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HomeMy WebLinkAbout6A - Annual Board of Review Hearing STAFF AGENDA REPORT AGENDA #: PREPARED BY: SUBJECT: DATE: ~~ BOYLES, CITY MANAGE;{ ~ 1997 BOARD OF REVIEW MAY 5, 1997 BACKGROUND: Under Minnesota statutes the City Council acts as the Board of Review each year to consider resident concerns about the valuation which is placed on their property by the County Assessor as of January 2. This evening, the Council will be acting as Board of Review for this purpose. DISCUSSION: County Assessor Leroy Arnoldi has conducted assessment of one fourth of the properties within the City of Prior Lake in accordance with state statute. Mr. Arnoldi has provided the attached Informational Booklet for City Councilmembers. As a result of his work he will provide the City Council with an oral report at the meeting which summarizes his findings. The Council, acting as the Board of Review, should listen to questions and concerns raised by residents about the value which has been placed upon their property as of January 2, 1997. Mr. Arnoldi will attempt to immediately respond to questions which do not require significant additional research. In some cases it may be necessary for Mr. Arnoldi to research the question and return to the Council when and if the Board of Review is reopened on May 19. The local Board of Review is the first of numerous opportunities afforded to taxpayers to appeal the value of their . property as of January 2, 1997. In order to proceed to the next step, the property owner must perfect their appeal at the previous step. To perfect the appeal, the person must send a letter documenting their concerns or address their concerns in person to their local Board of Review. ISSUES: The only issue in question is whether or not the valuation of the property is accurate when compared with other like properties as of January 2, 1997. The amount of property 16200 ~.~~ Ave. S.E., Prior Lake, Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245 AN EQUAL OPPORTUNITY EMPLOYER taxes is a separate matter which is considered as part of the budget hearing and truth in taxation process. RECOMMENDATION: The Council should provide Mr. Arnoldi the opportunity to make a presentation with respect to assessment trends this year~ The public should then be allowed to present their concerns with respect to this year's valuation. Questions which cannot be answered this evening should be referred to Mr. Arnoldi for further research. A report will be presented to the City Council prior to reopening the hearing on May 19 if necessary. After everyone has been heard, the Council should continue the Board of Review until May 19, 1997 at 8:00 p.m. or, if all questions have been answered satisfactorily, adjourn the Board of Review. AG60506A.DOC . ._u__ __ ___t........, U"',......UI'~ VI ""VQIU VI nCVICVY - C:4Ui:::lIl~C:ltlon. .~ Poucher, MpIS. OFFICE OF COUNTY ASSESSOR ,. TO THE CLERK OF THE CITY OF PRIOR LAKE SCOTT COUNTY, MINNESOTA: NOTICE IS HEREBY GIVEN, That the at R ! nn o'clock 5TH day of MAY P, M., has been fixed as the date for the meeting of the Board of Review- (Slrike oul one) X~~nyour CITY for said year. This meeting should be held in your office as provided by law. (Fire Station City Council Chambers) Pursuant to the provisions of Minnesota Statutes Section 274.03, you are required to give notice of said meeting by publication and posting, not later than ten days prior to the date of said meeting. Given under my hand this l~TH day of FFRRIIARY ,19 97 ::1..., t:.J1: ~ County Assessor SCOTT County, Minnesota .Applies only to Cities whose charter provides for a Board 01 Equalization instead of a Board of Review. SCOTT COUNTY ASSESSOR COURTHOUSE 112 428 HOLMES STREET SOUTH SHAKOPEE, MN 55379-1381 (612) 496-8115 GARY L. CUNNINGHAM COUNTY ADMINISTRATOR LEROY T. ARNOLDI ASSESSOR Fax: (612) 496-8257 To: Local Board of Review i nl lli6I 0 I lMC 11 U IDfN,QID~ID a I March 5, 1997 Enclosed is an informational booklet compiled by the Scott County Assessor to provide you with information about the property assessment process, common questions asked by troCpayers, and your responsibilities as the Local Board of Review. Please keep this booklet on file for reference and for any new member of the board of review to become familiar with this process. ~T~ Leroy T. Arnoldi Scott County Assessor An Equal OpportunityjSafety Aware Employer Memorandum To: Local Boards Of Review cc: From: Leroy T. Arnoldi, SAMA - Scott County Assessor Date: March 6, 1997 Subject: 1997 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 30,000 parcels of property. The total taxable market value exceeds 3 billion dollars, which bears a total property tax burden of in excess of 70 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. TABLE OF CONTENTS FORMA T FOR LOCAL BOARDS OF REVIEW........................................... 1 THE 1997 SCOTT COUNTY ASSESSMENT.................................................. 2 ESTABLISHING MARKET V ALVES............................................................4 SALES RA TI 0 ...................................................................................... 5 CO E FFI CIENT OF 0 ISPERSI 0 N ....................................................... 6 RESPONSIBILITIES OF LOCAL BOARDS OF REVIEW........................... 