Upcoming Worthington tax increase a result of many factors
WORTHINGTON -- City residents can anticipate an increase in taxes from anywhere between 6 percent and 13.8 percent when they receive their tax statements next month.
There are several major factors that contribute to the increase in property taxes, Nobles County Auditor Sharon Balster said.
Residential and commercial values
Residential homes in Worthington, on average, had an increase in assessed value of 7.76 percent this year.
"Every home didn't go up (in value), but that's the average," Nobles County Assessor Byron Swart cautioned. "There is a group of homes that did stay the same."
While there was an increase in assessed value for homes, the assessed value for buildings of commercial property (land excluded) was reduced by 0.5 percent, city-wide. As a result of a reduced tax base on the commercial end -- coupled with the increase in value of homes -- residents will have to shoulder more of the tax burden.
TIF district decertification
A portion of the city's increase in levy -- 7.6 percent -- is due to decertification of TIF District 7.
The district, which encompasses the area surrounded by Minnesota 60, Interstate 90, Oxford Street and Diagonal Road to the west of the city, became effective in 1986.
In line with Minnesota statute that allows 25 years for increments to be collected, the district needs to be decertified by the end of this year.
During their precertified levy discussion, Worthington City Council members decided to move revenue collected from the TIF to the general fund, which consequently increased the levy by 7.6 percent. The city's precertified levy represents an overall increase of 11.9 percent.
"What the levy is doesn't, per se, transfer to what you'd pay as an individual or business owner in taxes," said City Administrator Craig Clark when the levy was precertified.
Clark stressed that the 7.6 levy increase resulting from the TIF recertification has no impact on existing taxpayers.
"A 7.6 increase in the levy doesn't mean that you're going to pay 7.6 percent more on your tax bill," he said. "The vast majority of the city's levy increase is a recapture of the TIF, leaving an effective tax rate increase of just 4.3 percent. Given what translates to a 20 percent in local government aid and market value credit, the city worked hard to limit the increase to just 4.3 percent."
Homestead Market Value Exclusion
The Homestead Market Value Exclusion, established this year by state legislators, replaced the Market Value Homestead Credit.
The exclusion, applicable to all homesteads below $413,800, provides for a portion of each home's value to be excluded from being taxed -- an amount that is relatively the same as what used to be credited to property owners. This resulted in further reduction of the overall tax base.
According to research conducted by the Minnesota House, the tax burden on the homestead will vary depending on the mix of homestead and non-homestead properties in the taxing jurisdiction.
The effect of the Market Value Homestead Credit elimination on local government is a loss in credit to the levy. Before the elimination, the state contributed $204,000 to the city's levy. With the exclusion, taxpayers will bear the entire levy.
Three levy increases
Nobles County Auditor Sharon Balster and Swart were in agreement when they said the biggest cause of the property tax increase is due to levy increases from all three entities -- Nobles County, the city of Worthington and Independent School District 518.
"If these levies wouldn't have been what they are, I think most Worthington residents would have seen a decrease," Balster said.
Final levy increases for all three entities are yet to be certified. Current preliminary figures, as presented by Balster, are: Nobles County, 8 percent; City of Worthington, 11.9 percent; and District 518, 26.5 percent.
The loss in market value credit and local government aid ($325,000) for the city would have translated into a 20 percent levy increase instead of the 11.9 percent had the city decided to recover the cuts. An 11.9 percent increase in the city's tax levy will result in an effective tax rate increase of 4.3 percent for taxpayers.
"Having an effective tax increase of 4.3 percent is very responsible given the continuous loss in state aid," Clark reiterated.
If the school district decides on a 26.5 percent levy increase, the total amount being levied will be $5,135,083, an amount that is set by state. Part of the levy is Referendum Market Value (RMV) -- $1,803,394 -- Balster said. The majority of the levy is tax capacity value.
RMV, as defined by the state, is market value for all taxable property excluding certain properties like agricultural land and vacant rural land. An example would be for farms, where owners will pay for the house, garage and one acre of land.
"A good portion of our increase is because we reduced the levy a year ago," explained District 518 Superintendent John Landgaard.
The reduction was a one-time, $ 1 million reduction in local property tax levy due to the district's adequate fund reserves.
Based on the levy assumptions from all three entities, and with the exclusion in place, the property tax increase for taxpayers in Worthington will range from 6 percent to 13.8 percent.