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Crow Wing County Board asks Legislature to act on property tax relief

The request for action comes as county officials continue to be inundated with residents expressing frustration over the rise in their property values and what that increase might mean for their tax bills.

Crow Wing County commissioners speak in the boardroom during a meeting
Commissioner Paul Koering, center, discusses increasing property values in Crow Wing County and how it impacts the taxes people pay during the Tuesday, May 10, 2022, County Board meeting.
Chelsey Perkins / Brainerd Dispatch
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BRAINERD — Alleviating the property tax burden for those least able to afford increases should be a priority for the state Legislature, the Crow Wing County Board said Tuesday, May 10.

Commissioners voted unanimously to send a letter to lakes area legislators, asking them to support changes to state law that would expand the impact of the homestead market value exclusion and make more people eligible for the homestead credit refund. These tools are outdated and fail to reflect an inflationary environment in which property values are skyrocketing, the board said.

“The biggest thing is that we want the state to do something now,” said Commissioner Steve Barrows. “This cannot wait until the next legislative session. This has to happen now for the taxes that we’re going to all pay in 2023.”

The request for action comes as county officials continue to be inundated with residents expressing frustration over the rise in their property values and what that increase might mean for their tax bills.

Meetings of local boards of appeal and equalization — which provide the opportunity to appeal values or tax classifications — saw unusually high attendance in the past month. And the next step for those still dissatisfied, the County Board of Appeal and Equalization meeting set for next month, is likely to require six days or more to include everyone wishing to appear on the agenda. This is typically accomplished in one day.

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“I just want the public to know that we’re trying to — we’re trying to run this county as efficiently and not tax the hell out of you,” said Commissioner Paul Koering. “And I think we’re doing a good job, and I’m really proud of our staff. And I know there’s been some angry people that have came in and are screaming at them (at the land services counter) and made some of the ladies cry, and I just — it ain’t right. They’re just trying to do their job.”

What the Legislature could do

County Administrator Tim Houle drafted the letter to state Sen. Carrie Ruud and Reps. Josh Heintzeman and Dale Lueck just hours after commissioners approved it Tuesday. In the letter signed by Chairman Doug Houge, the board asks the legislators to support increasing the property value at which the homestead market value exclusion applies from $76,000 to at least $110,000, an amount more in line with the average price of a starter home in today’s market.

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Property is classified by the state as “homestead” when people occupy the property they own as their sole or primary residence. It includes all property used as a residence, including gardens, garages and outbuildings.

“It is critically important that this get done yet this legislative session to avoid an unnecessary shift to our seniors on fixed incomes,” the letter states. “We know it is late in the session, but it is never too late to do the right thing."

During Tuesday’s meeting, Barrows suggested the Legislature take it a step further and tie the exclusion maximum to inflation.

“We know when it’s not adjusted, that hits the lower-income households harder than anyone else, so that’s a problem in our area,” Barrows said.

“With inflation, the formula is outdated,” said Commissioner Rosemary Franzen. “This is a stressful time. We need to voice our concerns.”

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Commissioners also asked legislators to support increasing investment of the state’s surplus in the low-income tax relief program. The program provides refunds to those who own homestead property and earn less than $119,790 annually as a household, according to the Minnesota Department of Revenue.

And the Legislature should consider lowering the threshold at which people may qualify for relief based on the percent increase in their property taxes year over year, the letter stated. Currently, those who experience a 12% or higher increase in their property taxes qualify, but commissioners said that percentage should be lowered to 10%.

“We do not seek this relief because we want to spend more. To be clear, we do not,” the letter stated. “We have already directed staff that our levy target for 2023 is less than a 3% increase. We are not concerned that our spending will drive a tax increase; we are concerned that the erosion of the value of the Market Value Exclusion has shifted the tax burden to those least able to afford it. They need our help and they need it now.”

The omnibus tax bill passed May 4 by the Minnesota House of Representatives includes an increase in the value threshold for the homestead market value exclusion to $95,000. It also would reduce the threshold to qualify for a refund due to property tax increases from 12% to 10%.

The massive bill would result in $1.65 billion in tax reductions and credits in the 2022-23 biennium and $1.6 billion in the next biennium, according to the Department of Revenue. But it passed on a party-line vote of 69-62, with House Republicans arguing the bill didn’t go far enough to cut Social Security taxes and income taxes remain too high.

The Senate has not yet passed its own version of a tax bill.

How property valuation works — and what that means for taxes

County officials last month sought to clarify the relationship between valuation and taxes while also presenting statistics to show Crow Wing County is not alone in its steep value increases — even though it appears to be experiencing some of the biggest climbs in the state.

Residential and seasonal/recreational property values in Crow Wing rose at an average rate of 35%, just topping Cass at 31% and Aitkin at 29%, based on data Land Services Director Gary Griffin said was gathered from other county assessor’s offices. The estimated market value as a whole in Crow Wing, including all types of properties, was $17.1 billion, more than 66% higher than the value in 2016.

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The rise in values is a direct reflection of the housing market, which indicates people are willing to pay higher prices for a tight inventory of housing stock. And real estate changed hands last year in Crow Wing County at levels not seen since before the Great Recession, Griffin said.

Sales of comparable properties are the basis of the property valuation process, which is conducted by county government officials but is driven by rules set by the state Legislature.

The values must fall within 90%-105% of arm’s-length sales, a range established by the state. If they stray from that range, rules require the county to raise or lower all property values accordingly. And there’s a lag built into the system: property values as of January 2022 are based on sales between October 2020 and September 2021.

What residents pay in property taxes is determined by a multitude of factors — most importantly, how much money local governments decide to collect as part of their property tax levies to cover their spending. The recent valuation notices apply to the 2023 tax year, for which county commissioners and other jurisdictions will not set levy amounts until December.

A frequent metaphor employed by Houle and other county officials is to envision the property tax levy as a pie. Each county taxpayer is responsible for a slice of the pie, and the size of that slice is determined by one’s property classification and value. No matter what happens to values overall, however, the size of the pie itself does not change once the County Board sets the dollar amount of its final levy. The same pie metaphor applies to school districts, cities, townships and other special taxing districts, the levies for which combine to impact one’s overall tax bill.

Five main reasons exist for why a property owner might see a higher tax bill one year to the next, a land services news release explained. These include increases in government spending, a property’s market value decreasing less than other properties or increasing more than other properties, a change in property classification, or changes to state rules. This happened in 2011, for instance, when the state converted the homestead credit to a homestead exclusion.

CHELSEY PERKINS, community editor, may be reached at 218-855-5874 or chelsey.perkins@brainerddispatch.com . Follow on Twitter at twitter.com/DispatchChelsey .

Related Topics: CROW WING COUNTYCROW WING COUNTY BOARDGOVERNMENT AND POLITICSTAXES
Chelsey Perkins is the community editor of the Brainerd Dispatch. A lakes area native, Perkins joined the Dispatch staff in 2014. She is the Crow Wing County government beat reporter and the producer and primary host of the "Brainerd Dispatch Minute" podcast.
Reach her at chelsey.perkins@brainerddispatch.com or at 218-855-5874 and find @DispatchChelsey on Facebook, Twitter and Instagram.
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