What goes up must go up

Star Tribune Sun, 25 Nov 2007 00:26:13 CST
Tax bite deepens as home values fall

Minnesota is phasing out a program that shielded many homeowners from big property tax increases during the housing boom. ... The system, called the limited market value program, was created by the Legislature in 1993 in an effort to protect property owners from the tax impacts of sharp increases in property values. The program was supposed to end after 2001, but the Legislature feared that doing so in a hot housing market would sting homeowners with sharply increased property taxes. Instead, it began phasing out limited market value with the goal of ending it in the 2009 assessment year. But the phaseout, combined with a sharply slumping housing market, is creating especially jarring variations in proposed taxes this year. "You're going to have people on the same block, some of whom will have a big increase in taxes and others who will have little increase or a decline," said Matt Smith, an authority on taxes for the city of St. Paul. Many of those expected to be hit with steep tax increases are feeling the impact of the phaseout of limited market value. The system slowed the growth in the taxable value of properties when home prices were skyrocketing. Now that previously unrecognized value is showing up on tax notices, along with higher taxes. The phaseout means that a home's taxable value can rise each year to equal an ever greater portion of its actual market price -- a process that will continue until the two are identical. By 2009, all properties must be at their full market value for tax purposes in 2010. Combined with the swoon in the housing market, the result in some cases is that a home's taxable value can continue climbing while its market value falls, particularly among homes that jumped most in value in earlier years.

[[keywords: PropertyTax;Metro;]]