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Opening Statements I CITY OF •I Iv CHANHASSEN 1 - 690 COULTER DRIVE • P.O. BOX 147 • CHANHASSEN, MINNESOTA 55317 (612) 937-1900 • FAX (612) 937-5739 II MEMORANDUM TO: Mayor and City Council IFROM: Don Ashworth, City Manager ---D•A I � ' DATE: April 29, 1991 SUBJ: Board of Equalization and Review 1 IIAt this meeting, the City Council sits as the Board of E alization and Review to listen to citizen comments regarding th estimated II market value of their property. Property valuations r present the work efforts of the County Assessor's office from 1990. Although the City Council does have authority to modify these valuations, I changes cannot be more than 1% of the total gross values within the community. Values set by the local board are forwarded to the county for them to conduct a county-wide assessment hearing to ensure that each of the cities/townships are equalized. All 1 counties must submit their values to the Commissioner of Revenue who is to verify that equalization exists between all counties in the state. The Commissioner must finish this work before October 11 so that those equalized values can be used by the auditor in calculating taxes payable in the following year. I have attached information from the Handbook for Minnesota Cities regarding II property taxation which may be of help to Council members. Also attached is a blank form to enter citizen comments. It is recommended that the procedures used in previous years be IIfollowed again this year, i.e: - Persons wishing to speak be informed of the necessity to II sign-in in the back of the room (a sign advising citizens to do such will be at the entrance door and forms will be on the rear counter) . I 1:11 - The Council should announ - its intent to listen to each Pr person • - - • - • -- •. _ - s .c serrate f ' l 'a b e , - - - - - ) but that no I responses are anticipated this evening. Prior to closing IP 4 the Board of Equalization and Review meeting, the Council will instruct the Assessor's office to review each II 44 4 G✓i '--x _to v N./'t 4 •rte v:2 wit of , ea_, s� �� y i/'-�) 0th G. �t se p-� It /6 e c.-�,..J •..r �t f..s s t&-4t' le. I .' ea eti..,,/ 4.4... I Ord n. I 0 . • Mayor and City Council I April 29, 1991 Page 2 I comment received and to make a recommendation back to the Board for their next meeting. This closing procedure should include announcing that the Board will review and take final action on citizen concerns/Assessor I recommendations at our regular meeting on Monday, ©, I Mayor Chmiel is un ble to attend_ this meeting and th efore Co ncilman `Work}nan \will officiall\y lead ��,.fhe mass� s from de rad tion. Th'e sta€f "Christmas Party Fund" is ntj,d pat d to I be om well healed age 4n this year through the sale of eggs and to oes. F I E c...., �,, 4. • <J..r Ate✓ -' tL//,..,"8.,,./ t .a. v y. 1 7;,4e--c w 2 a C..J,a... „e I i"" /44 e/d •\ •( - 2N. •.4-..- /IA a n ,..s . s ., . q I r6 ^ 4;//o .mot S , 7C.- i A......., y,..01 ;S • /d a 74 1 SCLA--' Q�a i r,a.9nfrN . I I I 1 Sources of Revenue I 1 Chapter 20 i 1 I 1990 Supplement There are several major sources of revenue for This section will discuss the property tax as a rev- cities, including the property tax. This chapter will enue source. Chapter 22 will explain the process of discuss these sources. In order to develop and im- plement a city budget, the council should consider 1988 legislature made, the property tax system is all of these sources. These sources of revenue are changing, with most changes effective in 1990. as follows. Since the legislature may change the system even more in 1989, the 1989 Supplement will include an A. Property Taxation update of those provisions. B. Local Government Aid ' C. Homestead and Agricultural Credit Aid Authority to Tax (HACA) D. Equalization Aid The essential features of Minnesota's tax system E. Disparity Reduction Aid are in the Constitution which vests all taxing au- F. Fire and Police Service State Aid thority in the state legislature. 1 Lacking legislative G. Highway User Fund authorization, cities may not levy any taxes under H. Federal and State Grants-in-aid their own authority. The Constitution dedicates the I. Charges for Services revenues from specified taxes to certain purposes. J. Regulatory Revenues For example,the proceeds from the taxes on motor K. Gifts vehicles, gasoline, motor fuels, and iron ore pro- L. Interest Income duction must, in whole or in part, go to support M. Investment of Idle Funds certain state functions. The Constitution desig- N. Enterprise Funds pates certain state taxes as being in lieu of all other O. Borrowing taxes on property. P. How This Chapter Applies to Home Rule ' Charter Cities Within this constitutional structure, the legisla- ture alone has the authority to establish a state and A. Property Taxation local tax system.All city taxing authority is subject I to legislative change or revision. The property tax no longer is the major source of revenue for Minnesota cities. Less than 30 per- A consequence of this authority is annual legisla- cent of city revenue comes from the property tax. tive