Market Value Homestead Credit 101

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How it works for cities: "The reimbursement" The MVliC reimbursement is not an aid; it does not represent dollars in addition to what the city has levied. The reimbursement makes up part of a city's levy. Cities do not budget for it. The credit to homeowners reduces a city's property tax receipts by the amount of the credit allocated to the city. This means the city will receive less than its certified tax levy from taxpayers. The state makes up the difference by reimbursing the city for the city portion of the credit received by property OWlllers. The combination of after-credit tax receipts and the MVHC reimbursement should equal the city's certified levy. For most cities, between five and fifteen percent Qfthe city's levy is paid by the state through the MVHC reimbursement. An example helps to illustrate how the program works. Assume a city certifies a levy of$100. After taxpayers pay their tax bills, $90' is generated for the city. The difference between what is generated from taxpayers ($90) and what the city certified ($100) is made up by the MVHC reimbursement ($10). The city must still certify $100 for its levy in order to realize the full $100 from the combination of taxpayer payments and the reimbursement. The 2003 legislature balanced a major state deficit by cutting state aids and credits to cities. Under the cuts, some cities that receive little or nQ Local Government Aid experienced a reduation in the MVHC reimbursement. The 2005 legislature extended the MVHC reimbursement cuts for 103 cities for 2005 and 2006. The funding for the city portion of the MVHC reimbursement was reduced from approximately $82 million to $65 million for Revised August 2008 these years. While property owners continued to receive the benefit of the full credit, cities were not reimbursed for the full amount of those credits. These cities therefore did not collect their total certified levy amount. In other words, for these cities, the gap between the certifi,ed levy and what the taxpayers pay was not filled completely (or at all). Ttle MVHC reimbursements were restored for taxes payable in 2007. Cities receive their market value credit reimbursement in two installments from the state, in October and in December. Information on the amount of each. city's credit is usually available in late summer each year. MVHC and Tax Increment Financing (TIF) districts TIF districts are eligible for the market value credit when a property receiving the credit is located within the TIF district. The PQrtiQn of the credit allocated to the TIF district is based on the percentage of the parcel's value that is captured in the TIF district. The market value credits for a TIF district are sent to the city in each December. Cities with TIF districts can determine the amount of the market value credit the districts will receive by consulting the Department of Revenue. Agricultural Market Value Credit The 2001 legislature also created the Agricultural Market Value Credit program, which reduces the property tax of agricultural homestead property up to $345, based upon a percentage of market value. This credit program, like the MVHC, results in a portion of the city's certified levy paid by the state instead of local taxpayers. Most cities receive very little, if any, of this credit reimbursement.