7 RESPONSIBILITIES OF COUNTY BOARD OF EQUALIZA nON............ 9 CO MPOSITI 0 N OF DO ARD .......................................................................... 9 TIME 0 F MEETIN G .................... .................................................................. 10 DUTIES OF COUNTY BOARDS OF EQUALIZATION ............................. 10 COUNTY ASSESSOR AND COUNTY BOARD OF EQUALIZATION..... 12 RESPONSES TO TYPICAL TAXPAYER QUESTIONS............................. 13 SAMPLE ASSESSMENT PERCENTAGES.................................................. 19 APPRAISAL AND ASSESSM ENT TERMINOLOGy................................. 20 FORMA T FOR LOCAL BOARDS OF REVIEW At the 1997 Local Boards of Review, we will utilize a standardized sign 10 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, 1997 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 The 1997 Scott County Assessment The 1997 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 1997 Scott County Assessment March 6, 1997 The real estate tax is an ad valorem which is based on the value of property and not on the ability of the property own~r 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 State of Minnesota has two refund programs available. The property tax refund booklet explaining these programs is sent to individuals with their income tax return or is available by calling 296-3781 (Form M-IPR). The program provides for refunds to individuals who have high property taxes in relation to their income or have a significant tax increase (over 12 percent) for property taxes payable in the current year over the preVIOUS year. 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, 1997 valuation, sales from October, 1995, to September, 1996, 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 The 1997 Scott County Assessment March 6, 1997 ESTABLISHING MARKET VALVES 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 1997 Scott County Assessment March 6, 1997 SALES RATIO Evidence suggesting a forced sale, foreclosure, sale to a relative, or anything but an arm's- length transaction results in the sales infonnation being discarded. This is important because the real estate sales infonnation 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 $1 00,000 gives a sales ratio of 90 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 The 1997 Scott County Assessment March 6, 1997 COEFFICIENT OF DISPERSION A measure of the equity of-t:he 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 1997 Scott County Assessment March 6, 1997 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 I and May 31 each year. The clerk shall give published and posted notice of the meeting at least te~ 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 The 1997 Scott County Assessment March 6, 1997 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 - --r~ Y"T The 1997 Scott County Assessment March 6, 1997 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. It involves the equalization of the assessment level bet.ween 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 The 1997 Scott County Assessment March 6, 1997 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 ~ay be recommended by the Board of County Commissioners to the Commissioner of Revenue. DUTIES OF COUNTY BOARDS OF EOUALIZA TION 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] 997 Scott County Assessment March 6, 1997 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 I 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 a~ 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 The 1997 Scott County Assessment March 6, 1997 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 o[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 attend the meetings of the County Board of Equalization. He or she should be prepared to assist the Board in every way possible. He or she should have available for the Board's use tables and charts relating to values in various districts of the County. The County Assessor should prepare a map showing a comparison of the average market values per acre, both with and without improvements, of all land in townships and also the bordering tier of townships of each adjoining county. The County Assessor is further 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. Finally, the County Assessor is required to enter all changes made by the Board in the assessment books. 12 -~.~':'.- .;iT The 1997 Scott County Assessment March 6, 1997 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 serv.ices. 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. To be eligible for the regular refund, the household income must be $60,000 or less. There are different benefits for senior citizens, disabled individuals, or based on the number of dependents. Information about the M- I 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 1996 increased by more than 12 percent, you may be eligible for a special refund this year. The refund is available to taxpayers who qualify for the regular property tax refund as well as those ,whose household income is $60,000 or more. 13 The ] 997 Scott County Assessment March 6, ] 997 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. 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 $100,000 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 bring it within that corridor. 