HomeMy WebLinkAbout8B - Board Of Review
MEETING DATE:
AGENDA #:
PREPARED BY:
AGENDA ITEM:
DISCUSSION:
'-
CITY COUNCIL AGENDA REPORT
MAY 4, 1998 ~
~~ BOYLES, CITY MANAGE~V
BOARD OF REVIEW
History: Minnesota Statute provides that the County or City Council
can sit as the local Board of Review. The City Council has decided it
wishes to fulfill this function.
Current Circumstances: The Board of Review this year is scheduled
for Monday, May 4, 1998 at 8:00 PM in the Fire Station City Council
Chambers. County Assessor Leroy Arnoldi will be present to assist the
City Council in conducting the Board meeting.
The Issues: The only issue before the City Council sitting at the Board
of Review is the valuation placed upon each parcel by the County
Assessor as of January 1, 1998. Property owners received their
valuation notice last weekend on April 25. A property owner wishing
to contest his or her valuation must do so in person or in writing at the
Local Board of Review. This will allow the party to continue the
appeal to the County Board of Review or court system should they
desire.
Conclusion: The Council should review the attached report provided
by Leroy Arnoldi to refamiliarize itself with appraisal and valuation
related issues. The Mayor should open the Board of Review as it is a
hearing. I will provide a brief overview of the purpose of the Board of
Review. Assessor Arnoldi will give his report. Then each property
owner present should be given the opportunity to state their concerns
about their valuation as of January 1, 1998. For those questions
requiring additional research, Mr. Arnoldi will prepare a report and
provide it to the Board of Review prior to the extension of the Board
of Review meeting scheduled for May 18, 1998 at 8:00 p.m.
16200 Eagle Creek Ave. S.E., Prior Lake, Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245
AN EQUAL OPPORTUNITY EMPLOYER
T
r
...
I
Memorandum
To:
Local Boards Of Review
cc:
From:
Leroy T. Arnoldi, SAMA - Scott County Assessor
Date:
April 28, 1998
Subject:
1998 Local Boards Of Review
This booklet will serve to provide you with information about the property
assessment process and your responsibilities in the process acting as the Local
Board of Review.
The assessment in Scott County is done by a combination of the efforts of two
local assessors and their staffs and the County Assessor's Office; consisting of six
staff appraisers, the County Assessor, a Deputy County Assessor, and an
Assessment Technician. These individuals are responsible for an annual valuation
and classification of over 33,000 parcels of property. The total taxable market
value exceeds 4 billion dollars, which bears a total property tax burden of in excess
of 81 million dollars.
With real estate taxes bearing a large burden of the cost of government, the local
Board of Review is an important step in maintaining an equitable property tax
system. We hope that all members take their jobs very seriously and look forward
to working with you throughout the process. Please be aware any reductions that
the Board may make will have the effect of shifting the tax burden to all other
property. We must avoid the "easy way out" of reducing all individuals that
appear as it would be unfair to property owners that have not appealed.
Call me at 496-8124 with any questions you have about Local Boards of Review
or information within this booklet.
_,.._.;..".--..,.....__,...._,~.,_,__"',' ".___",.__""~"'__~_~..._--o.->... ,
r
I
TABLE OF CONTENTS
FORMA T FOR LOCAL BOARDS OF REVIEW........................................... 1
THE 1998 SCOTT CO UNTY ASSESSMENT................................................. 2
ESTABLISH ING MARKET VALUES............................................................ 4
SA L ES RA T 10 ............ ...... .... ...................... ........ .............. ....... ............. 5
CO EFFI CI ENT 0 F D ISPERSION ....................................................... 6
RESPONSIBILITIES OF LOCAL BOARDS OF REVIEW........................... 7
RESPONSIBILITIES OF COUNTY BOARD OF EQUALIZATION............ 9
COMPOSITION OF BOARD .......................................................................... 9
TIM E 0 F ME ETI N G ...................................................................................... 10
DUTIES OF COUNTY BOARDS OF EQUALIZATION ............................. 10
COUNTY ASSESSOR AND COUNTY BOARD OF EQUALIZATION ..... 12
RESPONSES TO TYPICAL TAXPAYER QUESTIONS............................. 13
SAMPLE ASSESSM ENT PERCENTAGES.................................................. 19
APPRAISAL AND ASSESSMENT TERMINOLOGy................................. 20
FORMAT FOR LOCAL BOARDS OF REVIEW
At the 1998 Local Boards of Review, we will utilize a standardized sign In sheet, and
report/recommendation to the Local Boards from the Assessor.
The format for the Local Boards of Review will be:
. On a first come, first serve basis, the individuals will make their presentation to the
Local Board of Review. The Assessor will make notes of taxpayer comments and
respond to questions, but will not make specific recommendations during the
appearance. The issues that the taxpayer should be discussing are the January 2,
1998 valuation and/or classification of the property.
. If there is more than one meeting, the Assessor will collect as much information as
possible on appealing properties after the first meeting and make specific
recommendations on each case at the second meeting. The level of detail provided
to the Local Board and number of properties inspected will depend upon the
number of properties appealing. Hopefully, the report will be provided to the
Local Board prior to its reconvened meeting. But, due to time constraints, there
may be cases where it is presented to the Board at that meeting.
