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Property tax intricacies The technical details of computing property taxes mask many other intricacies of the property tax system. Many communities over the past several years have experienced situations where individual property taxes rise much faster than the increase in the levies that are certified by local units of government. The most common factor that results in an increase in an individual parcel's tax is the change in the parcel's estimated market value. Without any change in local levies, a property owner can experience a tax increase due almost exclusively to any valuation Increase. The Legislature frequently changes the classification system. Changes to the classification system can shift property tax burdens from one type of property to another. Table A demonstrates some of the changes the Legislature has made to class rates since 1997. Commercial, industrial, and apartment ptoperties received significant reductions in their class rates. This shifts tax burden tCul other clasSes of property that did not receive class rate reductions. In an effort to minimize the effect of these shifts, the legislature reduced school levies across the state and created the Market Value Homestead Credit. This credit reduGes property taxes for homesteads by 0.4 percent of the homestead's market value up to a maximum $304 dollars. As part of the credit program, the state has reimbursed cities for the amount by which the credits reduce cities' tax receipts. The Legislature made significant reductions to the reimbursement amounts for cities in 2003 and 2004 and later extended those reductions to 2005 and 2006. The reimbursements were restored for 2007. Economic factors that may affect broad classes of property can also influence the overall tax changes for individual parcels of property. For example, in the early 1990s the metropolitan area experienced major declines in the valuation for commercial and industrial properties. These valuation declines shifted taxes from property classified as commercial and industrial to all other types of property. Valuation declines also may have accentuated the levy changes by local units of government. A 2002 law change exempted agricultural and cabin property from voter- approved referenda levies. In some jurisdictions where these types of property are a significant part of the tax base, this change shifted taxes onto other classes of property . Legislative changes in state aid programs can also affect the revenue needed to be raised from the property tax. In 2002 the legislature eliminated HACA and increased the other major aid program, LGA, by $140 million. In 2003, the Legislature reduced 2003 LGA by about $120 million and 2004 LGA by about $150 million. In 2005, however, th.e Legislature added about $48 million to the LGA program for 2006 and beyond, $4 million of which is directed to cities under 5QOO via a per Gapita aid base. Levy l~mits also impact local levy decisions. During the 2003 session, cities that had been previously covered by levy limits lost any wnused levy authority. There were no levy limits in place for 2008 but the Legislature did pass new levy limits for cities over 2500 fQr taxes payable in 2Q09, 2010, and 2011. , This discussion is only a general overview of the current MinnesQta property tax system. Over time, the system has become more complex and difficult for taxpayers to understand. Unfortunately, local officials must frequently explain how the system works and take the blame for the complicated features of the system. Local officials, however, can only cQntrollocallevy decisions. They have no direct ability to modify the overall structure of the tax system and are at the mercy of the Minnesota Legislature. 3