action substantially changing the property tax system. Handbook for Minnesota Cities • Page 313 I i 1 i ISources of Revenue 1989 Supplement IRole of the Property Tax Equalization of Assessment Ratios There are, essentially, only three kinds of taxes: Another intergovernmental problem is the those levied against what a person earns, owns, or equalization of assessment ratios between taxing I spends. The income tax is an example of the first while the sales tax represents the last. The prop- districts. Taxpayers in assessment districts which have a high ratio of assessed value to market value, erty tax, levied against real or personal property, pay proportionately more property taxes than tax- is a tax against the wealth a person owns. payers in assessment areas with a lower ratio, as- Because most property is relatively fixed in lo- stattenu esuivalen several methods in tr pnoperties. The cation and because the U.S. Constitution makes its these assessments. y g to equalize I use impractical on the national level, the property tax has been primarily a tool for local govern- ments. Consequently, it has become the backbone I of local revenue systems. Minnesota law'defines the term real property as the land itself including all buildings, improve- State law has restricted city governments to ments, and other fixtures on it; all rights and levying taxes against property. Most cities depend privileges pertaining to it; and all mines, mineral on it for much of their operating revenues. Many quarries, fossils, and trees on or under it. 2 The I considerations of equity are involved in the prop statutes state that wealth connected with the land, erty tax concept and process. For these reasons, such as minerals, may be separately owned and local officials should be familiar with the tax itself, taxed as real estate. 3 I with the tax levy limits and authorizations, with the details of its execution, and with the maintenance The term personal property refers to all and improvement of the tax base. detached or detachable moveable property, includ- ing furniture and other personal belongings,as well Intergovernmental Problems as commercial inventories and equipment a busi- ness uses to produce income. 4 Virtually all per- The property tax supports many governmental sonal property is exempt from taxation. I jurisdictions. The average homeowner pays, through the property tax,for the support of the city, All real property in the state is taxable as prop- school district, county, and any special districts erty under the laws of Minnesota, with certain ex- such as sanitary districts, housing and redevelop- ceptions. 6 The city has no authority to determine I ment authorities, hospital districts, watershed dis- what property is taxable, nor in what proportions tricts, soil and water conservation districts, and or amounts. The legislature alone prescribes the park districts. procedures to follow and sets all rates and exemp- t tions. The assessor and the local board of review This multiplicity of taxing jurisdictions creates have authority only to determine valuations in ac- problems, including the taxpayers' confusion re- cordance with the procedures the legislature has garding who is using their money. For example, prescribed. I people often criticize city governments for tax in- creases when, in fact,the city decreased its tax rate Assessors must list all real property subject to while other taxing jurisdictions were increasing taxation. The county or city assessor must assess theirs. This sharing of the tax base hampers inter- at least one-fourth of the listed parcels each year, I governmental coordination and limits the council's providing reappraisal of each parcel at maximum power to increase tax rates within its own levy intervals of four years. The assessor's list must in- limitations. dude all real property becoming taxable in any year I with reference to its value on January 2 of that year. 7 IPage 314 Handbook for Minnesota Cities I I 1 I 1989 Supplement Chapter 20 PP P ' Property Tax Process official believes the amount is incorrect. The steps in levying property taxes start with in- Assessment of Property I structions to local assessors and end with the tax settlements the county auditor makes. There are four steps in the assessment of prop- erty: appraising property to determine its full and Between April 1 and June 30, or later if the com- true value; classifying property to establish its tax I missioner of revenue gives an extension of time capacity category; equalizing valuations to reduce the local board of review must hold a meeting. $ inequities; and reassessing property. The board examines the assessor's list to determine if it accurately lists all taxable property. Assessment Officials I By the first Monday in May, the assessor must In addition to members of boards of review or have delivered the completed assessment books to equalization,the state,each county,and some cities ' the county auditor. 