Limited Market Value Report

Transcription

1 Limited Market Value Report 2005 Assessment Year Tax Research Division March 1, 2006 This report is available on the web at

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3 March 1, 2006 To The Members of the Legislature of the State of Minnesota: I am pleased to transmit to you the Limited Market Value Report for taxes payable 2006, undertaken by the Department of Revenue in response to Laws of Minnesota for 1993, Chapter 375, Article 5, Section 42 regarding the market value exclusion under Minnesota Statutes, Section , Subdivision 1a. The report provides summary and municipal tables on the market value limitation exclusion for farm, residential and seasonal recreational residential property. The market value exclusion for this limitation for taxes payable 2006 sums to $32,495,299,823 at the statewide level, or 7.9 percent of the total taxable market value of the limited classes of property. Minnesota Statutes, Section 3.197, specifies that a report to the Legislature must include the cost of its preparation. The approximate cost of preparing this report was $3,300. Sincerely, Daniel A. Salomone Commissioner 600 North Robert Street Minnesota Relay 711 (TTY) St. Paul, MN An equal opportunity employer

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5 Executive Summary This report presents information on the effects of Minnesota s Limited Market Value law. The law, enacted in 1993, currently excludes from taxation annual increases in the market value of favored properties that exceed 15% of the prior year s taxable market value, or 25% of the difference between the current estimated market value and the prior year s value. The law defines favored properties as farms, residential homesteads and non-homesteads, seasonal recreational residential property (cabins), and timberland. Under current law, this limitation will end after taxes payable in Payable 2010 taxes will be based on full estimated market valuations without this limitation. Over the past 30 years, governors and legislatures have been very concerned about rising property taxes, particularly on residential homesteads. Enactment of the Limited Market Value law in 1993 was one of many attempts to slow the growth in property taxes, particularly for the favored classes, since the late 1960s. Absent other mitigating policies, preferential valuations redistribute local property tax bases, shifting taxes across and within classes of property. It decreases taxes on some properties, while increasing taxes on others. This is the 13 th annual report on the impacts of the limitation. It is prepared each year at the request of the legislature (Law of Minnesota, 1993, Chapter 375, Article 5, Section 42). Key Findings Statewide Impacts Taxes Payable in 2006 Minnesota s Limited Market Value law has excluded nearly $32.5 billion in property valuation, statewide. This represents 7.9% of total pre-limit taxable market value of the limited classes of property (farm, residential, and seasonal recreational residential (noncommercial properties). The percentage of value excluded for payable 2006 (7.9%) is less than the percent excluded in the previous four years, but considerably higher than the annual percentage excluded in the years 1994 though The biggest annual percentage exclusion occurred in payable years 2003 and 2004 (10.8%). As shown in the table and graph on the next page. i

6 ($ Billions) $40 $35 $30 $25 $20 $15 $10 $5 $0 Payable Year Total Market Value Limitation Total Exclusion Amount (Dollars) Percent of Value Excluded 1994 $669,050, % ,047,762, ,615,639, ,045,660, ,529,034, ,389,506, ,621,821, ,573,691, ,961,007, ,879,740, ,862,284, ,067,516, ,495,299, $2.0 $2.5 $3.4 Market Value Limitation, Pay $5.6 $10.6 $21.0 $30.9 $34.9 $33.1 $ Taxes Payable Year Compared to other properties, statewide, the value of seasonal recreational residential property (cabins) was reduced the most, by 22.73% for payable The value of farm property was reduced by 16.32% (including a 31.64% reduction for timberland), homestead residential values were cut by 4.54%, and non-homestead residential values were reduced by 11.87% (Table 2). Major limited properties shared the total $32.5 billion exclusion in the following proportions: 40.9% for residential homesteads, 33.6% for farms, 14.7% for seasonal recreational residential, and 10.8% for residential non-homestead (Table 3). In percentage terms, changes in the taxable share of market value for each property class are relatively small. Farm homesteads share fell from 9.86% to 8.94%, Farm nonhomestead and timberland fell from 3.61% to 3.12%, seasonal recreational residential (cabins) fell from 4.23% to 3.50%, residential homesteads rose from 58.92% to 60.18%, and residential non-homesteads fell from 5.94% to 5.60% (Table 4). ii

7 Metro Area Impacts The total metro valuation exclusion is $13.7 billion. This represents 6.09% of total prelimit taxable market value (Table 2). By class, the excluded value and percent reduction in value were as follows: farms $1.73 billion (31.67%); seasonal recreational residential $81.8 million (23.07%); residential non-homestead $2.43 billion (12.42%); residential homestead $9.48 billion (4.74%) (Table 2). Major limited properties shared the total $13.7 billion exclusion in the following proportions: 69.1% for residential homesteads, 12.6% for farms, 0.6% for seasonal recreational residential, and 17.7% for residential non-homestead (Table 3). Greater Minnesota Impacts The total value exclusion in Greater Minnesota was $18.8 billion, 10.16% of pre-limit values (Table 2). By class, the excluded value and percent reduction were as follows: farms $9.2 billion (14.96%); seasonal recreational residential $4.7 billion (22.72%); residential nonhomestead $1.1 billion (10.79%); residential homestead $3.8 billion (4.11%) (Table 2). Major limited properties shared the total $18.8 billion exclusion in the following proportions: 20.3% for residential homesteads, 49.0% for farms, 25.0% for seasonal recreational residential, and 5.7% for residential non-homestead (Table 3). Limited Market Value Shifts Taxes Across Property Classes Statewide, the Limited Market Value law increased net taxes for residential homestead properties by $17.1 million (0.57%) relative to the tax that would have been paid without the limitation. Taxes on all other classes of property subject to the limitation decreased as follows: Farms -$43.6 million (-10.9%); cabins -$15.1 million (-8.4%); residential non-homestead -$21.4 million (-6.09%) (Table 6). Payable 2006 is the first year in which residential homestead properties as a group statewide have experienced a net increase in property taxes because of the Limited Market Value law. Non-limited properties (apartments, commercial and industrial properties, resorts, public utilities, mineral, railroad and personal property) paid $78 million more in taxes because of limited market value (+3.3%) (Table 6). iii

