Truth-In-Taxation
December 2000
The Minnesota Legislature passed a law in 1989 that was designed to help property owners understand how the property tax is determined and how they can get involved with local budgeting issues and taxation. This process known as “truth-in-taxation” occurs once a year during the months of November and December. It gives property owners an opportunity to review information pertaining to a property tax proposed for their property and to react to local budget decisions before they become finalized.
What is a notice of proposed property tax?
Between November 10th and November 24th, the county auditor/treasurer prepares and mails to each owner of real and personal property (excluding mobile homes) on the current year’s assessment roll, a notice of proposed property tax. This statement, also known as a “truth-in-taxation” notice, is an announcement that contains detailed information on the amount of property tax each taxing authority collected for taxes payable in the current year and proposes to collect for taxes payable in the next year. It shows property owners an estimate of how much the property tax bill will either increase or decrease due to spending or other factors. Additionally, this notification provides the specific date, time, and place for scheduled public hearings where property owners may go and speak on the budgets and future taxes of each local government unit as well as the mailing addresses for them should they wish to send written comments.
When does each taxing authority schedule a public hearing? What is the significance of the hearing?
If property owners are interested in either the change in or the amount of the proposed property tax to be collected, they are encouraged to attend the initial public hearings (scheduled between November 29th and December 20th) printed on their notice. The law requires the governing bodies of each city having a population over 500 and county to hold a public hearing on their final budget and property tax levy for taxes payable in the next year. The governing bodies of each school district are also required to hold a public hearing to review their current budget and proposed property tax levy for taxes payable in the next year. However, the governing bodies of each township are not required to hold a public hearing at this time because their final budget and property tax levy were acted upon and set at the annual township meeting held earlier in March.
At this hearing, sometimes referred to as the “truth-in-taxation” meeting, discussion on the assessment of properties completed earlier in the year cannot be reopened. In other words, the value and classification assigned to properties for the basis of taxation cannot be addressed by local government officials because these matters were to be heard and acted upon during the board of review and equalization meetings held in April, May, and June. The purpose of this hearing is to discuss the percentage change in property taxes proposed and the specific purpose for which property tax revenues are being changed. Furthermore, the public is invited to speak and ask questions so they may become informed and offer input during the budget setting process. If this initial hearing is not completed on its scheduled date, it is continued to another date, time, and place.
Can the boards, councils, and commission change the amount of property tax to be levied before the final tax statement is issued next March?
The final property tax bill issued next March depends on a number of factors, but the governing bodies who are required to hold a public hearing on this matter have the authority to amend their proposed property tax levy prior to adopting a final property tax levy. Even though the budget process is nearly complete, local government officials can make changes in the property tax levy that will ultimately have some bearing on the taxes paid by its property owners. According to law, the proposed property tax levy cannot be increased, but it may be lowered. The action to approve or amend the proposed property tax levy is usually taken at another hearing held on a date following the date of the taxing authority’s initial public hearing or immediately following its continuation hearing. It may be held at a regularly scheduled board, council, or commission meeting or at a special meeting. The date, time, and place of this subsequent hearing are announced at the initial public hearing or at the continuation meeting.
What factors other than spending impact the property tax reported on the notice of proposed property tax?
The answer to this question is not always clear given the complexity of the Minnesota property tax system. Other than changes in the budgets and levies of local government units, changes in property taxes are usually attributable to one or more of the following factors: (1) market value changes due to sales activity in the area; (2) new construction broadening the tax base; (3) changes in federal and state mandates; (4) changes in the amount of federal and state aid, if any, received by local taxing authorities; (5) changes in state tax laws that adjust the tax base; and (6) changes in the state property classification system that affect tax rates assigned to different property uses.