9 have an official responsible for property assess- State statutes specify when county boards of ment.Any county may require the county assessor equalization must meet to examine and compare to assess all property, except for property in cities q p over 30,000 population. I the assessment of property within the county, and equalize them so that each tract or lot is assessed State and County Officials at its market value. 10 Action a board takes after I adjournment is not valid unless the commissioner The state commissioner of revenue administers of revenue approves a longer session. The law also assessment laws, striving for a fair and equal as- specifies when the state board of equalization sessment of all property in the state.The commis- 11 m ets. October 25, the city council must set the sioner's duties include instructing assessors, I satisfying grievances, and refunding taxes if the tax levy for the next year and send a certified copy county board and the county auditor recommend to the county auditor. If a city fails to do this, the such action, 17 ordering the reassessment of any county auditor will levy the amount that the city real or personal property, 18 and requiring cities to I levied in the previous year. 12 supply information relating to property assessment Before the first Monday in January, the local as- and tax collection. The city or any person directly lessor must receive the property assessment books. interested pecia tb in the order may appeal an order to a I I . 13 Also before that date, the county auditor special board of tax appeals. i9 spreads the city's tax levy on all taxable property The assessment official at the county level is the in the city. On the first Monday in January, the county assessor. It is his or her duty to make the ' county auditor delivers the tax records to the final determination of the value of all property sub- county treasurer who then collects the tax. 14 ject to assessment and taxation. 20 If the city has its own assessor, he or she views and appraises the As soon as possible after March 5 and May 20 property, 21 but the county assessor assigns all I of each year, the county treasurer pays to the city book work and final evaluations. The county as- its portion of all monies the county received from sessor must determine the assessed value of all levy and collection of taxes. 15 property in the county and prepare all necessary I Property tax distributions, the estimated collec- tions that the county treasurer makes to local juris- The county assessor must examine the assess- dictions, must include taxes, special assessments, ment appraisal records of each local assessor any I and any penalties and interest due to the taxing jurisdiction. The treasurer or fiscal officer of any time after January 15 of each year and must notify the local governing body of any deficiencies. 22 If taxing district may appeal to the county board the the local assessor doesn't correct the deficiencies county treasurer's estimated collection, if the local within 30 days, the county assessor, with the ap- IHandbook for Minnesota Cities Page 315 I I I II ISources of Revenue 1989 Supplement I proval of the commissioner of revenue, may do so. or town. Under such an agreement, either The auditor may charge the local unit for the work, governmental unit could employ an assessor or they and if the local unit doesn't pay by September 1, could jointly employ an assessor to assess property the county auditor may levy a tax against property in both jurisdictions. I in the local unit. 23 The local units must make these contracts or If districts do not complete their assessments by agreements under the terms of the Joint Powers I May 1, the county assessor will do the work and Act, 27 and the commissioner of revenue must ap- charge accordingly. 24 These provisions do not ap- prove them ply in cities over 30,000 population. Valuation of Property I City Assessor Assessors must value all property at its market If a city has a local assessor, that person must value. 28 The statutes define market value as the place valuations on all taxable real property in the usual selling price in that location at the time of 1 city. 25 To do this, the assessor receives annually assessment. It is the price which a seller could ob- from the county auditor, on or before the first tain at a private sale and not at a forced or auction Monday in December of each year, the necessary sale. Market value is not necessarily the same as I assessment books and blanks. The city assessor original cost or intrinsic value. The assessor has must complete the work and return the books to authority to consider other value-producing factors the county auditor either on or before the first in assigning value to property. Monday in May or after the last meeting day of the Icity board of review, whichever is later. Property Tax Classifications Instructions in these duties are available from The 1988 legislature eliminated the current clas- several sources, including an annual meeting with sification structure which applied varying assess- I a representative from the state department of rev- ment ratios to market values, depending upon the rev- enue. Assessors may obtain valuable assistance property type. 29 The new law creates "net tax ca- from the book,Assessor's Manual, from the