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Figure 1 ! burden shifted onto these latter two Figure 5 0 Growth in Total City Market Values classes of property for taxes owed in Where Property Taxes Go 2010 11.9% (2009 to 2010) 2010.The tax capacity of agricultural State I property grew 12 percent over last year. Figure 3 12% District Special County 3.3% Ell 4% ® os% os% 11111Growth in Total City Tax Capacities 46/ 30% ( ' Non- 12.1% (2009 to 2010) i Res Homestead School \ Farm Homestead Res Comm/Ind Other Total 27% 2.1% City The breakdown of all city market II 28% value into the five major property cat- ® -1.0% 40.5% M Taxes owed egories remains virtually unchanged for -a 7% 2010(see Figure 2).Agricultural prop- Res Homestead Figures 6 and 7 show the average taxes Fans Homestead Res Comm/Ind Other Total owed on both a hypothetical homestead erty was less than 1 percent of the total last year and now represents just over 1 and business property in 2010.The tax percent.Conversely,homestead residen- bill for a homestead property valued tial property made up 65 percent of all Looking at the breakdown of all city at$100,000 increased by$56.The city city property in 2009 and now repre- tax capacity into the five major cat- portion of that bill increased by$22. sents 64 percent. egories of property reveals a shrinking Overall city residential homestead mar- of the residential homestead share for ket value fell in 2010;the final column Figure 2 the second year in a row (see Figure 4). in Figure 6 reflects this decline in value Total City Market Values 2010 This share has fallen from 56 percent of for the hypothetical homestead. Other Farm total tax capacity in 2008 to 54 percent Total taxes owed by a business prop- 3% in 2009,and is now just 53 percent. ertyvalued at$150,000 grew$131 from CommAnd Residential is% Homestead Other property types (e.g.,cabins,bed 2009 to 2010 while the city portion 64% and breakfasts,certain marinas) demon- increased by$52.Overall city commer- strated the reverse trend,growing from cial-industrial property market value fell 3 percent in 2009 to 4 percent in 2010. Non- in 2010.The final column reflects this 0 Homestead I loss in value for the hypothetical business. Residential 14% Figure 4 Total City Tax Capacities 2010 Figure 6:Tax on a Homestead(after MVHC) Other Fa 1rm 2009 2010 4% % Residential Tax on Tax2010 on Tax with Tax capacity trends $100,000 $100,000 Home Value Looking at changes in city property H53%Stead Home Home Deflated to Comm/Ind $95,380 tax base in terms of tax capacity reveals 29% very similar trends to the market value City Portion $298 $320 $317 ofTax Bill analysis above.Past declines in city tax capacity have been due to legislative Total Tax Bill $989 $1,045 $1,030 changes to the classification rate strut- Non-Homestead ture.This year,overall city tax capacity Residential Figure 7:Tax on a Business declined 3percent without substantial 13% 2009 2010 2010 changes in class rates (see Figure 3). Tax on Tax on Tax with The trends by category of prop- Where taxes go Bu Business Businoe s Businesslu . erty are the same as those identified in Figure 5 shows where property taxes Deflated to the market value analysis.Agricultural paid in cities go.Of the$5.9 billion in $149,325 property posted the greatest growth at property taxes paid in 2010,the larg- city Portion ofZ'az Bill $875 $927 $923 12 percent while homestead property est share (29 percent) goes to county Total Tax Bill $3,710 $3,841 $3,824 tax capacity fell 5 percent. governments.City governments col- Since most property taxes are lev- lect the next largest share (28 percent) ied on tax capacity rather than on mar- while school districts receive 27 per- The League would like to thank the ket value,these trends signify a shift in cent.The state has levied a property staff at the Department of Revenue for tax burden among the different cat- tax on seasonal-recreational property their help in preparing this report.r egories of property.Because residential (i.e.,cabins) and business property since homestead,non-residential homestead, 2002.Twelve percent of all property Rachel Walker is policy analysis manager and commercial-industrial tax capac- taxes paid in cities went to the state in with the League of Minnesota Cities.Phone: -ty actually decreased while agricul- 2010.The smallest share,4 percent,was (651) 281-1236.E-mail:rwalker@lmc.org. ural and other property experienced paid to special districts.This breakdown Lena Gould is LMC policy analyst.Phone: tax capacity growth,more property tax remains unchanged from 2009. (651) 281-1245. E-mail:lgould@lmc.org S E P T E M B E R-O C T O B E R 2010 M I N N E S O T A CITIES 5