City Council: State Property Tax Laws to Blame for Increase

The members of the attempted to explain the complex analysis of the city’s proposed 2012 budget at a public hearing at the Dec. 6 meeting.

In the proposed budget, the city’s property tax levy decreased by 2.9 percent but the overall budget includes a 1.3 percent increase.

“The challenge for us is to explain how the budget goes up and the tax levy goes down and then city taxes go up,” City Administrator Tom Hedges said.

 
“Mismanaged” changes by state government leaders to the property tax formula, said Mayor Mike Maguire, are to blame.

A new law repealed the old process, Market Value Home Credit (MVHC), where the state would grant credits to qualified property owners and vow to pay the city the difference. After years of never sending the promised funds to the cities, state lawmakers changed the law this year to a market value exclusion.

“The state said ‘we’re broke, we can’t pay for it,’” Maguire said commentating further noting legislators still wanted to give voters and taxpayers a break so the tax burden was shifted to commercial and industrial property owners to pay for the residential exclusions. “I’m frustrated.”

“It is what it is,” Councilmember Paul Bakken said sharing in the mayor’s frustration.

“The taxes are up because the taxpayers are now paying what the state previously said they were going to pay,” said Director of Administrative Services Gene VanOverbeke.

Budget
The proposed budget will be on the Dec. 20 agenda for approval.

Driving the levy down the most was not budgeting for the MVHC – a $1 million reduction. Additionally, there were two cut positions, a pledge for a “constant level of service” and modest non-union staff wages increases. The general fund is proposed to go from $21.2 million to $21.5 million in 2012 – which averages out to $67 per month, or $805 per year, for city services.

Compared to nine other Dakota County cities and eight population-comparable cities in the metro area, Eagan residents’ $805 annual property tax bill is 19 percent lower than the average $998.

Public safety accounts for the largest portion of the city’s general fund expenditures at 46 percent and property taxes are the city’s main revenue source.