Lawmakers Defend, Blast New Property Tax Law

Minnesota voters are beginning to tell politicians that they do not like a new law that some say could raise property taxes.

Opponents of the new law say it hurts homeowners with less expensive homes and that businesses will shoulder more of the property tax burden.

Few Minnesotans understood, or even knew about, the old market value credit law. Now, many are hearing that its elimination may raise their taxes and are beginning to complain about it.

“It is coming up at least a couple of times a night,” said Rep. Paul Marquart of Dilworth, who knocks on nearly every one of his constituents’ doors every year.

Marquart, a key House Taxes Committee Democrat, will push a bill when lawmakers return to session on Jan. 24 to reinstate the old market value credit law.

The new law excludes some home value, especially on lower-priced homes, from property taxes. However, in communities with few businesses or expensive homes property taxpayers still could pay more, in some cases much more, if local officials decide to raise taxes to make up for the elimination of payments they received from the state under the old law.

“I don’t think the Legislature understood it when they passed it,” Clay County Commissioner Jon Evert said of the new law. “It doesn’t seem like anybody can explain it.”

Rep. Pat Garofalo, R-Farmington, said that the new law simply replaces an old one that did not work.

“It is a more stable and reliable system,” Garofalo said.

Rural districts with low-value homes like Marquart represents will be the hardest hit by the law change, state officials say.

Garofalo, meanwhile, represents more suburbanites who will feel less impact. He said he has heard little about the situation.

Local governments should like the new law better, Garofalo said, because under the old law they could only hope the state would provide funding to make up for property tax breaks the state required. Those payments did not always come.

The new law no longer tells the state to make payments to compensate local governments for revenue lost due to property tax breaks. That means local governments will be short about $260 million that was supposed to be paid out under the old law.

“There is this finger pointing and blame game, but ultimately government has to live within its means,” Garofalo said. “This was a system that was badly in need of reform.”

Last year, the state did not pay governments $100 million of the $265 million it owned them. The state shorted some local governments in nine of the past 10 years.

Marquart said some homeowners in his district will pay $120 more per year more in property taxes under the new law if local officials raise taxes. Almost 60 percent of the increased taxes statewide would come from rural residents, he said.

“For suburbs or big cities with highly valued properties that didn’t benefit from the (old) system, the budget hit may not be that big,” said Sen. Tony Lourey, DFL-Kerrick. “But rural communities like ours, with average-priced homes that received a lot of … reimbursements from the state, are facing the loss of up to $200,000 a year.”