Lake property owners, farmers to feel tax pinch

By Tom Hintgen (Contact) | The Daily Journal

Published Monday, December 14, 2009

Thousands of Minnesota property owners, including many lake property owners and farmers in Otter Tail County, will face property tax increases next year. Other taxpayers, however, will see their taxes stay the same or even decline.

Those changes relate to Limited Market Value (LMV) that was created by the state legislature in 1993, an effort to protect property owners from the tax impacts of sharp valuation increases. This law, however, was changed for 2010 and succeeding years.

“The idea,” said Otter Tail County Assessor Robert Moe, “was to limit property tax increases when property values increased rapidly. There was a cap on how much of that increase could be taxed.”

Moe said that in many cases the gap between market value and taxable

value grew wider over the years. In many areas, including Otter Tail County, lake cabins will be hit hard because their value increased more rapidly than other real estate.

Limited Market Value has no effect on estimated market value. It only affects the amount of value the property is taxed on, namely the taxable market value.

If a property is eligible for the provisions of the Green Acres Law and

the property also qualifies for limited market value, the assessor must calculate two limited market values — one based on the agricultural value (Green Acres value) and one based on its highest and best use (the true market value which is sometimes called the development value).

The Old House was a program designed to give owners of deteriorated

and older homes an incentive to restore and renovate their houses. It

permitted the assessor to grant a temporary property tax exclusion on all or a portion of the value estimate rendered for certain newly constructed improvements. The total qualifying value was dependent upon the age of the home.

“This program (Old House) has been discontinued for new applications,” said Moe, “and those with deferrals are in the process of being phased out.”

At the program's peak in 2004, nearly $32 billion (statewide) was

excluded from the property tax rolls under LMV.

“Some property owners, such as resorts, residential and farm properties that had not received LMV, and also commercial properties, were paying more taxes,” said Moe. “That’s because someone else was not paying

on their full amount of value. It's shifted back, now, to where there's

probably a little more even playing field.”

He said that resorts and commercial property never were eligible for LMV.

Many homeowners in Fergus Falls and other communities are seeing

decreases in their property taxes and decreases in taxable values.

In Otter Tail County in 2007, $1.1 billion of taxable value was deferred. In the county in 2008, $1.2 billion was deferred. In 2009, there was about $750 million of taxable value that was deferred.

“In 2010, $326 million of taxable value will be deferred, much less than in prior years” said Moe. “This shows the removal effect of LMV.”