Attachment A
<br />T 0.- Roseville City Council
<br />FROM.- Bill Malinen,, City Manager
<br />DATE.- August 4, 2011
<br />RE.- Market Value Homestead Credit (MVHC)i
<br />You may have recently seen the LMC bulletin that described the changes to the MVHC program
<br />as a result of the special session of the MN legislature. As a part of the budget passing
<br />legislation, the current MVHC credit and reimbursement program will be eliminated beginning
<br />with taxes payable in 2012. In place of the current MVHC program, homeowners will receive an
<br />exclusion of a portion of the market value of their house from property taxes. The exclusion is
<br />computed in a manner similar to the current market value homestead credit. However, the impact
<br />of the repeal of the existing MVHC program and the new exclusion will vary from community to
<br />community, depending on a number of factors, including tax base of the community and the
<br />local tax rate. Under the new system with no MVHC credit and reimbursement, each city will
<br />receive those revenues as property tax payments that will occur with the normal property tax
<br />distribution process, which will accelerate the first half of the payment by as much as three or
<br />four months providing a small cash flow advantage.
<br />For cities and other local units of government, the elimination of the MVHC program will to a
<br />degree simplify and clarify the property tax process. No longer will a city's certified property
<br />tax levy be reduced by the allocation of the MVHC credit with a "promised"' reimbursement by
<br />the state for the loss of property tax receipts.
<br />For homes valued at less than $,76,,000,, the exclusion is equal to 4O percent of the home's market
<br />value. For homes valued between $,76,,000 and $,413,,800,, the exclusion is $30,400 minus 9
<br />percent of the value over $,76,000. The table below illustrates how the new market value
<br />exclusion compares to the existing MVHC program.
<br />New Market Value Exclusion Compared to Existing MVHC Program
<br />Home Market Value $76,,000
<br />$,150POOO
<br />$,300POOO
<br />$,45OPOOO
<br />Current MVHC $304
<br />$,237.40
<br />$,102.4O
<br />$,0
<br />MV Exclusion $30400
<br />$23,740
<br />$1 10 40
<br />$,0
<br />MV After Exclusion $45fiOO
<br />$126, 260
<br />$289,760
<br />$,45OPOOO
<br />The new market value exclusion for homes will mean that beginning in 2012, each city's tax
<br />base will be reduced and the city's tax rate will rise to obtain the same property tax levy.
<br />Although the homestead exclusion is computed in a mathematically similar manner to the
<br />repealed MVHC, the new system will shift taxes among properties within each community,
<br />especially to commercial, industrial, apartment, and other properties that will not receive the
<br />benefit of the homestead market value exclusion. The current MVHC program, if it was fully
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