Taxes on Median-Value Apple Valley Home Could Increase 1% in 2012, Budget Shows

While the City of Apple Valley's total tax levy for 2012 should go down compared to 2011, city property taxes on a median-value home could increase 1 percent, according to the proposed 2012 city budget.

The Apple Valley City Council on Tuesday adopted the 2012 proposed budget and property tax levy, and set the annual public budget meeting for 8 p.m. Dec. 8 at the .

The council is required by state law to adopt a preliminary budget by Sept. 15, but can change it until approving a final budget in December; the tax levy can only stay the same or decrease from where it is set in September.

In recent years, there has been little or no change from the preliminary budget to the final budget, city Finance Director Ron Hedberg said in August.

A presentation given to the council in August and on Tuesday gives examples of the predicted 2012 city property taxes for homes of different values:

Home Value   2011 Prop. Taxes   2012 Taxes   $ Change   % Change

$100,000              $359                 $359             $0               0

$197,800              $862                 $871             $9               1%

$300,000              $1,387              $1,405          $18             1.3%

$414,000              $1,968              $2,001          $33             1.7%

A 3-percent property-value decline for many Apple Valley homes plays a part in the equation to determine property taxes, as does the elimination of the state's former Market Value Homestead Credit program.

In years past, homeowners received a credit on their tax bills for which the state reimbursed the city. Without the program, the city will no longer have to levy the $1.12 million to fund the program, Hedberg said, which recently the state had not been reimbursing in full.

This factors into a predicted levy decrease of about $675,000 from 2011 to 2012, Hedberg said.

The program that replaces the MVHC—called the Homestead Market Value Exclusion—reduces the taxable market value of a home, with different effects on different home values. This reduces the overall dollar amount of the city's tax base, Hedberg said.

The tax rate goes up because of the reduced amount of the tax base, which shifts the burden to other properties.

But the tax rate goes down because the total levy is reduced, he said, which in Apple Valley will "mitigate most of that increase."

Hedberg said, however, that final property values from Dakota County—the most current available are from January—and final word from the state on how exactly the exclusion program will work could affect those numbers.

"There are changes that could be happening," Hedberg said, "and really we won't know until the tax notices are prepared come mid-November."

But the amount of property taxes for a median-value home will be lower in 2012 than in 2009, Hedberg said. For the past two years, most Apple Valley residents .

Councilman Clint Hooppaw said at Tuesday's meeting that the exclusion program ultimately shifts tax benefits to lower-priced homes. The maximum exclusion is 40 percent of the taxable value of a $76,000 property, and that percentage decreases as home value increases, and tops out at a home valued at $414,000.

He said, however, that it's fortunate that Apple Valley has not relied on state funding in recent years, thereby avoiding the impact other cities who have relied on state funding are now facing.

"We're not in that spot," he said.

Come back to Apple Valley Patch for more stories on other parts of the proposed 2012 city budget.