corn- " capaci- missioner of revenue. The state board of assess- pacifies" for each property type. These tax capaci- I ment establishes courses and approves classes that ties are tax rates applied to a property's market pp value in order to calculate the tax. Taxes are now schools, colleges, and universities offer. based on a fixed percentage of a property's market I When in doubt about the valuation of a parcel value. of property, a local assessor should seek aid from Exempt Property the county assessor. The local assessor should al- ways be reasonably certain before placing valua- Several classes of property are exempt from I tions on property and should not hesitate to seek property taxation (but not necessarily from special whatever aid is necessary. assessments). 31 These include: Joint Assessment Under Contract I1. All public burying grounds; Any city which is wholly within a county and 2. All public schoolhouses; separated from a township for assessment purposes I may enter into either of two kinds of agreements allowing someone other than a local assessor to as- 3. All public hospitals; secs the property. 26 4. All academies, colleges, and universities, I The city may contract with the county to have , and seminaries; - the county assessor assess property. Or, the city may participate in an agreement with another city 5. All churches, church property, and houses of worship; IPage 316 Handbook for Minnesota Cities I I • I 1 1989 Supplement pP Chapter 20 1 6. Institutions of purely public charity, 32 The city council may appoint a special board of review. It may delegate to the board all of the I 7. All public property,including all city-owned powers and duties the council would have if it acted property, for exclusive public purpose use; as the board of review.The members of the special and 33 board of review serve at the direction and discre- tion of the council. The council determines the I 8. Real and personal property for the abate- number of members, the compensation and went and control of air or water pollution. expense payments, and the term of office.At least one member of the board must be an appraiser, I Local governments in Minnesota may not exempt realtor, or other person familiar with property any land from taxation for the purpose of attracting valuations in the assessment district. or keeping industry. 34 The city council, however, may offer a developer a deferral of property tax The board of review meets in the city clerk's of- t on property improvements during the construction fice. The city assessor and the county assessor period until the improvements are complete and 50 must attend this meeting with their assessment percent of the'area of the building becomes occu- books and papers. These officials may take part in pied. 35 Once this occurs, the developer will be the proceedings, but may not vote. I subject to the full property tax plus the property tax on the property at the time the deferral took The meeting date of the board of review, which effect, times the number of years of the deferral. must be between April 1 and May 31, is fixed by the county assessor on or before April 1 of each I Equalization Procedures, year by giving written notice to the city clerk.After receiving the notice, the clerk must give published Once the assessor has completed his or her work, and posted notice of the meeting at least 10 days I the city, county, and state levels of government before the date of the meeting. review and modify, with limitations, the assess- ments.During this review, two kinds of corrections A majority of the members may take action at are possible: the governing body may check the as- the board of review meeting and may adjourn the I sensor's lists for accuracy, hear individual com- meeting from day to day for a period of 20 days plaints, and make any necessary adjustments; and until they complete their work. After 20 days, the it may equalize the ratio of market to assessed board has no authority and any action it takes is market values. The first function is the sole con- invalid unless the commissioner of revenue has 1 cern of the city board of review, while the county granted an extension. and state boards devote more time to the latter task. In fulfilling its role,the board of review has three I main functions. When the entire procedure is complete, the county auditor puts the valuations in his or her 1. It must review the assessor's list, making records to use when making up the tax rate figures. sere that all taxable property in the city has I Only when all three levels of government have been properly placed on it. reviewed and equalized the assessments, do they become the official assessed values. 2. It must review the assessor's valuations, . striving to standardize the ratio between I City Board of Review • market value and adjusted market value for each individual piece of property. To ac- The city council may serve as the board of review complish this,the board may raise or lower I in cities which have been separated from the town. valuations on individual properties, but it 36 In cities which have not been separated from the cannot increase valuations without notify- town for assessment and election purposes, the ing the property owner and giving that per- town board serves as the board of review. son an opportunity to be heard. 