. The Local Board may accept the Assessor's recommendations as a whole, may
accept part of the Assessor's recommendations, or may deal with the properties on
a case by case basis.
1
I
The 1998 Scott County Assessment
The 1998 assessment, like each of the annual assessments, affects all property owners in
Scott County. State law requires the assessor to re-assess all property every year.
This has been done and the owners of property in Scott County have been notified of any
value change or any classification change.
Minnesota statute 273.11 reads in part:
All property shall be valued at its market value. In estimating
and determining such value, the assessor shall not adopt a lower or
different standard of value because the same is to serve as basis for
taxation, nor shall he adopt as criterion of value the price for which such
property would sell at auction or force sale, or in the aggregate with all the
property in the town or district but he shall value each article or description
of property to be fairly worth in money.
The statute says all property shall be valued at market value, not may be valued at market
value. This means that no factors other than market value issues (such as personalities,
politics, owner's income, etc.) shall affect the assessor's value and the subsequent action by
the Board of Review.
Market value'has been defined many different ways. Simply stated it is:
The most probable price estimated in terms of money which a property will
bring if exposed for sale on the open market by a seller who is willing but
not obligated to sell, allowing a reasonable time to find a purchaser who is
willing but not obligated to buy, both with knowledge of all the uses to
which it is adapted and for which it is capable of being used.
All real property subject to taxation is listed and at least one-fourth of the parcels listed
are appraised each year with reference to their value on January 2 preceeding the
assessment so that each parcel shall be reappraised at maximum intervals of four: years.
2
The 1998 Scott County Assessment
April 27, 1998
The real estate tax is an ad valorem which is based on the value of property and not on the
ability of the property owner to pay. The values placed on all real estate in Scott County
are based on the estimated value of land and the improvements upon the land, while no
consideration is given to who owns the land.
The assessment is updated in a uniform, objective manner each year. Each year the
assessor analyzes the previous twelve months' real estate sales to modify the mass
appraisal system to properties. For the January 2, 1998 valuation, sales from October,
1996 to September, 1997, were analyzed both for market trends as well as the assessment
to sale ratio (assessor's value divided by the sale price) on the sales.
There are two reasons why valuations are changed. The most obvious is inflation or
deflation of prices in the real estate market. While inflation has slowed down in recent
years, there is still inflation in some parts of the residential market.
The second reason for a valuation change is, even in a stable market, if a property based
on an analysis of sales is perceived to be under-assessed either in relation to comparable
properties or to the "target" level of assessment, the valuation may increase. It also is a
result of continually attempting to improve the mass appraisal system to treat all property
in a uniform manner. This "fine tuning" of the assessment causes some properties to
receive larger valuation increases than other properties. The Commissioner of Revenue
requires a level of assessment between 90 and 105 percent of market value.
It should be noted that an increase in valuations will not necessarily result in an increase in
tax. Increased taxes are the result of increased government spending. If the tax base
increases and spending remains stable, there is a corresponding decrease in the tax rate
and taxes will stay the same.
3
t .
The ] 998 Scott County Assessment
April 27, 1998
ESTABLISHING MARKET VALUES
The purpose of the assessment process is to make an accurate estimate of the market
value of each parcel of taxable property every year. Doing so requires current information
about the properties being assessed and the local real estate market.
The Scott County Assessor's Office maintains a record of every property in the County,
including its size, location, physical characteristics and condition. This record is updated
whenever new information becomes available as the result of the four year review,
improvements being made to the property, or when a physical review is requested by the
property owner. This information is computerized, allowing statistical comparisons of
properties by type and location.
It is important to know that assessors use a mass appraisal process for valuing residential,
property, which is different from the individual appraisal system used by mortgage'
companies and others. The mass appraisal system used in Scott County involves the
comparison of thousands of properties with actual residential market sales from the same
area and throughout the county. New homes, additions, and remodelings are valued based
on their individual characteristics, their contributory value, and construction costs.
Because the property assessment sets estimated market values, having the local assessment
system operate effectively requires as much information about the local real estate market
as possible. The Assessing Division makes a record of all property sales using the
Certificate of Real Estate (or CR V) filed at the County for each property sale.
The office also examines multiple sales: properties which have sold more than once over a
period of a few years. After taking into account any physical changes that may have
occurred, the Assessor is able to estimate what is happening to the real estate market over
that period of time. All sales information collected by the Assessing Division is closely
analyzed.
4
The 1998 Scott County Assessment
April 27, 1998
SALES RATIO
Evidence suggesting a forced sale, foreclosure, sale to a relative, or anything but an ami's-
length transaction results in the sales information being discarded. This is important
because the real estate sales information is the data base for the statistical comparisons
necessary to make the property assessment.
The accuracy of the Assessor's Office estimated market values is measured by the sales
ratio, which is the Assessor's estimated market value divided by the actual selling price.
For example, a house having its estimated market value assessed at $90,000 and an actual
selling price of$100,000 gives a sales ratio of90 percent. For areas in Scott County, the
accepted range for the median sales ratio measurement is 90 to 100 percent. In other
words, the median (or midpoint) of the sales ratios for all properties sold should fall within
90 to 100 percent.
