Hennepin County taxpapers question falling home values, rising taxes

There are at least a few Hennepin County homeowners who understand their property tax bills a little better this morning, after the Hennepin County Board held a so-called 'Truth in Taxation' hearing Tuesday night in Minneapolis.

Only about two dozen people showed up — one-tenth the number that turned out Monday night in Ramsey County. But unlike the push to build a Vikings stadium in the neighboring county, there was only one big issue motivating people to show up — confusion over the state's arcane property tax system.

Jack Chiu was among those who doesn't understand what's happening. The taxable value of his Minneapolis home has dropped. But the notice he got in the mail from Hennepin County shows his proposed taxes for next year going up 5 percent. Chiu came to to last night's meeting to get answers.

"Is this unprecedented? Is this the first time in history that this happened? Do I have the right common sense that it didn't happen before?" he asked.

The issue is something many local officials are trying to explain at Truth in Taxation hearings around the state this time of year, and it was the kind of question that came up repeatedly over the course of hearing and Hennepin County Board Chair Mike Opat did his best to explain some of the factors involved.

"At the Legislature earlier in the year, they changed some rules about things. And so your value, my value, everybody's value — the base has all changed," he said. "We're stuck trying to explain basically an inexplicable situation."

What the legislature changed is the way it gives tax relief to homeowners. Rather than directly reducing their property tax bills like it used to, next year the state will reduce the taxable value of some homes. That tends to shift taxes onto other types of property.

In Hennepin County, it means homes worth less than $180,000 will see lower county tax bills. Homes worth more than that will see an increase. So will many business and rental properties.

Commissioner Jeff Johnson said there's also another factor that can cause taxes to rise even as property values fall: In a real estate market where prices are dropping, the better your home holds its value, the bigger your share of the tax burden.

That means, "You're paying a little more and maybe your neighbor is paying a little bit less and this guy over here is paying a lot more. Even though your valuation dropped, it might have dropped as much as the average within your city and within the county," he said.

Property tax bills are based on a homeowner's share of the total property value in a given city, county and school district. Ken Rowe, who manages property taxpayer services for Hennepin County, said that's fundamentally different from the the way other taxes work, and how people react to their tax bill.

"In sales tax, the person in front of me in line — I don't care what tax they pay. It doesn't affect me. The person behind me? It doesn't bother me. But with property taxes, if my neighbor for whatever reason is paying more, I pay less, because we are basically sharing that burden across the community."

Hennepin County proposes to hold its tax levy basically flat next year. Its overall spending will drop about 3 percent next year. Some of the taxpayers at the hearing praised the board for managing the budget in the face of declining state aid.

Others urged the commissioners to cut a lot deeper. Opat said that's probably not going to happen this year.

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