facing a large monitor as they look at numbers and discuss budget plans for 2023.
The Baxter City Council and city workers sat down to discuss the budget plans for 2023 during a workshop on Nov. 15, 2022.
Sara Guymon / Brainerd Dispatch
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BAXTER — Baxter residents are likely to see a property tax increase in the next year even if there is no increase in the property tax as residential home values increase an average of 32.20%.

The Baxter City Council met in a workshop Tuesday, Nov. 15, to discuss the budget further before it is finalized Dec. 6. The tax capacity rate is projected to decrease from 57.529% in 2022 to 52.925%. There will also be a tax burden shift from the commercial and industrial classification to residential due to the significant average increase in existing residential valuations, fueled by home sale prices.

Data the council considered looked at several options with preliminary property taxes increases of 9.9%, 9.7% or 7.3% or a zero percent increase as staff looked for additional budget cuts from the preliminary levy , which set a ceiling for how high the levy could be. All numbers are estimated with this proposed budget, which has yet to be finalized.

The city’s levy for 2022 was $7,739,000 and the 2023 adopted preliminary levy is $8,504,500, an increase of $765,500.

A tax levy increase of 9.9%

With a tax levy increase of 9.9%, a residential home valued at $76,000 in 2022 with an estimated market value increase to $100,472 in 2023, is estimated to have a property tax increase of 45.8% — from $262 to $383, or $120 more in taxes paid from 2022 to 2023.

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A residential home valued at $175,000 in 2022 could increase to an estimated value of $231,350 in 2023. From the city’s preliminary estimates for the property tax impact, the taxes paid by this homeowner could increase by 28.8% — from $883 to $1,138 with a $254 difference from 2022 to 2023.

A residential home valued at $250,000 in 2022 could increase to an estimated value of $330,500 in 2023. The tax paid by this homeowner is estimated to increase by 26.3% — from $1,353 to $1,710 with a $356 difference from 2022 to 2023.

A small commercial or industrial property valued at $500,000 in 2022 could increase to an estimated value of $509,750 in 2023. The tax paid on the property would decrease 6.1% — from $5,321 to $4,999 with a $323 savings from 2022 to 2023.

A tax levy increase of 9.7%

However, the preliminary levy has potential to go down to 9.7% with a $14,900 reduction to the Oscar Kristofferson Park outdoor ice rink and warming house.

With this change, using the same scenario with the average home value increase for 2023, a residential home valued at $76,000 in 2022 would have a 45.6% tax increase. The estimated average property tax would increase from $262 to $382, or $120 more from 2022 to 2023.

A residential home valued at $175,000 in 2022 would have a 28.6% tax increase. The average property tax would increase from $883 to $1,136 with a $252 difference from 2022 to 2023.

A residential home valued at $250,000 in 2022 would have a 26.1% tax increase paid by the homeowner. The average property tax would increase from $1,353 to $1,707 with a $353 difference from 2022 to 2023.

A small commercial or industrial property valued at $500,000 in 2022 would pay less by 6.2% and the tax paid on the property would reduce from $5,321 to $4,990, for a $331 decrease from 2022 to 2023.

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A 7.3% levy increase

Another proposed change would be finding an additional $185,100 to cut from the budget for a 7.3% levy. This levy would be below the current 7.7% inflation.

With this change, a residential home valued at $76,000 in 2022 with the same value increases as the previous scenarios for 2023, would have a 42.4% tax increase. The estimated property tax would increase from $262 to $374, a $111 difference from 2022 to 2023.

A residential home valued at $175,000 in 2022 would have a 25.8% tax increase. The estimated property tax would increase from $883 to $1,111 for $228 more from 2022 to 2023.

A residential home valued at $250,000 in 2022 would have a 23.3% tax increase. The estimated property tax would increase from $1,353 to $1,669 or $316 more from 2022 to 2023.

A small commercial or industrial property valued at $500,000 in 2022 would decrease 8.% and the tax paid on the property would reduce from $5,321 to $4,881, with a $440 difference from 2022 to 2023.