A sales ratio of slightly less than 100 percent is desirable in order to avoid having a great
many properties valued at more than their actual market value. If the sales ratio were at
100 percent, it would mean that half the properties were assessed at less than market value
and half were higher, with too many over the actual market value. On the other hand, a
sales ratio of 92.5 percent means half the properties are below 92.5 percent of actual
market value, half are higher, and a relatively low number are valued by the assessor at
more than actual market value. Therefore, the acceptable range is 90 to 100 percent.
Median
100
Median
92.5
92.5
95
105
80 85
95 100
HALF THE VALUES ARE
OVER 100%,
FEW VALUES ARE
OVER 100%
5
."._ ~~,,___~._,.~_.....<.."..._--o._.,.." .w___..."~.'h'."...,,"__'~,."_'_ ~..,- " -,., .,-"."'~-~__"____"~_."_~
,
I
The 1998 Scott County Assessment
April 27, 1998
COEFFICIENT OF DISPERSION
A measure of the equity of the property assessment is the co-efficient of dispersion, which
measures the average deviation or dispersion from the midpoint, or median. The more
closely the assessor's values are grouped around the midpoint, the more equitable the
assessment. This is true because relatively few properties will have been valued too high,
or too low, compared to actual selling prices. For the property assessment, a co-efficient
of dispersion of less than 15 percent is acceptable and less than 10 percent is considered
excellent.
The review process is a key aspect of the mass appraisal system. Because many properties
receive a statistic-based adjustment to market value, the review allows the assessing staff
the opportunity to individually examine certain properties. Where there is evidence a
property has been valued inequitably, its market value can be re-adjusted to an appropriate
amount. A property owner who is not satisfied with the assessing staffs review may make
an appeal to the Local Board of Review.
Median
92.5
Median
92.5
VALUES ARE DISPERSED
FROM MEDIAN
(HIGH COEFFICIENT)
VALUES ARE GROUPED
CLOSE TO MEDIAN
(LOW COEFFICIENT)
6
The 1998 Scott County Assessment
April 27, 1998
RESPONSIBILITIES OF LOCAL BOARDS OF REVIEW
The town board of each town and the councilor other governing body of each city is the
Board of Review, except in cities whose charters provide for a Board of Equalization.
The County Assessor shall fix a day and time when the Board of Review or the Board of
Equalization shall meet in the assessment districts of the County. On or before February
15 of each year, the Assessor shall give written notice of the time to the city or town clerk.
The meetings must be held between April 1 and May 31 each year. The clerk shall give
published and posted notice of the meeting at least ten days before the date of the meeting.
The Board shall meet at the office of the clerk to review the assessment and classification
of property in the town or city. No changes in valuation may be made by the County
Assessor after the Board of Review or the County Board of Equalization has adjourned.
This restriction does not apply to administrative in nature.
The Board shall determine whether the taxable property in the town or city has been
properly placed on the list and properly valued by the assessor. If real or personal
property has been omitted: the Board shall place it on the list with its market value;
correct the assessment so that each tract or lot of real property and each parcel, or class of
personal property is entered on the assessment list at its market value. No assessment of
the property of any person may be raised unless the person has been duly notified of the
intent of the Board to do so. On application of any person feeling aggrieved, the Board
shall review the assessment or classification, or both, and correct it as appears just.
A Local Board of Review may reduce assessments upon petition of the taxpayer, but the
total reductions must not reduce the aggregate assessment made by the County Assessor
by more than 1 percent. If the total reductions would lower the aggregate assessments
made by the County Assessor by more than 1 percent, none of the adjustments may be
made. The assessor shall correct any clerical errors or double assessments discovered by
the Board of Review without regard to the 1 percent limitation.
7
._~._,_",w",_~,-____,.,,_,~, ,,__"'._.'.__'__._ _.''''......4-..........<. _._"."_._.""_~._.__ ".~.,"-..,._. _..,-,.",.,"-.....__.._,.~~..---..._- ,-., ,,'"-~......-,_._,.,,----........~.."_._".,.,._.._----~",--
I
The 1998 Scott County Assessment
April 27, 1998
A majority of the members may act at the meeting and adjourn from day to day until they
finish hearing the cases presented. The assessor shall attend, with the assessment books
and papers, and take part in the proceedings, but may not vote. The Board shall list
separately, on a form appended to the assessment book, all omitted property added to the
list by the Board and all items of property increased or decreased, with the market value of
each item of property, added or changed by the Board, placed opposite the item. The
County Assessor shall enter all changes made by the Board in the assessment.
If a person fails to appear in person, by counsel, or by written communication before the
Board after being duly notified of the Board's intent to raise the assessment of the
property, or if a person feeling aggrieved by an assessment or classification fails to apply
for a review of the assessment or classification, the person may not appear before the
County Board of Equalization for a review of the assessment or classification. This
paragraph does not apply if an assessment was made after the Board meeting, as provided
in Section 273.01, or if the person can establish not having received notice of market value
at least five days before the Local Board of Review meeting.
