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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 <br />