Understanding the property tax process

Local property tax valuation and classification notices are currently being sent to all property owners in Crow Wing County. These notices inform residents of the assessed value of their property as of Jan. 2 and are based on sales of comparable properties in 2014 and 2015. The assessed values then are used to calculate taxes due and payable in 2017.

Highlighted below are some of the major components-and challenges-of the property assessment process and issues to be aware of when reviewing valuation notices.

• A state-prescribed process. Although counties perform the bulk of assessment work in Minnesota, the policies and procedures they follow are determined by the state Legislature. State rules govern how counties classify and value these properties, based on physical characteristics, use of the property, and sales of comparable properties during a prescribed period.

Counties can only use "arms length" transactions for comparable sales, which, for example, preclude the use of foreclosure sales when determining values. In addition, state rules require Crow Wing County assessed values to fall within a statistical range determined by the state. If an assessment is lower than or higher than that range, the state requires all property values to be raised or lowered accordingly.

• The time lag confusion factor. The state's assessment rules also require counties to use property sales that occurred as long as 18 months ago to determine assessed values. This time lag creates confusion when current market conditions do not reflect sales that occurred up to 1 1/2 years ago. For example, the current notices reflect the 2016 assessment based on sales of comparable property that occurred between October 2014 and September 2015. The result: 2016 assessed values may not reflect current market conditions. In periods when real estate prices are rising, this time lag delays increases in valuations. But during time of declining values, it understandably generates inquiries from taxpayers concerned that the assessment does not reflect current market conditions.

• Assessment versus taxes. Although residents are rightly concerned with the assessed value of property, the spending decisions of local governments-county, cities, townships and school districts-determine whether tax rates go up or down. For example, if the assessed value of all properties in Crow Wing County went down equally by 10 percent, property taxes could still be higher if the budgets of local governments were higher. Assessment valuations are determined without regard to tax rates, but according to comparable sales values. The tax rate is determined at a later point, based upon the level of spending approved by local elected officials at all local levels. Local units of government determine how much they need to run their operation-values are only used to determine how big a share of that spending each property owner will have to pay.

• Slicing the spending pie. Paying property taxes is like slicing a pie. Government spending is the pie. The value of each property determines how big a slice of that pie each property owner pays in taxes.

There are five main reasons why a property owner may see higher taxes one year to the next:

• Government spending went up. It is important to note Crow Wing County reduced spending in 2016. This is the sixth year in a row the county board has reduced county tax levy spending.

• The property's market value decreased at a lower rate than other properties.

• The property's market value increased at a higher rate than other properties.

• The property classification changed.

• The state changed the rules, as it did in 2011, converting the homestead credit to a homestead exclusion.

If none of these things occurred, property taxes owed should not be more from one year to the next.

Questions or concerns. Those with concerns about a valuation notice are encouraged to do the following:

• Check the value and compare it to last year. Some areas in the county have seen an increase in value, but not all.

• Check to see whether the classification of the property has changed from last year. The Legislature often changes the property classifications counties utilize, and a change in classification could change a tax rate.

• Check the spending levels of local governments-county, cities, townships and school districts-have they gone up, down or stayed the same?

• Note valuation is based on property sales during the period of October 2014 to September 2015, and therefore, may not reflect market conditions that existed after that time period. Again, this is part of the state-prescribed process counties must follow.

Those who still have questions are encouraged to visit Crow Wing County's website at www.crowwing.us or call the land services office to speak with one of the assessors to answer any questions. Assessors will address concerns in a courteous and professional manner.

The county expects to be held accountable to its own standard of excellent customer service and well-managed policies and procedures. Assessors are located in Brainerd on the main floor of the Land Services Building, 322 Laurel St. The phone number is 218-824-1010 and the email address is landservices@crowwing.us .

GARY GRIFFIN is the land services supervisor of the assessing unit in Crow Wing County Land Services.