The Board of Review or the Board of Equalization must complete its work and adjourn
within 20 days from the time of convening stated in the notice of the clerk, unless a longer
period is approved by the Commissioner of Revenue. No action taken after that date is
valid. All complaints about an assessment or classification, made after the meeting of the
Board must be heard and determined by the County Board of Equalization. A nonresident
may, at any time, before the meeting of the Board of Review, :file written objections to an
assessment or classification with the County Assessor. The objections must be presented
to the Board of Review at its meeting by the County Assessor for its consideration. (M.S.
274.01)
8
The 1998 Scott County Assessment
April 27, 1998
RESPONSIBILITIES OF THE COUNTY BOARD OF EQUALIZATION
The County Board of Equalization follows the Local Board of Review in the assessment
process. In every county, the basic charge of county equalization is essentially the same.
I~ involves the equalization of the assessment level between the individual assessment
districts and between the various classes of property within the county. Property owners
who are not satisfied with the results of their appearances at the Local Boards of Review
may appeal to the County Board of Equalization.
Assessments of property are made to measure each taxpayer's share in paying the costs of
government in his city, township, school district, and county. If the cost of local
government is to be fairly shared among the taxpayers, it is necessary all taxable property
be listed on the assessment rolls and all valuations be made as professionally and
accurately as possible.
COMPOSITION OF BOARD
The County Commissioners, or a majority of them, with the County Auditor; or, if he
cannot be present, the Deputy County Auditor, form a board for the equalization of the
assessment of property of the County.
The County Board may appoint a special Board of Equalization to which it may delegate
all of the powers and duties and discretion of the appointing County Board and be subject
to the same lawful regulations as the County Board of Equalization would be. The
appointing Board determines the number of members to be appointed to the special
Board, compensation, expenses to be paid, and the term of office of each member. At
least one member of the special Board of Equalization must be an appraiser, realtor, or
other person familiar with property values in the County. The County Auditor is a
nonvoting member and serves as the recorder for the special Board.
9
__.__~~_._~_______,_.__. _.,".~..^,~_ . _. .' __..... .._..._,...._..."_~__~__._._;_~_.,._"..._,.._~'....,.u.,,..^', _--....-~~~.".___.>-<-_..,,_
T
I
The 1998 Scott County Assessment
April 27, 1998
TIME OF MEETING
The Board shall meet annually during the last ten working days in June. The Board may
continue in session and adjourn from time to time until the final adjournment which must
occur on or before the following tenth working day.
No action taken after the adjournment day shall be valid unless a longer session period is
approved by the Commissioner of Revenue. If a change in the assessments becomes
advisable after the Board has adjourned, the change may be recommended by the Board of
County Commissioners to the Commissioner of Revenue.
DUTIES OF COUNTY BOARDS OF EQUALIZATION
The duties of the County Board of Equalization may be found in Minnesota Statutes;
Section 274.13 and 274.14.
The Board may make percentage increases on each class of both real and personal
property in the entire County, in any particular city, town, or district in the County when
the Board believes such property has been valued at less than market value. On real
property, such percentage increases may be limited to land alone or structures alone, or
may be made on both land and structures. It isn't necessary for the Board to give notices
when applying aggregate increases.
The Board may make individual increases in the assessments of both real and personal
property when the Board believes such property has been valued at less than market value.
In these cases, the Board must give notice to the owner of its intentions. The notice must
also set a time and place for a hearing.
The Board may make percentage decreases and individual decreases in the assessments of
both real and personal property when the Board believes such property has been valued at
more than market value. On real property, decreases may be limited to land alone or
structure alone or may be made on both land and structures.
10
The 1998 Scott County Assessment
April 27, 1998
The Board cannot, however, reduce the aggregate value of all property in its County, as
submitted to the Board with the additions made thereto by the Auditor, by more than 1
percent.
Taxpayers who feel that the assessments for the current year are unfair must first appear
before the Local Board of Review before the County Board of Review may hear their
appeal unless it is established that the taxpayer did not receive notice of the market value
at least five days prior to the Local Board of Review meeting or that the assessment was
made subsequent to the meeting of the Local Board as provided in M.S. 273.01.
Any complaints or objections to the current year's assessment made by taxpayers who may
appeal to the County Board of Equalization must be considered by the Board. Such
assessments must be reviewed in detail and the Board has the authority to make any
corrections it believes to be just. In reviewing a protest to an assessment, the Board may
ask the County Assessor to investigate and report back later.
The County Board of Equalization does not have the authority in any year to reopen
former assessments on which taxes are due and payable. The Board considers only the
assessments that are in process in the current year. Occasionally, a taxpayer may appear
to protest an assessment that was made in a previous year. The Board should explain
tactfully that it has no authority to consider such matters and that after taxes have been
extended, adjustments can be made only by the process of application for abatement or by
legal action.
The County Board of Equalization may not exempt property from taxation.
The County Board of Equalization may not place omitted property on the assessment
books. This power is vested only in the Local Boards of Review and to the County
Auditor. However, when it comes to the attention of the Board that any property subject
to taxation has not been assessed, the Board may, by resolution, request the Auditor to
place such property on the tax tolls.
The County Board of Equalization has no authority to make original assessments. Its
duties are restricted to review and equalization of assessments already made.