8 Limited Market Value Shifts Taxes Within Property Classes Homesteads In 2006, the Limited Market Value law increased property taxes on 78% of the state s 1.4 million residential homesteads (1.1 million parcels), by $106 million (an average of $96 per parcel). For the other 22% of residential homesteads (314,000), the law decreased property taxes by $86 million (an average of $273 per parcel). 16% of the parcels with tax increases resulting from the limitation actually had some valuation withheld. This seemingly counter-intuitive result occurs because the limitation on these residential homestead properties was overwhelmed by proportionately larger limitations on other properties. The net tax increase of $20 million on residential homesteads as a group results from shifts off of other limited classes of property. Seasonal Recreational Property (Cabins) In 2006, the Limited Market Value law decreased property taxes on 70% of the state s seasonal recreational residential properties (140,000 parcels) by $23 million (an average of $167 per parcel). For the other 30% of parcels (59,000), the limitation law increased property taxes by $6 million (average of $103 per parcel). The net tax reduction of $17 million for cabins as a group resulted in shifts onto other classes of limited and nonlimited properties. Greatest Degree of Limitation Reductions Occurred in Sparsely Populated Areas and Lake Areas of the State The greatest degree of limitation occurred in north east and north central Minnesota (Table 7 and Appendix Tables A-1 and A-2). iv

9 Table of Contents Introduction...1 How Does the Limit Actually Work?...2 Statewide and Regional Limitation Amounts by Property Class...4 Statewide Changes in Distribution of Market Values Across Property Classes...4 Changes from Pay 2005 to Statewide and Regional Changes in Distribution of Net Tax Amounts Across Property Classes..7 Parcel Level Analysis: Change in Net Tax Within Property Classes...12 Pay 2006 Limitation Reductions at the City and Township Level...14 Appendix Total Market Value Limitation and Percentage Reductions by City and Township.19 Top 140 Cities and Townships Map List of Figures and Tables Figures 1 Limited Market Value Determination Examples Limited Market Value Impact on Homesteads Limited Market Value Impact on Seasonal Recreational Property...13 Tables 1 History of Limited Market Value Law Market Value Limitation by Property Type Statewide and Regional Totals Market Value Limitation Shares by Region Change in Statewide Distribution of Real and Personal Market Values Change in Market Value Limitation by Property Type Change in Distribution of Real and Personal Net Taxes Total Market Value Limitation and Reduction Percentage by City and Township...15 Appendix Tables A-1 Total Market Value Limitation and Reduction by City and Township Farm Homestead, Farm Non-Homestead, and Seasonal Recreation Property...20 A-2 Total Market Value Limitation and Reduction by City and Township Homestead, Farm Non-Homestead, and Seasonal Recreation Property...21 v

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11 Introduction This report presents information on the effects of Minnesota s Limited Market Value law. The law, enacted in 1993, currently excludes from taxation any annual increase in the market value of favored properties that exceeds 15% of the prior year s taxable market value, or 25% of the difference between the current estimated market value and the prior year s value. The law defines favored properties as farms, residential homesteads and non-homesteads, seasonal recreational residential property (cabins), and timberland. Under current law, this limitation will end after taxes payable in Payable 2010 taxes will be based on full estimated market valuations without this limitation. Over the past 30 years, governors and legislatures have been very concerned about rising property taxes, particularly on residential homesteads. Enactment of the Limited Market Value law in 1993 was one of many attempts to slow the growth in property taxes, particularly for the favored classes, since the late 1960s. Absent other mitigating policies, preferential valuations redistribute local property tax bases, shifting taxes across and within classes of property. It decreases taxes on some properties, while increasing taxes on others. Table 1 below shows the history of the Limited Market Value law from its enactment in 1993 through the 2005 legislative changes. Table 1 History of Limited Market Value Law Year Enacted Limit Difference Factor Effective Assessment Year 1993 Established program/sunset 10% 33.33% after 6 years 1994 Sunset one year earlier 10% 33.33% Ends in Extended program and 10% 25% increased number eligible 1999 Increased number eligible 8.5% 18% Extended program, but 10% 15% 2002 established phaseout schedule 12% 20% % 25% % 33% % 50% 2006 Repealed after Assessment Year Delayed phaseout by 2 years 15% 25% % 25% % 33% % 50% 2008 Repealed after Assessment Year

12 In response to the mandate in Laws of Minnesota for 1993, Chapter 375, Article 5, Section 42, this is the thirteenth annual report on the total value excluded from taxation by the limitation law for each property type in each city or township. For taxes payable in 2006, Appendix A includes the mandated table of excluded value by property type for each city or township. Cities or townships with the largest percentage reductions under the limit are shown in rank order in Table 7. The report also summarizes the effects of the limit at the statewide and regional levels, showing how limited market value changes taxable market value for different property tax classes. For residential homesteads and seasonal recreational property (non-commercial), the parcel level analysis in the report identifies the number of parcels that pay less tax and the number that pay more because of limited market value. The sources of information for the summary are the 2005 fall mini-abstract of assessment and the 2005 final abstract of assessment (which report taxable market values after the limitation reduction and other property value exclusions). Each county assessor submitted these abstracts to the Department of Revenue. The limitation amounts by type of property were obtained from data listed on the mini-abstract. How Does the Limit Actually Work? The limitation provision in Section , Subd. 1a limits the annual increase in the market value of eligible properties that is subject to taxation to increases of no more than 15 percent of the prior year s value or 25% of the difference between the current estimated market value and the prior year s value, whichever is greater. The prior year value used in this calculation is the prior year s market value, after limitation, after any reductions for green acres ( ) and open space ( ), and excluding any new improvements made during the year. (This value is before any exclusions for platted lands, this old house or this old business.) As Figure 1 shows, the maximum market value is first determined by increasing the previous year s taxable market value by 15 percent or by taking 25% of the increase in value. The limited market value then is the greater of the two maximum market values. 2

