The Free Press, Mankato, MN

August 4, 2013

Taxes shift from homes to farms

2014 property taxes will show big change in who foots bill

By Mark Fischenich mfischenich@mankatofreepress.com
The Mankato Free Press

---- — MANKATO — The impact of the Legislature's property tax freeze and the spike in the value of farmland is beginning to solidify in Blue Earth County, and it's looking like very good news for homeowners.

"We've got more (tax) base and we're not trying to collect more money," said Blue Earth County Assessor Michael Stalberger.

The county portion of a Blue Earth County home's property taxes should drop more than 11 percent in 2014 while most farms will see an increase of close to 20 percent, according to preliminary calculations by Stalberger. Commercial/industrial properties should also see the portion of their property taxes going to the county fall by more than 11 percent whereas apartment buildings, which are also increasing in value (but not nearly as much as farms) will see about a 3 percent reduction.

"We're going to see some property tax reductions for a lot of our taxpayers at the expense of our agricultural properties," Stalberger said.

The county can't increase its levy in 2014 because the Legislature, which boosted aid to cities and counties during the 2013 session, put a levy freeze on most of those local governments. The county board could choose to reduce its levy, which would bring even bigger reductions for homes and commercial property and slightly ease the increase on farms.

But if the board sticks with a levy freeze — collecting the same $29 million in 2014 that it is levying this year — a hypothetical Blue Earth County home valued at $160,000 will see its county tax bill fall $69 to $535. The owner of a $300,000 home would see a $144 reduction, leaving a county tax bill of roughly $1,100.

As with homes, valuations of commercial properties in the counties are holding steady for next year. So the shift in tax burden to farm land will mean a projected reduction in county taxes for a $1 million commercial property of nearly $1,000 next year, bringing the county portion of the real estate bill to about $7,500.

Farmers, who are seeing the value of their land jump dramatically because of land sales that are pushing prices past $10,000 an acre, would see a $483 jump in county property taxes on a hypothetical homesteaded farm valued at $1.1 million this year — because its taxable market value will be $1.5 million in 2014. That would put the farm's county tax bill at $2,927.

The owner of smaller $452,000 farm (about 75 acres) will see the valuation rise to $610,000 and the county tax bill jump from $994 this year to $1,190 in 2014.

"It looks good for the city of Mankato, but you've got to feel for the farmer," said Commissioner Vance Stuehrenberg of Mankato.

Stalberger said farm sales this year demonstrate that the county still has a ways to go in getting taxable values (currently averaging roughly $8,500 per acre) up to actual market values.

"We're looking at double-digit increases again," he said for valuations on farmland for the 2015 tax year.

The good news for farmers is that the housing market is finally starting to rebound, so residential properties should see rising values again in coming years. That will ease the shift in tax burden toward ag land. But it's been a dramatic shift in recent years.

For the 2011 tax year, owner-occupied homes made up nearly 36 percent of the county's tax base, commercial/industrial was 26 percent and ag land was 22 percent. In 2014, farms will constitute nearly 33 percent of the tax base, commercial will be less that 24 percent and homesteaded residential property will be down to 26.5 percent.

Because the levy is frozen and taxable market values are based on actual sales, there's little the county board can do to alter the shift in who is paying the tab. Still, Commissioner Mark Piepho figures the board will be hearing from frustrated farmers.

"But we're really the messenger," Piepho said. "... We could get shot, but we're the messenger."