11
.......4__...A.~.".........._...._~. ,'w___'n__d_.__.._,_.~_,.__M"___M..__-"-
T
I
The 1998 Scott County Assessment
April 28, 1998
The County Auditor is to keep a record of the proceedings and orders of the Board and
the record is to be published in the same manner as other proceedings of the County
Commissioners. A copy of the published record is to be forwarded to the Commissioner
of Revenue along with the abstract of assessment.
COUNTY ASSESSOR AND COUNTY BOARD OF EOUALIZA TION
The County Assessor is required to keep and maintain a record of sales of real property in
the County. In addition, the assessment ratio studies of the Commissioner of Revenue are
reported to each County Assessor. These sources of information help the County
Assessor make recommendations to the County Board of Equalization of necessary
changes in individual assessments or aggregate increases. The analysis of the material
presented by the County Assessor will form the major part of the work of county
equalization.
12
The 1998 Scott County Assessment
April 27, 1998
RESPONSES TO TYPICAL T AXP A YER QUESTIONS
1.
Q.
Why did my taxes increase?
A. The fundamental reason for increase in taxes is increased government
spending. The government suffers from inflation, just as individuals do,
as well as demand for increased services. Additionally for property taxes
payable in recent years, there have been some changes in State aids to
school districts and local units of government. Generally speaking, a
larger share of the costs of doing government are being borne by the
property tax.
2.
Q.
Why are my taxes so high?
A. (For Residential Homestead Property) Property taxes are based on the
valuation of the property. There is a progressive system for computing
the tax capacity from the market value. This results in a progressive
property tax for owner occupied property.
The State of Minnesota has an income adjusted property tax refund for
homeowners. There are different benefits for senior citizens, disabled
individuals, income levels, or based on the number of dependents.
Information about the M-1 PR form, (which is mailed out to individuals
along with their State Income Tax Forms) is available by calling 296-
3781.
If you are a homeowner and your property tax for 1997 increased by
more than 12 percent, you may be eligible for a special refund this year.
3.
Q.
What is State Paid Tax Relief?
A. This is your pro-rated share of a State aid paid to Scott County to reduce
the property tax level. This is already within the calculations of your
taxes.
13
I
I
The ] 998 Scott County Assessment
April 27, 1998
4.
Q.
Why does my tax statement have a different market value than the
valuation notice which I received last spring?
A. An assessor's evaluation is based on sales ratios. A sales ratio is the
assessor's value divided by the selling price. For example, if a property
sells for $] 00,000 and has a $90,000 estimated market value, it results in
a sales ratio of 90 percent. The Minnesota Department of Revenue
requires that the sales ratios for all properties within the State lie between
90 and ] 05 percent. If an area has a sales ratio below 90 percent, they
will receive an aggregate increase to brin it within that corridor.
5.
Q.
Do we still have the Homestead Credit?
A. If the definition of the Homestead Credi is: "Will there be a significant
property tax reduction for owner/occ pied residential property?"The
answer is yes. However, as the law curr ntly exists, it is not being called
the Homestead Credit, but will be a net t x capacity.
6.
Q.
What is tax capacity?
A. The gross tax capacity is the term that re laces the former term assessed
vallie. It is a calculation based upon a St te mandated computation from
the estimated market value. For example a residential property will have
1 percent of the first $75,000 and 1. 5 percent of everything over
$75,000 added together to compute their ax capacity.
14
The 1998 Scott County Assessment
April 27, 1998
7.
Q.
What is the tax rate?
A. The term tax rate replaces the former term mill rate. The tax rate is
expressed in percentages and is multiplied by the tax capacity resulting in
the tax obligation prior to any reduction by credits.
8.
Q.
How do you arrive at the tax amount?
A. All taxable property is classified and valued as of January 2 of each year.
This classification and valuation is the basis for the property tax payable
in the following year. For example, your 1998 property taxes are based
on the valuation and classification as of January 2, 1997. Based on the
classification of the property, the market value is taken times the
statutory tax capacity percentage to compute a gross tax capacity.
If a residential property has a value of $125,000, the computation:
o the first $75,000 in value x 1.0 % = 750
o above $75,000 is value x 1.85% = 925
o totaling those computations = 1,675
(This represents the tax capacity.)
The gross tax capacity is taken times the tax rate to yield the tax. For
example, if the tax rate were 1.50, the 1,675 would be taken times 1.50
to yield a tax of $2,512.50. The tax rate will differ depending on the
school district, township, or city.
The first half is payable by May 15, the second half payable by October
15.
15
.._,__~~...__,,~_"._..,.,~ _,~.._.., '_"_'''"'"_~_~'"_"_''~'_'''''_'"_M''''_"'_'_''_'''~_____."''_."_.,.,".~...~.
t
.
The 1998 Scott County Assessment
April 27, 1998
9.
Q.
Why are non-homestead taxes higher than homestead?
A. The property tax benefits of owning and occupying one's own home are
reflected not just in the State Paid Homestead Credit but also in
calculation of the gross tax capacity from the market value. The tax
capacity percentage for residential non-homestead property is 1.9 percent
on the first $75,000 of value and 2.1 percent of the value over $75,000.
