Mendota Heights Property Tax Payers To See Increases, Despite Lower Levy, Spending
Declining property values and a new state program will increase the tax rate 8 percent.
Mendota Heights City Council approved a reduction in both the city’s levy and the city’s budget for 2012 at their meeting Tuesday night, but residents could see a small increase in city taxes due to a new state program.
“This is a very responsible budget, and everyone worked very hard to keep expenses in line,” said Finance Director Kristen Schabacker.
No residents spoke at the public hearing that accompanied the agenda item.
The final levy approved is $58,379 less than the preliminary levy proposed in September, due to three refunded bonds that have reduced the city’s debt payments.
Compared to the 2011 levy, the final levy will decrease by .51 percent to $6.17 million.
The general fund budget will increase by 1.9 percent from the 2011 budget, mostly due to increases in police and fire, while the total budget will decrease .78 percent to $10.4 million. One position in administration and one position in code enforcement have been eliminated for 2012, providing additional savings.
"The message is again the city is being very cautious with your tax dollars," said Mayor Sandra Krebsbach, who said the position reductions have not affected services.
Why the Tax Rate Rises
Schabacker explained the transition from a Homestead Market Value Credit to a Homestead Market Value Exclusion program. The change was decided upon by the Minnesota Legislature as part of the state’s budget balancing efforts.
In past years under the credit, property taxes were directly reduced based on the value of the property, and local governments were reimbursed to varying degrees by the state for the lost revenue.
This year, that program was ended and replaced with the exclusion, which applies to properties valued under $413,800. Under the exclusion program, the value of a property is “reduced” for tax purposes, and the state does not reimburse local government for the reduction in property taxes paid.
By reducing the overall market value of the city for tax purposes, the tax rate rises to capture the same amount of dollars. For Mendota Heights, the rate rose 8.83 percent.
“This is not unique to Mendota Heights. Most cities are going to see an increase in their tax rate,” said Schabacker. In an example she provided, a home that was valued at $300,000 in 2011 will pay approximately $919 in city taxes for 2012, $11 more (1.2 percent).
The rate is also impacted by declining property values. Residential property values in Mendota Heights declined by 5.78 percent over the past year.