Expect Your Property Taxes to be Lower Next Year

The typical Minnetonka homeowner will pay a bit less in taxes next year.

While the preliminary tax levy that the City Council approved Monday is 2.87 percent bigger than this year’s levy, a continuing decline in the median home value has shifted the property tax burden onto commercial properties.

Unlike with an income tax or sales tax, a property's value alone doesn't dictate its tax bill. Instead, the entity that sets your property taxes—in this case, the city—first decides how much money it needs to raise. This is called the tax levy. At this point, property values are used to determine each property owner's share of that total.

In other words, values don't dictate the size of the pie; they determine how that pie is divided.    

As a result, the city property taxes for a median-valued home in Minnetonka, worth $273,200 in 2013, are expected to decrease slightly.

Still, the city levy is preliminarily set to grow from $31 million to $31.9 million. The bulk of that increase is due to personnel expenses, such as pensions and costs from the Affordable Care Act, also called Obamacare, according to the city. Road maintenance and other capital costs also contribute to the growth, as does an aggressive effort to prepare for the imminent arrival of the emerald ash borer.

But the preliminary levy is smaller than the 5 percent growth Minnetonka staff initially expected. Thanks to a new state law, cities and counties will no longer have to pay the 6.875 percent sales tax on most purchases starting Jan. 1. Minnetonka estimates the exemption would have saved $485,000 in 2012—and that the change shaved a percentage point off next year’s levy growth. In addition, revenue increases cut another percentage point.

The city will continue budget discussions through the fall. Under state law, the council may decrease the levy but not increase it. There will be a public hearing Dec. 2. The council will adopt a final budget Dec. 16.