13 Figure 1 Limited Market Value Determination Examples Estimated Market Value Comparison Examples A B C 1) 2005 Taxes Payable Market Value $ 100,000 $ 100,000 $ 100,000 2) 2006 Taxes Payable Estimated Market Value * $ 105,000 $ 130,000 $ 200,000 3) Market Value Increase (2-1) $ 5,000 $ 30,000 $ 100,000 Percentage Increase 5.0% 30.0% 100.0% Maximum Market Value Determination 4) 115% of 2005 Taxes Payable Market Value (1 x 115%) $ 115,000 $ 115,000 $ 115,000 5) 2005 Taxes Payable Market Value Plus 25% of Estimated Market Value Increase [(1 + (3 x 25%)] $ 101,250 $ 107,500 $ 125,000 6) 2006 Taxes Payable Maximum Market Value (Greater of 4 or 5) $ 115,000 $ 115,000 $ 125,000 Limited Market Value Determination 7) 2006 Taxes Payable Limited Market Value (Lesser of 2 or 6) $ 105,000 $ 115,000 $ 125,000 Percentage Increase 5.0% 15.0% 25.0% Example A: Limitation does not apply. Example B: 15 percent limitation applies. Example C: 25 percent limitation applies. * Excluding the value of new improvements for pay

14 The limit applies to farm, residential and seasonal recreational residential (non-commercial) properties for assessment years 1993 to 2008 (taxes payable 1994 to 2009). Timberland is included in farm non-homestead. All rental housing with three or fewer units is included as residential non-homestead property. New ownership of a previously limited parcel does not change the market value limitation. New improvements, whether to land or structures, are excluded from the limit calculation in the year in which the new improvements become taxable, but thereafter become part of the estimated market value used in determining the market value limitation in subsequent years. Limitation does not continue to apply when a property class changes from a favored class to a non-favored class. 1 Also note that the exclusions in law for platted vacant land, green acres and this old house take precedence over the Limited Market Value law and are calculated without taking into account the limitation reduction. 2 Statewide and Regional Limitation Amounts by Property Class The total limitation reduction statewide for taxes payable 2006 is $32,495,299,823. As Table 2 shows, the reduction remains significant. In percentage terms, the value of seasonal recreational residential property was reduced the most (22.73 percent statewide). The taxable value of residential homestead property was reduced the least (4.54 percent statewide). Regionally, the limit reduced the market value of favored classes more in Greater Minnesota (10.16 percent) than in the metro area (6.09 percent). In dollar terms, most of the limitation (57.8 percent) occurs in Greater Minnesota (down by $18.8 billion), where the limit affects farm homestead property more than other property classes. Market values in the metro region were reduced by $13.7 billion (42.2 percent of the statewide reduction). The reduction for residential homestead property statewide was $13.3 billion, with $9.5 billion of this reduction in the metro region. Table 3 provides a percentage distribution of the total limitation by region and property type. homestead reductions account for 69.1 percent of the total reductions in the metro area, but only 20.3 percent in Greater Minnesota. Statewide Changes in Distribution of Market Values Across Property Classes As Table 4 shows, the value limitation reduced the share of taxable market value for most eligible property classes, but in percentage terms the changes are relatively small. The limit reduced the shares of total market value most for farm homestead property, from 9.86 percent to 8.94 percent of total market value. The shares for farm, seasonal recreational, and residential non-homestead property declined. In contrast, limited market value increased the shares for residential homestead, apartment, commercial, industrial, and public utility property. 1 Memo from Michael P. Wandmacher to all county assessors, June 23, 1993, pp Minnesota Department of Revenue, Supplement to the Instructions for Limits on Increases to Estimated Market Value,

15 Table 2 Market Value Limitation by Property Type Statewide and Regional Totals Taxable Market Taxable Market Value before Value after Total Percent Limitation Limitation Limitation Reduction Statewide Farm Homestead $ 48,963,799,982 $ 41,524,897,260 $ 7,438,902, % Farm Non-Homestead 16,159,645,726 13,244,001,520 2,915,644, % Timberland 1,797,289,200 1,228,597, ,691, % Total Farm $ 66,920,734,908 $ 55,997,496,280 $ 10,923,238, % Seasonal Recreational $ 21,008,570,840 $ 16,233,215,340 $ 4,775,355, % Homestead $ 292,705,668,114 $ 279,412,835,324 $ 13,292,832, % Non-Homestead 29,510,969,325 26,007,096,420 3,503,872, % Total $ 322,216,637,439 $ 305,419,931,744 $ 16,796,705, % Total $ 410,145,943,187 $ 377,650,643,364 $ 32,495,299, % Metro Area Farm Homestead $ 3,697,275,575 $ 2,702,823,730 $ 994,451, % Farm Non-Homestead 1,753,759,050 1,021,344, ,414, % Timberland 3,473,700 2,666, , % Total Farm $ 5,454,508,325 $ 3,726,834,730 $ 1,727,673, % Seasonal Recreational $ 354,541,880 $ 272,735,180 $ 81,806, % Homestead $ 199,961,355,778 $ 190,480,810,269 $ 9,480,545, % Non-Homestead 19,598,938,671 17,165,001,780 2,433,936, % Total $ 219,560,294,449 $ 207,645,812,049 $ 11,914,482, % Total $ 225,369,344,654 $ 211,645,381,959 $ 13,723,962, % Greater Minnesota Farm Homestead $ 45,266,524,407 $ 38,822,073,530 $ 6,444,450, % Farm Non-Homestead 14,405,886,676 12,222,657,020 2,183,229, % Timberland 1,793,815,500 1,225,931, ,884, % Total Farm $ 61,466,226,583 $ 52,270,661,550 $ 9,195,565, % Seasonal Recreational $ 20,654,028,960 $ 15,960,480,160 $ 4,693,548, % Homestead $ 92,744,312,336 $ 88,932,025,055 $ 3,812,287, % Non-Homestead 9,912,030,654 8,842,094,640 1,069,936, % Total $ 102,656,342,990 $ 97,774,119,695 $ 4,882,223, % Total $ 184,776,598,533 $ 166,005,261,405 $ 18,771,337, % 5