The tax capacity percentages on homestead property are 1.0 percent on
the first $75,000 and 1.85 percent on the remaining value. This serves to
reduce in relative terms the tax capacity and, hence, the tax. For
example, a $125,000 home with 1.50 capacity rate would have the
following tax burdens:
o Homestead Tax - $2,512.50
o Non-Homestead tax - $3,712.50
The relative tax burdens between different types of property (residential
versus industrial versus apartments versus agricultural) as well as
different classifications within the same type of property (Homestead
versus Non-Homestead) are policy decisions made by the Minnesota
State Legislature.
16
The 1998 Scott County Assessment
April 27, 1998
10.
Q.
My property was reassessed last year, so why should I get a State
imposed aggregate increase?
A. Aggregate changes in assessment are made by the State Board of
Equalization. The purpose of these changes is to ensure that the
assessment level lies with the 90 to 105 percent of market value corridor
which is required by the Department of Revenue. The changes are made
on a class of property rather than on individual properties. If a property
was revalued and received an increase, it is possible for the State in their
statistical analysis of the assessment to impose another increase. After
the aggregate increase from the State, if the property's estimated market
value for property tax purposes exceeds what it could be sold for on the
open market, the value should be reduced to within the 90 to 105 percent
acceptable corridor.
11.
Q.
What can I do about my taxes?
A. The Assessor deals with the classifications and valuation of the property
which provides the basis for the taxes, but not the specific tax amount. If
the classification or valuation is in error, the first step is to discuss your
concerns with your local assessor or a staff appraiser from the Scott
Count Assessor's Office. If an agreement cannot be reached, a more
formal method of appeal may be necessary.
There are basically three methods of appealing the valuation or class-
ification of a property.
They are:
[J The abatement process
[J Local Board of Review, County Board of Equalization
o Tax Court, including the Small Claims Division
17
_,~"","","m__',.'_"'~"'''''"'''"'__ ._,.,__. "."._.~~,"_..-,"_~.___~;_",_~_.__~,......_,.__~___~_~""'~'''__~
I
1
...
The 1998 Scott County Assessment
April 27, 1998
The abatement process is an administrative appeal done by the County
Assessor. Abatements can be made for taxes payable in the current year.
Abatement applications are available from the County Assessor's Office.
The Local Board of Review meets in April and May to react to taxpayers'
concerns on the January 2 valuation and classifications. These are
generally informal meetings where an individual will express his or her
concerns to the Board. The Board generally consists of the City Council
or Township Board Members. They do not have jurisdiction over taxes
payable in the current year, only about the January 2 classification and
valuation.
The County Board of Equalization has many parallel duties with the
Local Board, but has the additional functions of equalizing values
between jurisdictions within the County.
The Tax Court consists of three judges that comprise a division of the
Executive Branch of Government. They hear aU types of tax appeals, but
spend a majority of their time in real estate appeals. Filing information
can be obtained by calling the Tax Court at 296-2806.
18
The 1998 Scott County Assessment
April 27, 1998
Property Tax Classification Rates:
What They Are, How They Work
The classification rates on selected properties for taxes payable in 1998 are shown below:
PROPERTY
CLASS
TAXES PAYABLE 1998
CLASSIFICATION RATE
Residential Homesteads
First $75,000 of market value
Value over $75,000
Residential Non-Homestead (single unit)
First $75,000 of market value
Value over $75,000
Commercial and Industrial
First $150,000 of market value
Value over $150,000
1.0%
1.85%
1.9%
2.1%
2.7%
4.0%
Farm Homesteads
House, garage, one acre
Land value up to $115,000
Land value over $115,000
Up to 320 acres
Over 320 acres
Farms Non-Homestead Land
Residential Rental (apartments)
3 or fewer units
4 or more units
Same as residential homesteads
0.4%
0.9%
1.4%
1.4%
2.1%
2.9%
Seasonal Cabins (non-commercial)
First $75,000 of market value
Value over $75,000
1.4%
2.5%
How to Use Classification Rates:
Example: Suppose your home is valued at $90,000 and your local tax rate is 1.35 (135% of tax
capacity)
Then:
Your Home's Tax Capacity =($75,000 times .01) + ($90,000 minus $75,000) times .0185=$1,027
Your Propertv Tax = $1,027 times 1.35 = $1,387
(Note: Homesteads also receive the education homestead credit to reduce tne;r school taxes. For
1998, this credit would be approximately $121 for a $90,000 home.) 't . I
, ('
~ ...,.___"~.~_________.~.,_____~,_~"~_,__,....."._~.,_..,,._."__"____>'m'...'..'....._.~".....-..._.__,.......,...__.~,._.__,~'~_.'h..__.........~~__~""M'-
1
I
The 1998 Scott County Assessment
April 27, 1998
APPRAISAL & ASSESSMENT TERMINOLOGY
AD VALOREM TAX
A tax varying with the value of a good or commodity; a real estate tax
based on the value of the property.
AMENITIES
The pleasant satisfactions that are received through using right in real
property but that are not received in the form of money. The tangible and
intangible benefits generated by a property.
APPRAISAL
An estimate or opinion of value. The act or process of estimating value. .
The resulting opinion of value derived from the appraisal may be infonnal,
transmitted orally; or it may be formal, presented in written form. Usually,
it is a written statement setting forth an opinion of the value of an
adequately described property as of a specified date, supported by the
presentation and analysis of relevant data.
