FAIRMONT - Tax payers in Fairmont and other cities throughout rural Minnesota should get some relief next year thanks to a reversal in state government philosophy, according to Matt Entenza with Minnesota 2020.
"This will be the first time in 10 years we'll see property taxes go down," he said.
As head of Minnesota 2020, a progressive St. Paul-based think tank, Entenza is on a 10-city swing that included Fairmont on Monday.
The relief comes as a result of the most recent legislative session, in which lawmakers and Gov. Mark Dayton agreed to invest $80 million in Local Government Aid and designate almost $500 million for schools - funds generated through an increase in income tax on households that earn more than $250,000 and a hike in the tobacco tax.
Minnesota 2020 is projecting the average homesteads should see a 6.4 percent drop in property taxes, and south-central Minnesota property tax owners could see even greater decreases. Commercial and industrial companies valued between $150,000 and $1 million also could see a drop in property taxes of 3.8 percent to 4.1 percent, based on Minnesota 2020 estimates.
Tax payers should receive a notice of the future adjustment in November, and it will be reflected in their payments starting in May 2014.
For many other rural cities, the increase in Local Government Aid won't come close to covering the funding cuts experienced due to state budget deficits. Fairmont, for example, lost about $2.148 million from 2002 to 2013 in state aid and credit reductions. To offset the loss in revenue, the city increased its property taxes 68.8 percent, generating $1.3 million, and cut spending by $815,000. Across the state, property taxes increased an average of 86 percent from 2002-2012, according to the state Department of Revenue.
"The so-called 'no new taxes' did not really mean no new taxes for rural regional centers like Fairmont," said Entenza, referring to a pledge promised by former Minnesota Gov. Tim Pawlenty, who was in favor of cutting Local Government Aid to help balance the state budget rather than raising income tax.
"Wealthy cities, like Edina and Eden Prairie, they did well," Entenza said. "... They have a huge, huge tax base, and they weren't relying on Local Government Aid.
Fairmont and small towns across the state that get much of the money to fund their budgets from state aid did not fare as well.
"Across the state, we saw cities eliminate police departments and go with sheriff's coverage. Fire departments were cut; libraries were cut," Entenza said. "... Cities managed as best they could."
Those hurt most by increasing property taxes are arguably senior citizens who live on a fixed income.
"From our perspective, property tax is the most unfair tax," he said.
Lawmakers in favor of eliminating Local Government Aid altogether have worried that state funds provide easy money for cities and promote careless spending.
Entenza argues otherwise. His proof actually comes from the state Legislature's mandated levy cap of 3.5 percent.
"We're not seeing any cities raising levies by 3.5 percent," he said.
More information on the LGA increases for south-central Minnesota cities is available at http://bit.ly/16uYMMV