Kandiyohi County, Minn., officials say residents to see tax hike
For nearly four hours Monday, the Kandiyohi County Commissioners sat around a work table littered with pages of budgets from county departments in an attempt to put together a 2012 budget and levy that doesn't hit taxpayers too hard.
The task wasn't easy -- especially considering that action by the state Legislature is expected to increase local property taxes on homeowners an average of 6 percent. A "quiet secret" is what County Administrator Larry Kleindl called the elimination of market value homestead credits that will translate into property tax increases for homeowners.
"Baloney" is the word Commissioner Harlan Madsen used to describe claims by lawmakers that they didn't raise taxes. "The middle class is getting clobbered," he said.
The action to eliminate the homestead credits and replace it with a new system called the homestead market value exclusion was approved by lawmakers during the special legislative session.
In the past, the credits were used to reduce local property taxes through state reimbursements. Now, home values will be lowered before taxes are figured, which is expected to increase tax rates even if the tax levy is flat. The end result is a property tax increase even if law makers say they are only raising tax rates, said Madsen.
In a memo, Kandiyohi County Auditor Sam Modderman said "all properties will have a 6 percent increase in taxes just from the new law change."
Chairman Dean Shuck said he didn't believe farmland would be affected by the change, but farm homes would be.
The formula for figuring out the new system is complicated.
That's why Kleindl recently contacted Sen. Joe Gimse and Rep. Bruce Vogel, both Willmar Republicans, seeking additional information.
As a result, Greg Davids, chairman of the House tax committee will meet with county and other local elected officials at 7 p.m. tonight at The Oaks in Willmar to discuss details to the change in market value homestead credits.
Kleindl said it's important for county officials to understand the changes to they can explain it to taxpayers.
When people open their county tax statements "I don't want to have them come back and blame the county," Kleindl told the commissioners, while being quick to add that the county "isn't whining" about the task of meeting a tight budget and is making changes and reductions to operate more efficiently.
When introducing his proposed 2012 budget, Kleindl said a combination of revenue reductions and a major landfill expansion would result in a 9.1 percent levy increase, even if the rest of the budget was basically unchanged from 2011.
Knowing that a 9.1 percent levy increase wouldn't fly, Kleindl proposed making cuts and revenue adjustments to reduce the levy by 2.4 percent.
By using reserves, the levy will be reduced another 4 percent - with plans to repay that loan over the next three years.
That leaves a levy increase of about 2.7 percent.
But when the 6 percent homestead tax credit exclusion is added, the total tax impact to homeowners will be more than 8 percent.
The first draft of the budget of $59 million includes an increase of $570,000 over 2011.
Revenue reductions for 2012 include a loss of nearly $200,000 in county program aid and a loss of $605,997 in state aid that's being cut to a variety of programs including community corrections, mental health and chemical dependency.
On top of that, the county jail is expected to lose $540,000 next year because of a decline in prisoners boarded there and the health department will lose $173,000 from the Statewide Health Improvement Program funding.
Most of the county departments had budgets that were nearly the same as last year, but a $1.1 million expansion to the landfill will increase expenses.
The proposed budget will get a formal review and preliminary approval next month. The final budget and levy will be approved in December.