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ARDEN HILLS CITY COUNCIL WORK SESSION — AUGUST 29, 2011 3 Councilmember Werner reviewed the expiring statute and the new statute regarding the Market Value Exclusion. Director of Finance and Administrative Services Iverson explained that the property tax statements going out to residents will only show the figures for the 2011 taxes and taxable value and the 2012 taxes and taxable value under the new law, which will show a reduced value. There will be no explanation of the changes which will be confusing to the property owners. Mayor Grant arrived at 5:20 p.m. Mayor Grant asked if it is up to the City to get the word out to residents about this change. Director of Finance and Administrative Services Iverson responded that the League of Minnesota Cities, the County, and the Department of Revenue are working to provide information for the public. Councilmember Tamble suggested that our City newsletter include information about this change prior to the tax statements going out. Councilmember Holden arrived at 5:25 p.m. Since all Councilmembers were now present, Director of Finance and Administrative Services Iverson proceeded with her presentation on this agenda item. She reviewed the table on Page 1 of the budget book stating that the levy has remained at the same level as 2011 while the tax rate has increased. This is due in part to the change in legislation regarding the Market Value Homestead Credit (MVHC) program and a reduction in our share of fiscal disparity dollars. According to information provided by Ramsey County in March of this year, the median home value in Arden Hills will decrease from $276,000 for 2011 taxes, to $272,800 for 2012 taxes which is a 1.16% drop in value compared to the county average decrease of 4.01%. The MVHC program was replaced with the new Market Value Exclusion (MVE) program which reduces the local taxable value of homestead properties under $413,800 at which point the credit is phased out. This affects the City's tax rate as it reduces the overall taxable value of the City. All jurisdictions will see an increase in tax rates in 2012 as a result of this change. She pointed out that the table at the top of Page 3 provides an example of how the new program will work for five different home values. Homes valued at $76,000 receive the maximum value reduction, and homes valued at $413,800 (value at which the exclusion is phased out) and above receive no value reduction. She then referred to the table at the bottom of Page 4, specifically referring to the line item with a Taxable Market Value of $272,800 and explained that without the change in legislation, there would have been a $4.06 annual deduction in property taxes for that value level. The impact from the legislative change and fiscal disparity raises the annual tax to $14.28. The $4.06 deduction combined with the $14.28 increase results in a net annual increase of $10.22. Mayor Grant asked if the $10.22 figure would be reflected on property tax statements. Director of Finance and Administrative Services Iverson responded tax statements will reflect the net figure.