Referendum Levies
March 2011
Local governments in Minnesota are allowed by law to initiate voter referenda for various purposes. Referendum levies are some examples of ballot questions put to a direct vote in which the electorate is asked to accept or reject a particular taxation proposal. They are used by some governmental subdivisions like counties, cities, townships, and special taxing districts to raise additional funds for operating and/or bonding purposes. School districts also make use of the referendum tax provision to collect extra money to either cover their general daily operating costs or meet long-term debt obligations when a new school or an addition to an existing school is built. These voter approved referendum levies are calculated on a property’s referendum market value or net tax capacity value.
What is referendum market value?
Referendum market value is the taxable market value, not the estimated market value, of all taxable property. However, there are certain properties that are excluded from voter approved referendum market value levies and others that are subject to a tax not calculated on their full taxable market value. The tax exclusion applies to: class 2a agricultural land and buildings except for the house, garage, and surrounding one acre of land (both homestead and non-homestead properties); class 2b rural vacant land (both homestead and non-homestead properties); class 2c managed forest land; class 2d private airport properties; class 2e land with commercial aggregate deposits; class 4c(1) non-commercial seasonal residential recreational properties such as cabins; and class 4c(4) post-secondary student housing. Included in the definition of referendum market value is also a tax limitation that affects any class or part of a class of property having a tax classification rate of less than 1.00%. These properties include: class 1b blind/disabled homesteads which has a class rate of 0.45% on the first $50,000 of taxable market value and 1.00% on the taxable market value over $50,000; class 1c commercial seasonal residential recreational (resort) properties which has a class rate of 0.50% on the first $600,000 of taxable market value and 1.00% on the taxable market value over $600,000; and class 4d qualifying low-income apartments which has a class rate of 0.75% on the taxable market value. The referendum market value for these property types is equal to the net tax capacity value multiplied by 100. In short, a 40-acre parcel of tillable land having a taxable market value of $112,000 or a cabin with a taxable market value of $200,000 will both have a referendum market value of $0. A residential property having a taxable market value of $150,000 and qualifying for a class 1b blind/disabled residential homestead will have a referendum market value of $122,500 ($50,000 x .45 = $22,500; $100,000 x 1.00 = $100,000; $22,500 + $100,000 = $122,500), while a class 1a residential homestead with the same taxable market value will have a referendum market value of $150,000.
Can you define taxable market value?
The taxable market value of a property refers to the amount of value that is used in calculating taxes. This value may differ from its market value should a special property tax program like Green Acres, Rural Preserve, Open Space, This Old House, or Plat Deferral limit, restrict, exclude, or defer some market value from taxation until the benefit expires or ends. For instance, if a class 1a residential homestead has a market value of $165,000 and qualifies for a market value exclusion of $35,000 under This Old House, then the taxable market value of the property is $130,000 ($165,000 - $35,000 = $130,000). If this same property does not receive a benefit from a special property tax program, then its market value of $165,000 is also its taxable market value.
What is the meaning of the term “net tax capacity value”?
Net tax capacity value is a property’s tax base that is determined by multiplying its taxable market value by a specific tax classification rate written in law. The assessor determines the tax classification of property based upon its use. Each class of property is assigned one or more class rates according to a classified property tax system enacted by the state legislature. For example, class 1a residential homestead property has a class rate of 1.00% on the first $500,000 of taxable market value and 1.25% on taxable market value over $500,000. These rates when applied to a taxable market value of $250,000 equal a net tax capacity value of $2,500 ($250,000 x .01 = $2,500).
Are there different types of referendum levies?
Yes, there are different types of voter approved referendum levies. Non-school referenda are always calculated on the referendum market value of all taxable property, except for some property excluded by law. School referenda are either calculated on a property’s referendum market value or net tax capacity value. Specifically, school operating referendum levies are levied on the referendum market value of certain property unlike regular local levies that are based on the net tax capacity value of all property. School bonding referendum levies are levied on the net tax capacity value instead of the referendum market value. They are calculated as part of the local net tax capacity rate for the school district and collected from all property, including those that are exempt from operating referendum levies.
Can you calculate the voter approved school operating and bonding referendum amounts for a cabin with a taxable market value of $125,000; a residential homestead with a taxable market value of $175,000; an agricultural homestead with a taxable market value of $450,000 with the house, garage, and surrounding one acre having $150,000 and the remaining land and outbuildings having $300,000; and a commercial property having a taxable market value of $200,000 if the operating referendum rate is .11256% and the bonding referendum rate is 7.775%?
Cabin with a taxable market value of $125,000:
Operating referendum levy = $0 (Cabins are exempt from the operating referendum.)
Bonding referendum levy = $125,000 x .01 class rate = $1,250 net tax capacity value;
$1,250 net tax capacity value x .07775 bonding referendum rate = $97.19
Total voter approved levies = $0 + $97.19 = $97.19
Residential homestead with a taxable market value of $175,000:
Operating referendum levy = $175,000 x .0011256 operating referendum rate = $196.98
Bonding referendum levy = $175,000 x .01 class rate = $1,750 net tax capacity value;
$1,750 net tax capacity value x .07775 bonding referendum rate = $136.06
Total voter approved levies = $196.98 + $136.06 = $333.04
Agricultural homestead with a taxable market value of $450,000 with the house, garage, and surrounding one acre having $150,000 and the remaining land and outbuildings having $300,000:
Operating referendum levy = house, garage, and surrounding one acre: $150,000 x .0011256 operating referendum rate = $168.84 + remaining land and outbuildings = $0 (Remainder land and outbuildings on a farm are exempt from the operating referendum.) = $168.84
Bonding referendum levy = house, garage, and surrounding one acre: $150,000 x .01 class rate = $1,500 net tax capacity value; $1,500 net tax capacity value x .07775 bonding referendum rate = $116.63 + remaining land and outbuildings = $300,000 x .005 class rate = $1,500 net tax capacity value; $1,500 net tax capacity value x .07775 bonding referendum rate = $116.63; $116.63 + $116.63 = $233.26
Total voter approved levies = $168.84 + $233.26 = $402.10
Commercial property with a taxable market value of $200,000:
Operating referendum levy = $200,000 x .0011256 operating referendum rate = $225.12
Bonding referendum levy = $150,000 x .015 class rate = $2,250 net tax capacity value, $50,000 x .02 class rate = $1,000 net tax capacity value, $2,250 + $1,000 = $3,250 net tax capacity value; $3,250 net tax capacity value x .07775 bonding referendum rate = $252.69
Total voter approved levies = $225.12 + $252.69 = $477.81
If you have any questions regarding this information or suggestions for a future column, please contact me.
Stearns County Assessor’s Office
Administration Center, Room 37
705 Courthouse Square
St. Cloud, MN 56303
Phone: 320-656-3680
or e-mail: gary.grossinger@co.stearns.mn.us