1 Handbook for Minnesota Cities Page 317 I I I 1 Sources of Revenue 1989 Supplement I 3. The board must hear and settle the com- Upon the property owner's application, the plaints of individual property owners re- board may change a property's homestead classifi- garding the valuations on their property. cation or reduce its market value by as much as I $300, reducing or refunding any taxes the person If a person fails to appear in person or through has already paid. 38 counsel or written communication before the board of review after receiving notice of intent to raise State Board of Equalization I the assessment, or if a person fails to apply for a review of the assessment,he or she may not appear The commissioner of revenue acts as the state before the county board of equalization for a board of equalization. 39 The commissioner's pri- review of the assessment.An exception is when the mary assessment task is to assure uniformity of I assessment takes place after the meeting of the valuations between counties. The commissioner board of review or when the aggrieved person can may adjust valuations between districts and be- establish that he or she did not receive notice at tween classes of property. The commissioner may I least five days before the local board of review meeting. raise or lower individual assessments, but may in- crease individual assessments only after the tax- payer has received notice and has.had an The local board of review may not reduce the opportunity to be heard. The commissioner may I total or aggregate amount of the county assessor's assessment by more than one percent. This means not reduce the aggregate value of all property in the state by more than one percent below the total that the board must often compensate for reduc- the county boards of equalization have reported. tions in assessed values by making comparable in- The commissioner may order a reassessment of I creases in assessments against other parcels of property in any district. •property. Appeals to Tax Court After the final adjournment of the board of I review, the city assessor may make additional as- The tax court is the final authority for the sessments, but the board cannot make further hearing and determination of all questions under review. Complaints on these later assessments can the property tax laws of the state, except for an I go to the county board of equalization. appeal to the Supreme Court.40 The tax court has jurisdiction in cases dealing with property taxes County Board of Equalization only after the taxpayer has appealed the valuation or assessment to the town or city board of review I The county board of equalization consists of and to the county board of equalization,except for either the county auditor and the county commis- those taxpayers whose original assessments came sioners, or a special board of equalization that the from the commissioner of revenue. The tax court auditor and the board of county commissioners ap- has no jurisdiction involving an order of the state I points. 37 The statutes establish meeting dates. board of equalization unless a taxpayer contests the valuation of the property. Although the county board of equalization may I decrease and, after notice to the taxpayer, increase The tax court must hold hearings at any place in individual valuations,its primary task is to equalize the state so that taxpayers may appear before the the ratio between market value and assessed mar- court with as little inconvenience and expense to ket value in the various districts. Its main purpose the taxpayer as possible. I is to secure uniformity of assessed value from dis- trict to district with only occasional attention to The small claims division of the tax court has uniformity between taxpayers within any one dis- jurisdiction in any case concerning the valuation, trict. It may not reduce the aggregate valuations assessment, or taxation of residential property the I of either real or personal property in the county taxpayer has homesteaded.It also hears cases con- below the amounts the assessors have determined, cerning the tax laws in which the amount in con- but it may increase these amounts. IPage 318 Handbook for Minnesota Cities Am I I I1990 Supplement Chapter 20 I troversy does not exceed$5,000,including penalties adequate adjustment of sale prices for terms of and interest. 41 financing, inadequate adjustment of sale prices to reflect the difference in the date of sale compared The notice that goes to the taxpayer of the as- to the assessment date, and inadequate sale size. I sessment, determination, or order of the commis- sioner or the appropriate unit of government, should include written notice that the taxpayer has Cities receive their LGA in two equal payments I the right to appeal to the tax court, and if applica- on July 20 and December 15. A city may request ble, to the small claims division. The notice must state that the taxpayer must appeal to the town or an advance from the commissioner of revenue if it a cash flow problem. city board of equalization and to the county board I of equalization before appealing to the small claims Since the stated purpose of local government aid division of the tax court, except in those cases is to provide property tax relief to local govern- where the commissioner of revenue determined the meats,the law provides for uniform accounting and assessment. 