Breaking News on Aids & Credits to Cities
The Property and Local Tax Dvision of the Minnesota Houses of Representatives posted a spreadsheet late last night with their Division Report, including their proposed changes to property tax aids and credits. It appears that the House Republicans propose a complete elimination of Local Government Aid for all Metro suburbs by fiscal 2013, and all cities of the first class (i.e., Minneapolis, Saint Paul, and Duluth) will have zero LGA by 2015.
Maplewood has not received LGA in years, so this won't have a direct impact on us. It is likely to be very painful for some of our neighbor cities, however.
The proposal also includes cuts to Market Value Homestead Credit (which Maplewood receives in theory, though it was unallotted or otherwise eliminated in recent years) in 2011, and a complete elimination of the program thereafter. The plan seems to involve a change to how property taxes are calculated, designed to reduce the taxes paid by properties that now receive MVHC, although there would still be a net reduction in the amount of property tax relief being provided. It would mean that the levy figure we set each year would no longer include hundreds of thousands of dollars that the state promises to pay Maplewood on behalf of homeowners, but then doesn't.
I don't have a really clear picture right now of exactly how this would impact Maplewood. In our specific situation, where we receive no LGA and have made the assumption that we would receive no MVHC, it might all have little impact to some positive effect for our city finances (if it means that we'll actually receive more of the money in our levy). But for a great many Minnesota cities, it would be painful and disruptive. And for homeowners state-wide who now receive the homestead credit (which basically means homes under $400,000 in value -- here's a primer from the LMC with more detailed info), it is likely to result in an increase in their property tax bill when the MVHC line goes away.
Maplewood has not received LGA in years, so this won't have a direct impact on us. It is likely to be very painful for some of our neighbor cities, however.
The proposal also includes cuts to Market Value Homestead Credit (which Maplewood receives in theory, though it was unallotted or otherwise eliminated in recent years) in 2011, and a complete elimination of the program thereafter. The plan seems to involve a change to how property taxes are calculated, designed to reduce the taxes paid by properties that now receive MVHC, although there would still be a net reduction in the amount of property tax relief being provided. It would mean that the levy figure we set each year would no longer include hundreds of thousands of dollars that the state promises to pay Maplewood on behalf of homeowners, but then doesn't.
I don't have a really clear picture right now of exactly how this would impact Maplewood. In our specific situation, where we receive no LGA and have made the assumption that we would receive no MVHC, it might all have little impact to some positive effect for our city finances (if it means that we'll actually receive more of the money in our levy). But for a great many Minnesota cities, it would be painful and disruptive. And for homeowners state-wide who now receive the homestead credit (which basically means homes under $400,000 in value -- here's a primer from the LMC with more detailed info), it is likely to result in an increase in their property tax bill when the MVHC line goes away.
Labels: finance
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