16 Table 3 Market Value Limitation Shares by Region Total Share of Share of Property Type Limitation Region State Statewide Farm Homestead $ 7,438,902, % Farm Non-homestead 2,915,644, % Timberland 568,691, % Total Farm $ 10,923,238, % Seasonal Recreational $ 4,775,355, % Homestead $ 13,292,832, % Non-homestead 3,503,872, % Total $ 16,796,705, % Total $ 32,495,299, % Metro Area Farm Homestead $ 994,451, % 3.1% Farm Non-homestead 732,414, % 2.3% Timberland 807, % 0.0% Total Farm $ 1,727,673, % 5.3% Seasonal Recreational $ 81,806, % 0.3% Homestead $ 9,480,545, % 29.2% Non-homestead 2,433,936, % 7.5% Total $ 11,914,482, % 36.7% Total $ 13,723,962, % 42.2% Greater Minnesota Farm Homestead $ 6,444,450, % 19.8% Farm Non-homestead 2,183,229, % 6.7% Timberland 567,884, % 1.7% Total Farm $ 9,195,565, % 28.3% Seasonal Recreational $ 4,693,548, % 14.4% Homestead $ 3,812,287, % 11.7% Non-homestead 1,069,936, % 3.3% Total $ 4,882,223, % 15.0% Total $ 18,771,337, % 57.8% 6

17 Table 4 Change in Statewide Distribution of Real and Personal Market Values (in thousands) Caused by the Limited Market Value Law Taxable Taxable Market Value Market Value Before Percent After Percent Change in Limitation Of Total Limitation Of Total Percent Farm Homestead $ 48,963, % $ 41,524, % 8.84% Farm Non-homestead and Timberland 17,956, % 14,472, % 3.08% Seasonal Recreational 21,008, % 16,233, % 3.45% Homestead 292,705, % 279,412, % 59.59% Non-homestead 29,510, % 26,009, % 5.54% Apartment 19,755, % 19,755, % 4.21% Seasonal Commercial 1,114, % 1,114, % 0.24% Commercial/Industrial 57,138, % 57,138, % 12.19% Public Utility 3,347, % 3,347, % 0.71% Mineral 2, % 2, % 0.00% Railroad 497, % 497, % 0.11% Personal 4,807, % 4,807, % 1.03% Total Real and Personal $ 496,809, % $ 464,316, % 99.00% Changes from Pay 2005 to 2006 Table 5 shows that the Limited Market Value law has excluded nearly $35 billion in property values statewide. The total exclusion decreased statewide from $33.1 billion for taxes payable 2005 to $32.5 billion for payable 2006, a drop of $0.6 billion or 1.7 percent. Table 5 also shows that the total limitation increased by 14.8 percent in Greater Minnesota while falling by 17.9 percent in the metro region. In dollar terms, the exclusion increased by $2.4 billion in Greater Minnesota and decreased by $3.0 billion in the metro area. Statewide and Regional Changes in Distribution of Net Tax Amounts Across Property Classes Table 6 shows how limited market value changes the statewide distribution of net tax payable in 2006 across property classes. The non-limitation simulation holds the state levy constant, allows market value credits to change, and allows TIF levies to decrease due to lower tax rates on commercial property. In percentage terms, timberland property taxes fell the most, with a 21.4 percent decrease statewide. In 2006, for the first time, residential homesteads statewide have a higher net tax under LMV than without. In terms of net tax dollar amounts the tax burden shift is most evident in the statewide reduction in the farm homestead property tax burden by $25.6 million, and the increase in the commercial/industrial property tax burden by $51.1 million. In Greater Minnesota, the largest reduction in net tax in dollar terms ($20.0 million) is for farm homestead property. 7

18 Table 5 Change in Market Value Limitation by Property Type Statewide and Regional Totals Taxes Payable 2005 and 2006 Statewide Pay 2005 Pay 2006 Change in Percent Property Type Total Limitation Total Limitation Total Limitation Change Farm Homestead $ 5,805,106,277 $ 7,438,902,722 $ 1,633,796, % Farm Non-homestead 2,565,326,979 3,484,335, ,008, % Total Farm $ 8,370,433,256 $ 10,923,238,628 $ 2,552,805, % Seasonal Recreational $ 4,264,781,975 $ 4,775,355,500 $ 510,573, % Homestead $ 17,078,660,468 $ 13,292,832,790 $ (3,785,827,678) -22.2% Non-homestead 3,353,640,630 3,503,872, ,232, % Total $ 20,432,301,098 $ 16,796,705,695 $ (3,635,595,403) -17.8% Total $ 33,067,516,329 $ 32,495,299,823 $ (572,216,506) -1.7% Metro Area Farm Homestead $ 954,776,419 $ 994,451,845 $ 39,675, % Farm Non-homestead 639,352, ,221,750 93,869, % Total Farm $ 1,594,128,500 $ 1,727,673,595 $ 133,545, % Seasonal Recreational $ 87,762,300 $ 81,806,700 $ (5,955,600) -6.8% Homestead $ 12,682,309,248 $ 9,480,545,509 $ (3,201,763,739) -25.2% Non-homestead 2,356,987,952 2,433,936,891 76,948, % Total $ 15,039,297,200 $ 11,914,482,400 $ (3,124,814,800) -20.8% Total $ 16,721,188,000 $ 13,723,962,695 $ (2,997,225,305) -17.9% Greater Minnesota Farm Homestead $ 4,850,329,858 $ 6,444,450,877 $ 1,594,121, % Farm Non-homestead 1,925,974,898 2,751,114, ,139, % Total Farm $ 6,776,304,756 $ 9,195,565,033 $ 2,419,260, % Seasonal Recreational $ 4,177,019,675 $ 4,693,548,800 $ 516,529, % Homestead $ 4,396,351,220 $ 3,812,287,281 $ (584,063,939) -13.3% Non-homestead 996,652,678 1,069,936,014 73,283, % Total $ 5,393,003,898 $ 4,882,223,295 $ (510,780,603) -9.5% Total $ 16,346,328,329 $ 18,771,337,128 $ 2,425,008, % 8