APPRAISER
One who estimates value; specifically, one who possesses the necessary
qualifications, ability, and experience to execute or direct the appraisal of
real property.
CAPIT AUZA TION
The process of converting into present value (or obtaining the present
worth of) a series of anticipated future periodic installments of net income.
In real estate appraising, it usually takes the form of discounting.
CAP IT ALIZA TION RATE
The sum of a Discount and a Capital Recapture Rate. It is applied to any
income stream with a finite term over which the invested principal is to be
returned to the investor or lender.
20
The 1998 Scott County Assessment
April 27, 1998
CLASSIFICATION OF PROPERTY
The classification of property after the valuation is complete to identify the
property as residential, commercial, homestead, non-homestead, etc. Each
class refers to a different statutory assessment rate. It is based on the use
as of the assessment date.
CLASS RATE
Statutory percentages applied to the estimated market value of a parcel
based on the parcel's classification to arrive at the tax capacity.
COEFFICIENT OF DISPERSION
In statistics, the ratio of a measure of absolute dispersion to an appropriate
average usually expressed as a percent. It may be computed from either
the quartile or mean deviation, but is usually expressed as a ratio of the
standard deviation to the mean. A measure of relative dispersion.
COST APPROACH
That approach in appraisal analysis which is based on the proposition that
the informed purchaser would pay no more than the cost of producing a
substitute property with the same utility as the subject property. It is
particularly applicable when the property being appraised involves
relatively new improvements which represent the highest and best use of
the land or when relatively unique or specialized improvements are located
on the site and for which there exist no comparable properties on the
market.
21
, ---",,--,,-~-,,-"-,~--~,~,"~--~~,-,----,^~-~-,..._--~-_.~'"~,..,_...~.~-",~~.._---
T
I
The 1998 Scott County Assessment
April 27, 1998
DEPRECIATION
A loss of utility and, hence, value from any cause. An effect caused by
deterioration and/or obsolescence. There are several types of depreciation:
CURABLE DEPRECIATION
Those items of physical deterioration and functional obsolescence which
are economically feasible to cure and, hence, are customarily repaired or
replaced by a prudent property owner. The estimate of this depreciation is
usually computed as a dollar amount of the cost-to-cure.
INCURABLE DEPRECIA TION
Elements of physical deterioration or functional obsolescence which either
cannot be corrected; or, if possible to correct, cannot be corrected except
at a cost in excess of their contribution to the value of the property.
PHYSICAL DEPRECIA TION
A reduction in utility resulting from an impairment of physical condition.
For purposes of appraisal analysis, it is most common and convenient to
divide physical deterioration into curable and incurable components.
PHYSICAL CURABLE DEPRECIATION
Physical deterioration which the prudent buyer would anticipate correcting
upon purchase of the property. The cost of affecting the correction or cure
would be no more than the anticipated addition to utility and, hence,
ultimately to value, associated with cure.
PHYSICAL INCURABLE DEPRECIATION
Physical deterioration which in terms of market conditions as of the date of
the appraisal is not feasible or economically justified to correct. The cost
of correcting the condition or affecting a cure is estimated in utility, and,
hence, ultimately in value, of the property that will result from correcting
or curing the condition.
22
The 1998 Scott County Assessment
April 27, 1998
FUNCTIONAL DEPRECIA TION
Impairment of functional capacity of efficiency. Functional obsolescence
reflects the loss in value brought about by such factors as overcapacity,
inadequacy, and changes in the art, that affect the property item itselfor its
relation with other items comprising a larger property. The inability of a
structure to perform adequately the function for which it is currently
employed.
FUNCTIONAL CURABLE DEPRECIATION
Functional obsolescence which may be corrected or cured when the cost of
replacing the outmoded or unacceptable component is at least offset by the
anticipated increase in utility, and, hence, ultimately in value, resulting
from the replacement.
FUNCTIONAL INCURABLE DEPRECIATION
Functional obsolescence that results from structural deficiencies or
superadequacies that the prudent purchaser or owner would not be justified
in replacing, adding or removing, because the cost of effecting a cure
would be greater than the anticipated increase in utility resulting from the
replacement, addition, or removal.
ECONOMIC OBSOLESCENCE
Impairment of desirability or useful life arising from factors external to the
property, such as economic forces of environmental changes which affect
supply-demand relationships in the market. Loss in the use and value of a
property arising from the factors of economic obsolescence is to be
distinguished from loss in value from physical deterioration and functional
obsolescence, both of which are inherent in the property. Also referred to
as Locational or Environmental Obsolescence.
ESTIMATED MARKET VALUE
The value which the Assessor has estimated the property to be worth. This
value is required to be at least 90 percent of what similar properties are
actually selling for.
23
r
I
The 1998 Scott County Assessment
April 27, 1998
EQUALIZATION
The adjustment of assessed valuation of real property in a particular area to
establish a more equitable division of the total tax burden within the area.
FISCAL DISPARITIES
Program which provides for the sharing of 40 percent of the growth of the
commercial/industrial tax base in the seven-county metro area since 1971.
A percentage of the property tax on each commerciaVindustrial parcel is
calculated at the seven-county uniform rate.
