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Minnesota View: Keep calm, and enjoy the ride on a rising tide

Minnesota Opinion editorial
Minnesota Opinion editorial
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On April 6, 2021, “Saturday Night Live” did a racy mock commercial for Zillow, the website that lets users anonymously browse for information – including estimated market values – for nearly every home in the United States.

It was a timely skit. People were so bored at the height of the pandemic that they amused themselves by snooping into the values of friends' and neighbors' homes. Or, if they were in a hot real estate market, they may have enjoyed watching their own home's value increase at an eye-popping rate. A home is a big investment, and it's fun to go online and say “Hey, our net worth just went up $20,000!”

It's less fun, however, when your home's gain in value actually shows up on your valuation notice from the county.

Minnesota residents received these notices in mid-March, and we suspect that a lot of people immediately had a bad case of sticker shock. Across the s, the estimated state market value of homes increased 20% or more.

Such increases can frighten homeowners, who immediately conclude that a 20% increase in their home's value will translate into a 20% increase in their property taxes.

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Fortunately, those fears are likely overblown, and we'd offer this advice to homeowners: Calm down. Property taxes are complicated, but at the risk of over-simplification, we'll summarize the current situation by saying that a rising tide lifts all boats.

Single-family homes, apartment buildings, commercial property and agricultural land all have increased significantly in value in the past year.

That increase in value, however, doesn't create a tax bonanza for the county, because local government spending isn't based on how much tax revenue is generated. Quite the opposite, in fact. Later this fall, the county will estimate the amount of tax revenue it will need to meet its obligations in 2023, and property owners will then be taxed in proportion to the value of the property they own in order to raise the necessary revenue.

That means a lot of tax scenarios are possible. If the county's estimated expenses for next year go up 8%, and your home's estimated market value went up the typical 20%, then you likely will face something in the neighborhood of a 8% increase in your property tax bill.

On the other hand, if your home's value went up less than the typical home, you might see no increase at all, or even a decrease in your tax bill — especially if the county adds new homes and new homeowners to its property tax rolls.

Still confused? Perhaps this will help. If the current housing bubble bursts next year, and home values plummet 30% almost overnight (as they did in 2007), you wouldn't see a 30% percent cut in your property taxes. The county would still need to plow roads, staff county parks, pay sheriff's deputies and provide social services. That's why there are years when some property owners see their estimated market value drop, yet their tax bill actually increases. The county must pay its bills, regardless of what property values did the previous year.

The reality is that we won't know the true meaning of the 2023 valuation notices until the county sets its budget for next year and sends out Proposed Taxes Notices in November. Still, if you believe a mistake has been made in the valuation of your property, now is the time to act.

And by now, we mean immediately.

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The first step is to contact your county assessor. If you still have concerns after making that initial contact, you will need to participate in a Local Board of Appeal and Equalization meeting. The process is described on the back of your valuation notice, as are other options you have for appealing a valuation.

You also will want to verify that you are receiving all exclusions and deferrals to which you may be entitled, including the Homestead Market Value Exclusion, the Exclusion for Veterans with Disabilities and several others that are listed on your valuation notice. If you have questions regarding these exclusions, the county assessor should be able to help.

While no one likes a tax increase — especially at a time when inflation is soaring — we'd point out that Minnesota consistently ranks high on any quality-of-life rankings. We like our well-maintained parks. We want our roads to be plowed within a few hours of the snow stopping. We want our first responders to be well-trained and well-equipped. We want our students to learn in safe, modern classrooms.

These things can't be accomplished on the cheap — yet we'd also point out that while Minnesota's property tax burden is the 18th highest in the nation, the typical homeowner in Minnesota enjoys a lower property tax rate than our neighbors in Iowa, Wisconsin and South Dakota.

Think about that the next time you browse Zillow for a four-bedroom walk-out rambler in (your town).

This Minnesota Opinion editorial is the opinion of the editorial board of the Rochester Post Bulletin.

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