19 Table 6 Change in Distribution of Real and Personal Net Taxes Caused by the Limited Market Value Law Net Tax Net Tax Before Percent After Percent Change in Percent Statewide Limitation Of Total Limitation Of Total Net Tax Change (000's) (000's) (000's) Farm Homestead $ 263, % $ 237, % $ (25,583) -9.72% Farm Non-homestead 136, % 118, % (17,969) % Total Farm $ 399, % $ 356, % $ (43,552) % Timberland $ 14, % $ 11, % $ (3,109) % Seasonal Recreational $ 178, % $ 163, % $ (15,073) -8.42% Homestead $ 3,006, % $ 3,023, % $ 17, % Non-homestead $ 351, % $ 329, % $ (21,394) -6.09% Apartment $ 271, % $ 287, % $ 16, % Commercial/Industrial < 150,000 $ 229, % $ 237, % $ 7, % Commercial/Industrial > 150,000 1,582, % 1,625, % 43, % Total Commercial.Industrial $ 1,811, % $ 1,862, % $ 51, % Seasonal Commercial $ 9, % $ 10, % $ 1, % Public Utility $ 90, % $ 93, % $ 3, % Mineral $ % $ % $ % Railroad $ 15, % $ 16, % $ % Personal $ 142, % $ 147, % $ 5, % Total Real and Personal $ 6,290, % $ 6,302, % $ 11, % 9

20 Table 6 (Continued) Change in Distribution of Real and Personal Net Taxes Caused by the Limited Market Value Law Net Tax Net Tax Before Percent After Percent Change in Percent Metro Area Limitation Of Total Limitation Of Total Net Tax Change (000's) (000's) (000's) Farm Homestead $ 22, % $ 17, % $ (5,645) % Farm Non-homestead 14, % 9, % (5,773) % Total Farm $ 37, % $ 26, % $ (11,418) % Timberland $ % $ % $ (4) % Seasonal Recreational $ 3, % $ 2, % $ (509) % Homestead $ 2,131, % $ 2,118, % $ (13,298) -0.62% Non-homestead $ 235, % $ 218, % $ (17,044) -7.25% Apartment $ 213, % $ 226, % $ 13, % Commercial/Industrial < 150,000 $ 96, % $ 98, % $ 2, % Commercial/Industrial > 150,000 1,240, % 1,271, % 31, % Total Commercial/Industrial $ 1,336, % $ 1,370, % $ 34, % Seasonal Commercial $ 1, % $ 1, % $ % Public Utility $ 23, % $ 24, % $ % Mineral % % % Railroad $ 6, % $ 6, % $ % Personal $ 70, % $ 72, % $ 2, % Total Real and Personal $ 4,059, % $ 4,067, % $ 8, % 10

21 Table 6 (Continued) Change in Distribution of Real and Personal Net Taxes Caused by the Limited Market Value Law Net Tax Net Tax Before Percent After Percent Change in Percent Greater Minnesota Limitation Of Total Limitation Of Total Net Tax Change (000's) (000's) (000's) Farm Homestead $ 240, % $ 220, % $ (19,938) -8.29% Farm Non-homestead 121, % 109, % (12,196) % Total Farm $ 361, % $ 329, % $ (32,134) -8.88% Timberland $ 14, % $ 11, % $ (3,105) % Seasonal Recreational $ 175, % $ 160, % $ (14,564) -8.30% Homestead $ 874, % $ 905, % $ 30, % Non-homestead $ 115, % $ 111, % $ (4,350) -3.75% Apartment $ 57, % $ 60, % $ 2, % Commercial/Industrial < 150,000 $ 132, % $ 138, % $ 5, % Commercial/Industrial > 150, , % 353, % 11, % Total Commercial.Industrial $ 474, % $ 491, % $ 16, % Seasonal Commercial $ 8, % $ 9, % $ % Public Utility $ 66, % $ 69, % $ 2, % Mineral $ % $ % $ % Railroad $ 9, % $ 10, % $ % Personal $ 71, % $ 75, % $ 3, % Total Real and Personal $ 2,231, % $ 2,234, % $ 3, % 11

22 Parcel Level Analysis: Change in Net Tax Within Property Classes The reductions in valuations shown in this report have the effect of increasing local property tax rates and consequently shifting property taxes from properties with faster growing valuations to those growing more slowly. To estimate the parcel-level tax effects of the current limitation for taxes payable in 2006, parcel limited market value and limitation amounts for residential homesteads and non-commercial seasonal recreational residential property were taken from the market value sales ratio file created from county submissions. Local tax rates were computed with and without the limitation to identify the change in parcel level property tax due to the limitation.* In 2006, the Limited Market Value law increased property taxes on 78% of the state s 1.4 million residential homesteads (1.1 million parcels), by $106 million (an average of $96 per parcel). For the other 22% of residential homesteads (314,000), the law decreased property taxes by $86 million (an average of $273 per parcel). 16% of the parcels with tax increases resulting from the limitation actually had some valuation withheld. This seemingly counter-intuitive result occurs because the limitation on these residential homestead properties was overwhelmed by proportionately larger limitations on other properties. The net tax increase of $20 million on residential homesteads as a group results from shifts off of other limited classes of property. Figure 2 shows the distribution of counts of residential homestead parcels by net change in tax. In 2006, the Limited Market Value decreased property taxes on 70% of the state s 199,000 seasonal recreational properties (140,000 parcels) by $23 million (an average of $167 per parcel). For the other 30% of parcels (59,000), the limitation law increased taxes by $6 million (an average of $103 per parcel). The net tax reduction of $17 million for cabins as a group resulted in shifts onto other classes of limited and non-limited properties. Figure 3 shows the distribution of counts of seasonal recreational homesteads by net change in tax. * For taxes payable 2006, 99.8% of residential homestead market value on the parcel file was captured compared to assessment abstracts % of non-commercial seasonal recreational residential improved and unimproved parcel taxable market value was captured compared to assessment abstracts. Data inconsistency prevents a farm parcel analysis. Tax rates from the net tax analysis model runs were applied to market value before and after limitation using Truth-in-Taxation levies available in January. 12