The tax capacity for each property is based on the taxable market value, which equals the property’s estimated market value minus any tax exemptions, deferrals or value exclusions — like a homestead market exclusion. To determine the tax capacity, the taxable market value is then multiplied by the property’s classification rate, which is set by the state and differs based on how the property is used — residential, commercial, agricultural, etc.

If the city’s levy stays the same and its total tax capacity increases, the tax rate decreases. If the city’s levy stays the same and its total tax capacity decreases, the tax rate increases.

The council gave no opinions on what they are leaning toward during the meeting. They previously approved the 2023 preliminary levy with 9.9% increase from 2022 with the hopes of lowering it further.

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If the overall preliminary levy for 2023 did not increase at all from 2022, residents would still see an increase based on rising home values. A home valued at $76,000 in 2022j with the average estimated market value increase, would pay $86 more in taxes in 2023, representing a 32.7% increase. The home valued at $175,000 in 2022 would pay $152 more, a 17.2% increase. The $250,000 home in 2022 would pay $202 more, or a 14.9% increase. The small commercial/industrial property valued at $500,000 in 2022, would pay less — $773 less for a decrease of 14.5% in the tax impact.

Rising revenues from sales and lodging taxes

Sales and lodging taxes also increased following the pandemic. The proposed budget reflects an estimated revenue of $448,900 for lodging tax which is up from $326,100 in the 2022 budget. The lodging taxes account for the collection of lodging tax revenues and the promotion of tourism for the area and lodging in the city with 95% of funds going to Visit Brainerd Lodging Association for marketing efforts and $22,400 or 5% to the city to administer the fund. The large increase puts tourism and lodging in close comparison to 2019 prior to the COVID-19 pandemic. The local option sales tax revenue is forecast to bring in $3,078,000, an increase of $138,000 from 2022. Year to date sales tax through May is up 15.9% from last year.

There is also a projected revenue of $90,000 from the motor vehicle excise tax. Baxter collects a maximum of $20 for its vehicle excise tax on each vehicle for sales of motor vehicles by dealers. The motor vehicle excise tax was down 17.6% as the city noted automobile chip shortages continue to dampen vehicle production.

Notable expenses

Some notable expenses and changes in the proposed budget include:

  • $40,000 for fuel expenses, increased $2,000 due to rising gas prices.
  • $12,900 for Heartland Animal Rescue Team animal control and $21,000 for animal control officer contract, an increase of $1,700 from the previous year.
  • $19,600 funding to The Center, increased 3.16% from the previous year.
  • $110,000 for street salt and sand, increased $20,000 from the previous year.
  • $71,000 for contract plowing, increased $17,000 from the previous year.
  • $165,000 for crack sealing, increased $62,000 from the previous year.
  • $20,000 for professional services for tree removal in street right-of-way, increased $5,000 from the previous year.
  • $50,000 for vehicle and machinery repair, increased $20,000 from the previous year.
  • $21,500 for landscaping, increased $3,500 from the previous year.
  • $37,000 for the Brainerd Lakes Area Economic Development Corp., increased $1,000 from the previous year.
  • $95,100 funding for Knollwood Full Depth Reclamation Improvement Project.
  • $180,200 for 2023 full depth reclamation street improvements.
  • $621,900 estimated payment to Brainerd for airport revenue sharing agreement. 
  • $5,330 to the Initiative Foundation. 
  • $8,000 for the Fourth of July fireworks. 

Next steps

The city council may schedule additional work sessions for budget discussions.

The city will host a public informational meeting to review the proposed budget and property tax levy at 6 p.m. Dec. 5 at Baxter City Hall.

The council is expected to adopt a final budget and tax levy at the Dec. 6 meeting.

SARA GUYMON, Brainerd Dispatch, staff writer, may be reached at 218-855-5851 or sara.guymon@brainerddispatch.com

Sara Guymon recently joined the Brainerd Dispatch as a staff writer.
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