GRADING OF PROPERTY
The process used by an appraiser to identifY the quality of construction in
the physical structure.
GROSS TAX CAPACITY
A parcel's estimated market value multiplied by the gross class rate for that
type of property. Formerly known as assessed value.
HIGHEST AND BEST USE
That reasonable and probable use that will support the highest present
value, as defined, as the effective date of an appraisal.
HOMESTEAD AND AGRICULTURAL CREDIT AID (HACA)
Replaces homestead credit and agricultural credit. The State gives this aid
directly to the local units of government.
HOMESTEAD FULL YEAR
Property is granted a lower assessed value if the owner lives in and owns
the property as of January 2. If a person owns and occupies their home up
until December 1, they still qualify for the homestead class the following
year. The lower tax capacity affects the taxes in the following year.
24
The 1998 Scott County Assessment
April 27, 1998
NON-HOMESTEAD
Residential property that does not qualify for a full year or mid-year
homestead. The tax capacity is higher, hence, a higher tax.
INCOME APPROACH
That procedure in appraisal analysis which converts anticipated benefits
(dollar income or amenities) to be derived from the ownership of property
into a value estimate. The income approach is widely applied in appraising
income-producing properties. Anticipated future income and/or reversions
are discounted to a present worth figure through the capitalization process.
LEGAL DESCRIPTION
A statement containing a designation by which land is identified according
to a system set up by law or approved by law.
LOCAL TAX RATE
Rate of tax applied to the tax capacity of property to calculate the tax due.
Formerly known as the mill rate.
MARKET APPROACH
A process of analyzing sales of similar recently sold properties in order to
derive an indication of the most probable sale price of the property being
appraised. The reliability of this technique is dependent upon (a) the
availability of comparable sales data, (b) the verification of the sales data,
(c) the degree of comparability or extent of adjustment necessary for time
differences and (d) the absence of non-typical conditions affecting the sale
pnce.
MARKET VALUE
The highest price in terms of money which a property will bring in a
competitive and open market under all conditions requisite to a fair sale,
the buyer and seller, each acting prudently, knowledgeably and assuming
the price is not affected by undue stimulus.
25
r
.
..
The ] 998 Scott County Assessment
April 27, 1998
MASS APPRAISING
A method used in revaluation of a community for tax purposes. As the
term implies, it is a method of appraising a large number of properties at
one time by adopting standard techniques, and giving due consideration to
the appraisal process so that uniformity or equality of values may be
achieved between all properties.
METES AND BOUNDS
A description of a parcel of land by reference to the courses (bearings, that
is, the angles east or west of due north or due south) and distances (usually
in feet or chains) of each straight line which forms its boundary, with one
of the corners tied to established point; that is, the bearing and distance
from an established point, such as a section corner or to the intersection of
the center lines of two roads, etc.
If one part of the boundary is on a curve, this part is described by showing
the number of degrees of the central angle subtended by the curve (arc),
the length of the radius, and the length along the curve.
NET TAX CAPACITY
A parcel's estimated market value multiplied by the net class rate for that
type of property.
OBSOLESCENCE
One of the causes of depreciation. It is the impairment of desirability and
usefulness brought about by new inventions, current changes in design and
improved processes for production, or from external .influencing factors,
which make a property less desirable and valuable for a continued use.
Obsolescence may be either economic or functional.
26
The 1998 Scott County Assessment
April 27, 1998
PARCEL
A piece of land, regardless of size, in one ownership.
PROPERTY TAX REFUND
Also know as the "Circuit Breaker". State-reimbursed refund to owners
of homesteaded property and renters based on income.
REVALUATION
The mass appraisal of all property within an assessment jurisdiction to
obtain equalization of assessed values. Also for reappraisal of a former
assignment.
SALES ASSESSMENT RATIO
The ratio derived by dividing the estimated market value by the selling
pnce.
AGGREGA TE RA TIO
The ratio determined by dividing the total assessed value of all sales by the
total selling prices.
MEAN RATIO
The total of all the ratios in a given set divided by the number of items in
the set.
MEDIANRATIO
The value of the middle item where an odd number of items are arranged
(arrayed) according to size~ or the arithmetic average of the two central
items, if there is an even number of items. It is a positional average and is
not affected by the size of extreme values.
SPECIAL (LOCAL) ASSESSMENT
Street, sewer, curb, etc, cost determined by local municipality.
27
T
.
1
The 1998 Scott County Assessment
April 27, 1998
TARGETING REFUND
State-reimbursed refund to owners of homesteaded and seasonal recre-
ational residential property. The refund is a percentage of the tax increase
in excess of 12 percent over the previous year on the same property. It
does not apply to increases resulting from improvements. Forms are
available in the property tax refund booklet.
T AX INCREMENT FINANCING (TIF)
TIF districts are created and generally bonds are issued to finance city cost
of street improvements, etc, which increase the market values of the
property in the district. The taxes due on a parcel are based on the parcel's
total market value. The extra taxes generated by the increased market
values are shown as "TIF" on the tax statements and are used to payoff the
TIF bonds.
WATERSHED ASSESSMENT
Watershed cost determined by watershed district based on benefit to
individual parcel.
28