23 Count of Homesteads in Thousands Figure-2 Limited Market Value Impacts on Homesteads (Payable 2006) 314,000 homeowners pay, on 1,099,000 homeowners pay, average, $273 less tax. on average, $96 more tax. Total Tax Decrease Total Tax Increase $86 Million $106 Million 0-5,000-3,000-2,000-1, ,000 2,000 3,000 5,000 Estimated Homeowner Tax Change in Dollars 60 Figure-3 Limited Market Value Impacts on Seasonal Recreational Property (Payable 2006) Count of Homesteads in Thousands ,000 seasonal recreational residential properties pay, on average, $167 less tax. Total Tax Decrease $23 Million 59,000 seasonal recreational residential properties pay, on average, $103 more tax. Total Tax Increase $6 Million 0-5,000-3,000-2,000-1, ,000 2,000 3,000 Estimated Seasonal Recreational Tax Change in Dollars* *Includes state tax. State tax rate adjusted to hold state tax amount constant. 5,000 13

24 Pay 2006 Limitation Reductions at the City and Township Level The greatest degree of market value limitation at the city and township level occurred in sparsely populated and lake areas of the state. Table 7 ranks cities and townships by the percentage of market value limitation for favored classes. As the table shows, the greatest degree of limitation occurred in northern and north central Minnesota, although a few Wright County municipalities also rank highly. Appendix Tables A-1 and A-2 provide a detailed breakdown in county order of the limitation reductions for each favored class in each city and township in the state. Total includes timberland limitation. A map showing the location of the top 140 rankings from Table 7 appears at the end of the report. Table 7 Total Market Value Limitation and Reduction Percentage by City and Township With Greater Percent Reduction in Value Total Percent County Name Limitation Reduction ITASCA Unorg ,309, % AITKIN Unorg , % POLK Lengby 817, % AITKIN Unorg , % CASS Unorg ,758, % WRIGHT Middleville Township 66,472, % ITASCA Unorg ,743, % AITKIN Unorg ,585, % ITASCA Unorg , % ITASCA Nore Township 4,515, % WRIGHT Woodland Township 75,711, % OLMSTED Kalmar Township 79,677, % PINE Park Township 4,306, % ITASCA Unorg ,594, % CHISAGO Shafer Township 58,420, % ITASCA Unorg ,065, % AITKIN Libby Township 7,038, % CASS Unorg , % WRIGHT Victor Township 60,850, % WRIGHT Buffalo Township 100,209, % 14

25 Table 7 (Continued) Total Market Value Limitation and Reduction Percentage by City and Township With Greater Percent Reduction in Value Total Percent County Name Limitation Reduction HOUSTON Jefferson Township 9,011, % ST. LOUIS Unorg 13-NE 6,649, % ITASCA Alvwood Township 2,152, % LAKE Beaver Bay 8,873, % ITASCA Unorg ,793, % CASS Ottail Peninsula Township 16,524, % HUBBARD Lake Hattie Township 7,895, % AITKIN Unorg , % AITKIN Aitkin Co Unorg 2,085, % PINE Danforth Township 8,626, % PINE New Dosey Township 10,840, % ITASCA Unorg ,528, % POLK Trail 243, % CHISAGO Amador Township 39,307, % CASS Unorg ,697, % ST. LOUIS Eagles Nest Township 32,558, % COOK Unorg Rge 6e 572, % ITASCA Unorg ,808, % OLMSTED New Haven Township 63,693, % ITASCA Unorg , % ITASCA Wawina Township 2,324, % ITASCA Moose Park Township 3,021, % ITASCA Grattan Township 1,617, % CASS Wilkinson Township 11,574, % WRIGHT Albion Township 55,884, % ITASCA Unorg ,945, % ST. LOUIS Breitung Township 45,312, % CASS Unorg ,815, % BELTRAMI Unorg Winner 13, % AITKIN Milward Township 3,585, % MILLE LACS Bradbury Township 8,941, % AITKIN Unorg ,873, % ISANTI Maple Ridge Township 31,461, % MORRISON Mt Morris Township 6,118, % WRIGHT Franklin Township 146,600, % LAKE Fall Lake Township 77,308, % AITKIN Turner Township 16,126, % PINE Bruno Township 8,188, % ITASCA Itasca County Unorg 127, % ISANTI Stanchfield Township 39,512, % 15

26 Table 7 (Continued) Total Market Value Limitation and Reduction Percentage by City and Township With Greater Percent Reduction in Value Total Percent County Name Limitation Reduction CARLTON Beseman Township 4,468, % AITKIN Cornish Township 4,078, % WRIGHT Marysville Township 73,512, % CASS Thunder Lake Township 53,077, % AITKIN Seavey Township 3,721, % CROW WING Little Pine Township 5,707, % ITASCA Unorg ,678, % AITKIN Unorg ,468, % WRIGHT French Lake Township 58,411, % ITASCA Pomroy Township 1,479, % ITASCA Unorg ,096, % CARLTON Lakeview Township 7,118, % ITASCA Unorg ,717, % ST. LOUIS Crane Lake Township 16,263, % CARLTON Unorg Clear Creek 7,054, % PINE Birch Creek Township 9,604, % CARLTON Split Rock Township 6,043, % ITASCA Liberty Township 2,866, % CROW WING Fairfield Township 24,161, % ISANTI Dalbo Township 25,112, % ST. LOUIS Unorg 11-Orr-leiding 13,765, % AITKIN Rice River Township 6,551, % ITASCA Bearville Township 13,095, % LAKE OF THE WOODS Unorg , % POPE Lake Johanna Township 8,016, % CARLTON Automba Township 5,012, % MORRISON Pulaski Township 20,159, % BELTRAMI Shotley Township 4,062, % MORRISON Leigh Township 8,338, % ST. LOUIS Unorg 10-Lake Verm 48,530, % ITASCA Kinghurst Township 4,448, % AITKIN Haugen Township 9,562, % ITASCA Unorg , % CARLTON Unorg Red Clover 6,477, % AITKIN Beaver Township 4,116, % AITKIN White Pine Township 1,534, % AITKIN Morrison Township 6,237, % OTTER TAIL Dead Lake Township 30,630, % WINONA Wiscoy Township 17,808, % CARLTON Unorg Progress 919, % 16