42 reporting standards for cities over 2,500 and uni- t form reporting requirements for cities under 2,500 B. Local Government Aid population. 45 Local government aid (LGA) is a state aid to lo- C. Homestead and agricultural cal governments. LGA has undergone several credit aid (HACA) changes since its creation in 1971. It has replaced • most of the individual taxes such as cigarette, liq- Homestead and agricultural credit aid (HACA) I uor,bank excise, and gross earnings taxes which the replaced the homestead and agricultural credit pro- state previously distributed to local governments grams in 1988. 46 The distribution design of the under various laws. 43 program is different, however,whereas the original 1 LGA, like other aspects of the state tax system credit programs provided relief directly for the tax- is now manipulated by the legislature annually. payer, HACA is designed to provide relief to local governments to pay for tax rate reductions for cer- LGA amendments are extensively discussed in tain classes of property. For example, under the the Preparing City Budgets memo. credit programs, if the class rate on low-valued homes were reduced, it would usually cause an in- One of the figures used to calculate a city's LGA crease in taxes for other property. In contrast, un- ' is fiscal capacity, measured in terms of a city's der the new system, HACA payments would equalized assessed value(changed to"equalized tax increase in an attempt to prevent such tax burden shifts. (Note: Not all reductions in class rate capacity under the 1988 tax law.) Equalized as- changes will be paid for through the HACA pro- I sessed value (tax capacity) is the assessor's esti- mate of market value of all taxable property in a city divided by the city's sales ratio. D. Equalization aid I A city's sales ratio is a percentage figure the state department of revenue derives by dividing the as- Equalization aid was first distributed through sessor's market value figure by the actual selling the 1989 Special Session tax law. It is intended to price for property sold during the year.Its purpose reduce tax burdens in cities which have lower than I is to equalize the tax capacity of property in one average tax bases. For Pay 1990, the program dis- taxing jurisdiction to make it comparable with tributed approximately $19.5 million. Under the other taxing jurisdictions throughout the state. A 1989 law,the program was to be eliminated and the I city may appeal its sales ratio determination. The aid distributions folded into the LGA base. The law provides that no sales ratio study shall be con- 1990 tax law changes this plan and retains equaliza- tion aid as an annual aid formula.Distributions for elusive or binding on a court . Any party may in- troduce evidence of the unreliability of a sales ratio Pay 1991 are frozen at the 1990 levels, but if addi- Istudy, including, but not limited to, evidence of in- tional appropriations are made to the program,dis- Handbook for Minnesota Cities Page 319 l BOARD OF EQUALIZATION AND REVIEW April 29, 1991, 7: 00 p.m. Ref. Name and Parcel No. Address No. Comments 1 I 1 11 I 1 1 1 I 1 BOARD OF EQUALIZATION AND REVIEW April 29, 1991, 7: 00 p.m. Ref. Name and Parcel No. Address No. Comments I 1 1 1 I 1 1 BOARD OF EQUALIZATION AND REVIEW April 29, 1991, 7: 00 p.m. ' Ref. Name and Parcel No. Address No. Comments I I 1 I 1 1 r t I BOARD OF EQUALIZATION AND REVIEW IIApril 29, 1991, 7: 00 p.m. . IRef. Name and Parcel No. Address No. Comments II I II I 1 II II I I II I I II I II II II 1 BOARD OF EQUALIZATION AND REVIEW April 29, 1991, 7:00 p.m. ' Ref. Name and Parcel No. Address No. Comments 1 1 1 1 I I I/ BOARD OF EQUALIZATION AND REVIEW April 29, 1991, 7: 00 p.m. Ref. Name and Parcel No. Address No. Comments i I I BOARD OF EQUALIZATION AND REVIEW 11 April 29, 1991, 7: 00 p.m. II Ref. Name and Parcel No. Address No. Comments II II II II II I . 1 II I II II I I I I 11 1 BOARD OF EQUALIZATION AND REVIEW April 29, 1991, 7: 00 p.m. IIRef. Name and Parcel No. Address No. Comments I I II II II r I I I I I I I . I II I BOARD OF EQUALIZATION AND REVIEW IIApril 29, 1991, 7:00 p.m. 1 Ref. Name and Parcel No. Address No. Comments II II I II II II I I I 11 I I I 1 I II I r BOARD OF EQUALIZATION AND REVIEW April 29, 1991, 7: 00 p.m. Ref. Name and Parcel No. Address No. Comments r r 1 r I r r r r r r 1 r i s r r 11 7 BOARD OF EQUALIZATION AND REVIEW April 29, 1991, 7:00 p.m. Ref. Name and Parcel No. Address No. Comments 1 1 1 1 1 1 I I II BOARD OF EQUALIZATION AND REVIEW April 29, 1991, 7:00 p.m. IRef. Name and Parcel No. Address No. Comments _ 11 I II I I I . I 1 I I I I I I I I I 1 1 I 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1