5. Q. Do we still have the Homestead Credit? A. If the definition of the Homestead Credit is: "Will there be a significant property tax reduction for owner/occupied residential property?"The answer is yes. However, as the law currently exists, it is not being called the Homestead Credit, but will be a net tax capacity. 6. Q. What is tax capacity? A. The gross tax capacity is the term that replaces the former term assessed value. It is a calculation based upon a State mandated computation from the estimated market value. For example, a residential property will have ] percent of the first $72,000 and 2 percent of everything over $72,000 added together to compute their tax capacity. 14 The 1997 Scott County Assessment March 6, 1997 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 1997 property taxes are based on the valuation and classification as of January 2, 1996 Based on the classification of the property, the market value is taken times the statutory tax capacity percentage to compute a gross tax capacity. Ifa residential property has a value of$125,000, the computation: o the first $72,000 in value x 1.0 % = 720 o above $72,000 is value x 2% = 1,060 o totaling those computations = 1,780 (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 1,780 would be taken times 1. 50 to yield a tax of $2,670. 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 The 1997 Scott County Assessment March 6, 1997 9. Q. Why are non-homestead taxes so much higher than homestead? A. The properyy 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 2.3 percent on all of the value. The tax capacity percentages on homestead property are 1.0 percent on the first $72,000 and 2.0 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 - $2,670 o Non-Homestead tax - $4,312.50 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 1997 Scott County Assessment March 6, 1997 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: [] The abatement process [] Local Board of Review, County Board of Equalization [1 Tax Court, including the Small Claims Division 17 The 1997 Scott County Assessment March 6, 1997 The abatement process is an administrative appeal done by the County Assessor. Abatements can be made for taxes payable in the current year. Abatemen.t 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 all 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 1997 Scott County Assessment March 6, 1997 SAMPLE ASSESSMENT PERCENTAGES 0.45% First $32,000 blind homestead Farmland to total value $115,000 1.0% Homestead, $0,- $72,000 Homestead farmland over $115,000 total, less than 320 acres 1.5% Other farmland 1.75% Cabins, $0 - $72,000 2.0% Homestead, over $72,000 in value Subsidized apartments, building value 2.3% I - 3 unit non-homestead Vacant land 2.5% Cabins, over $72,000 in value 3.0% Commercial/industrial, $0 - $100,000 Utilities, $0 - $100,000 3.4% Subsidized apartments, land value 4+ unit apartments 4.6% Commercial/industrial over $100,000 in value Utilities, over $100,000 in value. 19 The 1997 Scott County Assessment March 6, 1997 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 informal, 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. CAP IT ALIZA nON 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. CAPITALIZATION 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 1997 Scott County Assessment March 6, 1997 CLASSIFICATION OF PROPERTY The classification of property after the valuation is complete to identify the property as r~sidential, 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 a~ve 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 The 1997 Scott County Assessment March 6, 1997 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 DEPRECIA TION 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 o.f 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 DEPRECIATION 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 1997 Scott County Assessment March 6, 1997 FUNCTIONAL DEPRECIATION 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 itself or 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 The 1997 Scott County Assessment March 6, 1997 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 (HAC A) 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 1997 Scott County Assessment March 6, 1997 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. Anticip~ted 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 The 1997 Scott County Assessment March 6, 1997 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 comers tied to established point; that is, the bearing and distance from an established point, such as a section comer 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 r - -- ~- tit' The 1997 Scott County Assessment March 6, 1997 PARCEL A piece ofland, 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 RA no The ratio derived by dividing the estimated market value by the selling pnce. AGGREGATE RATIO 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 The 1997 Scott County Assessment March 6, 1997 TARGETING REFUND State-reimbursed refund to owners of homesteaded and seasonal recre- ational reside!ltial 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. TAX 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