27 Table 7 (Continued) Total Market Value Limitation and Reduction Percentage by City and Township With Greater Percent Reduction in Value Total Percent County Name Limitation Reduction PINE Fleming Township 5,922, % LAKE OF THE WOODS Keil Township 434, % CASS Smokey Hollow Township 4,865, % AITKIN Spalding Township 6,442, % AITKIN Lakeside Township 32,418, % CASS Unorg , % COOK Unorg Rge 3e 27,899, % ST. LOUIS Leiding Township 18,188, % CASS Ponto Lake Township 54,311, % CROW WING 2nd Assessment Unorg 4,909, % CASS Wabedo Township 64,645, % WINONA Whitewater Township 9,243, % WRIGHT Rockford Township 120,530, % BECKER Savannah Township 10,476, % WADENA Huntersville Township 5,456, % CROW WING Ross Lake Township 23,959, % PINE Kerrick Township 10,519, % MORRISON Hillman Township 6,840, % WRIGHT Monticello Township 109,352, % HOUSTON Brownsville Township 13,065, % PINE Bremen Township 10,978, % AITKIN Salo Township 3,106, % CASS Hiram Township 58,667, % HUBBARD Clay Township 10,927, % MORRISON Platte Township 11,123, % ITASCA Unorg ,583, % LAKE Stony River Township 14,160, % ITASCA Spang Township 9,729, % LAKE OF THE WOODS Rulien Township 116, % ST. LOUIS Beatty Township 63,562, % ISANTI Oxford Township 29,298, % AITKIN Pliny Township 4,009, % ITASCA Wirt Township 3,379, % POLK Gully Township 2,540, % CROW WING Perry Lake Township 11,646, % PINE Arna Township 6,840, % WINONA Hart Township 17,174, % ST. LOUIS Unorg 04-Whiteface 12,159, % ITASCA Unorg ,582, % ST. LOUIS Bassett Township 3,477, % 17

28

29 APPENDIX TABLES Total Market Value Limitation and Reduction By City and Township Details by Property Type Note: The market value limitation for the five property classes included in Tables A-1 and A-2 may sum to less than the total limitation shown in Table A-2. The difference is the limitation for timberland. 19

30 Table A-1 Total Market Value Limitation and Reduction by City and Township Farm Homestead, Farm Non-Homestead, and Seasonal Recreational Property Seasonal Farm Farm Non- Homestead Percent Homestead Percent Recreational Percent AITKIN Aitkin Township 886, % 415, % 3,336, % Ball Bluff Township 2,100, % 382, % 2,598, % Balsam Township 114, % 79, % 438, % Beaver Township 370, % 99, % 1,057, % Clark Township 2,250, % 680, % 754, % Cornish Township 416, % 211, % 2,700, % Farm Island Township 2,353, % 616, % 30,502, % Fleming Township 2,557, % 1,193, % 10,715, % Glen Township 3,530, % 260, % 16,768, % Haugen Township 1,650, % 197, % 3,877, % Hazelton Township 1,098, % 564, % 23,993, % Hill Lake Township 1,695, % 122, % 4,019, % Idun Township 1,665, % 552, % 1,488, % Jevne Township 1,705, % 161, % 4,240, % Kimberly Township 2,295, % 513, % 2,459, % Lakeside Township 3,471, % 526, % 15,533, % Lee Township 863, % 192, % 362, % Libby Township 588, % 741, % 2,162, % Logan Township 2,658, % 857, % 1,436, % Macville Township 899, % 257, % 886, % Malmo Township 2,298, % 951, % 7,284, % Mcgregor Township 858, % 508, % 227, % Morrison Township 2,623, % 1,090, % 844, % Nordland Township 3,427, % 764, % 21,335, % Pliny Township 1,344, % 668, % 692, % Rice River Township 1,400, % 168, % 1,479, % Salo Township 989, % 449, % 704, % Seavey Township 816, % 170, % 826, % Shamrock Township 111, % 3, % 60,406, % Spalding Township 1,816, % 504, % 1,241, % Spencer Township 2,435, % 1,970, % 638, % Turner Township 141, % % 11,108, % Verdon Township 765, % 125, % 604, % Wagner Township 2,670, % 913, % 7,188, % Waukenabo Township 794, % 57, % 5,429, % Wealthwood Township 975, % 971, % 6,685, % White Pine Township 838, % 127, % 246, % Williams Township 1,025, % 418, % 1,640, % Workman Township 1,858, % 437, % 4,501, % Milward Township 587, % 347, % 1,058, % Unorg , % 21, % 251, % Unorg , % 26, % 496, % Unorg , % 559, % 698, % Unorg , % 69, % 2,316, % Unorg , % 679, % 354, % Unorg , % 317, % 308, % 20

31 Table A-2 Total Market Value Limitation and Reduction Percentage by City and Township Homestead, Non-Homestead, and Total Property Homestead Percent Non-Homestead Percent Total Percent AITKIN Aitkin Township 3,197, % 142, % 8,119, % Ball Bluff Township 1,879, % 49, % 7,830, % Balsam Township 75, % 13, % 1,056, % Beaver Township 406, % % 4,116, % Clark Township 437, % 97, % 4,894, % Cornish Township 258, % 19, % 4,078, % Farm Island Township 17,328, % 423, % 52,866, % Fleming Township 3,177, % 96, % 19,102, % Glen Township 9,026, % 261, % 31,284, % Haugen Township 2,134, % 27, % 9,562, % Hazelton Township 11,968, % 242, % 39,256, % Hill Lake Township 4,413, % 176, % 12,432, % Idun Township 660, % 69, % 5,775, % Jevne Township 1,444, % 186, % 9,737, % Kimberly Township 936, % 3, % 7,158, % Lakeside Township 11,286, % 235, % 32,418, % Lee Township 141, % 6, % 2,176, % Libby Township 357, % 104, % 7,038, % Logan Township 425, % 21, % 6,101, % Macville Township 717, % 82, % 3,992, % Malmo Township 4,003, % 114, % 15,864, % Mcgregor Township 380, % 22, % 2,468, % Morrison Township 612, % 32, % 6,237, % Nordland Township 12,501, % 542, % 40,294, % Pliny Township 536, % 28, % 4,009, % Rice River Township 434, % 1, % 6,551, % Salo Township 146, % 31, % 3,106, % Seavey Township 683, % 28, % 3,721, % Shamrock Township 18,767, % 662, % 80,267, % Spalding Township 379, % 140, % 6,442, % Spencer Township 934, % 309, % 7,137, % Turner Township 4,243, % 15, % 16,126, % Verdon Township 209, % 4, % 2,469, % Wagner Township 3,000, % 84, % 15,758, % Waukenabo Township 1,903, % 26, % 9,287, % Wealthwood Township 4,746, % 198, % 13,969, % White Pine Township 77, % 61, % 1,534, % Williams Township 516, % 55, % 5,099, % Workman Township 1,883, % 242, % 11,122, % Milward Township 345, % 23, % 3,585, % Unorg , % 6, % 806, % Unorg , % 10, % 1,364, % Unorg , % 75, % 2,468, % Unorg , % % 3,187, % Unorg , % 9, % 2,585, % Unorg , % % 1,873, % 21

32 Table A-1 (Continued) Total Market Value Limitation and Reduction by City and Township Farm Homestead, Farm Non-Homestead, and Seasonal Recreational Property Seasonal Farm Farm Non- Homestead Percent Homestead Percent Recreational Percent AITKIN (Continued) Unorg , % 53, % 55, % Unorg % % % Unorg , % % 112, % Unorg , % 122, % 528, % Unorg , % % 142, % Unorg , % 75, % 72, % Unorg , % 28, % 226, % Aitkin Co Unorg 410, % 67, % 423, % Aitkin % % 17, % Hill City % % 1,196, % McGrath % % 10, % McGregor 4, % 12, % 7, % Palisade 22, % % 97, % Tamarack 387, % 94, % 3, % TOTAL 65,781,200 21,399, ,796,400 ANOKA Burns Township 2,579, % 2,409, % % Columbus Township 1,075, % 6,786, % 484, % Linwood Township 1,393, % 866, % 3,733, % Anoka % % % Bethel 4, % % % Andover 5,390, % 1,625, % % Centerville 10, % 142, % % Columbia Heights % % % Circle Pines % % % Fridley % % % Lexington % % % Coon Rapids 192, % 14, % 57, % Ramsey 968, % 1,137, % % Lino Lakes 1,438, % 2,840, % 271, % East Bethel 735, % 1,058, % 1,333, % Hilltop % % % St Francis 752, % 1,853, % 217, % Ham Lake 2,035, % 1,218, % 561, % Oak Grove 2,114, % 2,684, % 686, % Blaine 2,038, % 3,322, % % Spring Lake Park % % % TOTAL 20,730,205 25,958,250 7,345,600 BECKER Atlanta Township 1,892, % 917, % % 22

33 Table A-2 (Continued) Total Market Value Limitation and Reduction Percentage by City and Township Homestead, Non-Homestead, and Total Property Homestead Percent Non-Homestead Percent Total Percent AITKIN (Continued) Unorg % 10, % 225, % Unorg % % 102, % Unorg % % 469, % Unorg , % % 1,522, % Unorg , % % 633, % Unorg , % % 639, % Unorg , % % 1,791, % Aitkin Co Unorg 62, % % 2,085, % Aitkin 1,991, % 726, % 2,770, % Hill City 2,164, % 364, % 3,725, % McGrath 77, % 57, % 145, % McGregor 510, % 89, % 627, % Palisade 521, % 96, % 738, % Tamarack 40, % 39, % 594, % TOTAL 133,469,500 6,371, ,411,300 ANOKA Burns Township 10,341, % 2,695, % 18,025, % Columbus Township 8,871, % 4,095, % 21,359, % Linwood Township 10,676, % 2,767, % 19,438, % Anoka 10,523, % 3,396, % 13,920, % Bethel 1,840, % 549, % 2,394, % Andover 23,648, % 8,376, % 39,040, % Centerville 3,479, % 1,904, % 5,537, % Columbia Heights 37,913, % 9,410, % 47,324, % Circle Pines 4,758, % 489, % 5,248, % Fridley 49,683, % 10,826, % 60,510, % Lexington 4,321, % 1,769, % 6,091, % Coon Rapids 34,592, % 10,997, % 45,855, % Ramsey 14,664, % 8,917, % 25,687, % Lino Lakes 15,380, % 8,498, % 28,428, % East Bethel 21,091, % 5,215, % 29,468, % Hilltop 412, % 112, % 525, % St Francis 7,137, % 2,915, % 12,876, % Ham Lake 13,873, % 4,584, % 22,274, % Oak Grove 8,987, % 2,438, % 16,911, % Blaine 38,542, % 32,325, % 76,228, % Spring Lake Park 5,889, % 876, % 6,766, % TOTAL 326,629, ,164, ,911,555 BECKER Atlanta Township 26, % 5, % 2,841, % 23