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LOCAL TAX RATEAREA-WIDE TAX RATEWITHOUT FISCAL DISPARITIES The full value of this office tower would be includedin the tax base of the community in which it islocated, anywhere in the metro area, and be taxed atthe applicable local tax rates.WITH FISCAL DISPARITIES Up to 40% of the building’s value travels through the process tobecome part of a new “Area-Wide Tax Base,”and is parceled out andshared with every metro area city, county, school district and otherlocal taxing units.UP TO 40% OF VALUE SENT TO PO O LCounty Assessor sets propertyvalue. Up to 40% of that valueis sent off to the FiscalDisparities pool, where it isjoined by similar pieces ofvalue from every C-I propertyin the seven-county metroarea. This piece is nowEXC LUDED fro m the lo c a l ta xbase. The remaining 60% of C-I property value is RETAINED bythe local taxing unit.1?How does FISCAL DISPARITIESworkHere’s how Fiscal Disparities’ sharing of the growth in Commercial-Industrial (C-I) values impacts a specific property……step by step from the Assessor’s office to your final tax bill!IT’S AUTOMATIC…Fiscal Disparities’ success is due in part to theautomatic nature of its operations.It is not dependent upon a metropolitangovernment to succeed, but operatesautomatically, on a purely structural level. Theseven county auditors elect one of their numberto serve as Administrative Auditor, who collectsthe growth figures,aggregates them,and then tellsevery local taxing authority what the new tax baseand rate will be.LO C AL LEV Y SET The local taxing unitdetermines how muchmoney it must raise in taxrevenues from its localbase and its pooledbase–its levy–to pay forthe delivery of localse rvic e s.NEW LOCAL TAX BASES ARE ESTABLISHEDEach city, county or schooldistrict now has a new local taxbase. It includes its original totaltax base (or tax capacity)minus the value contributed tothe area-wide pool, plus itssha re fro m the a re a -w id e p o o l.5LO C ALLEV YNEW TAX BASEFO R LO C AL TAXING UNITSLO C AL TAX RATE IS SETTh e C o u n t y A u d it o r d e t e rm in e seach local unit’s tax rate as apercentage of its new total taxbase. For purposes of determiningthe amount of money it must raiseto cover local spending, thesa m e ra te is a p p lie d e q ua lly o nthe C-I property value it receivedfrom the area-wide pool and onthe 60% of C-I property value itretained, as well as on allresidential, cabins, agriculturaland other taxable properties.LO C ALTA XRATE6AREA-WIDE TAX RATEMETROADMINISTRATIVEAUDITORAREA-WIDELEV YSTATEWIDEGENERAL TA X RA TE (ON 100% OF VALUE)THE RESULT: YO UR TA X BILL!Yo u r fin a l t a x st a t e m e n t c o m b in e s t h eamounts determined by the threedifferent rates to arrive at a totalproperty tax for this C-I building or land.EAC HCOUNTYAUDITORPROPERTYTA X BI LL40-45%Loc a l Ta xes (City, County, Sc h o o l Dist ric t )20-25%Area Wide Tax 30-35%St a t e w id e General Tax100%TO TA L TA X TO BE PAIDWHO WINS? WHO LOSES?The City of St. Paul is the largest net recipient of Fiscal Disparities tax base among large taxingunits. Minneapolis is also a significant recipient, as is every city in Anoka County except Fridley.The largest net contributors among cities are all located in the south and west suburbs ofMinneapolis, with the City of Bloomington being the largest net contributor.WHOSE NET CONTRIBUTION IS THE LARGEST?Among the seven counties covered by the Fiscal Disparities law, Hennepin County– the economic center of theregion– is the only net contributor of tax base to the area-wide pool.With a net contribution of 2.7 percent of itstotal tax base to the area-wide pool in 2007, the county provides the metro area with a measure of fiscal stability that no other region enjoys.Anoka County is the largest net recipient among all of the counties.HOW IS GROWTH INVALUE COMPUTED?The total commercial-industrialvaluation in the current year iscompared to the total in the base year,1971. If there is no net growth, or ifthere has been a decline, themunicipality makes no contribution tothe area-wide pool. Declines invaluation can offset increases due tonew construction or inflation.In effect,the law shares the benefits of growthand the burdens of decline.FISCAL DISPARITIESAPPLIES TO EVERYLO C AL TAXING UNITEveryone contributes, everyoneshares…cities, townships, schooldistricts, counties, special taxingdistricts…every local assessment unitwith taxing authority.HOW DOES FISCAL DISPARITIES AFFECT OWNERS OFBUSINESS PRO PERTY?It is true that it LEVELS business property taxes across the seven-county area…For owners of business property, Fiscal Disparities each year effectively levels a significantportion of their property tax bills,reducing the differences between the taxes paid in a high taxarea vs. a lower tax area.No matter where a business may be located in the seven county area, the portion of its tax billincluded in Fiscal Disparities will be based on a uniform weighted average of all property taxrates across the metro. In effect, as much as 40 percent of the business property’s total value issheltered from the annual taxing and spending decisions made by the city, county or schooldistrict in which it is located.…but Fiscal Disparities also INCREASES business property taxes above what they might be ifthelaw did not exist.In the aggregate, the C-I tax base is redistributed from municipalities where tax rates are lowerto those where the rates are higher, so that the average tax levied against C-I property woulddecrease if Fiscal Disparities did not exist.Adding to the load is the specific $5 million levy for the Metropolitan Council’s tax baserevitalization account, passed in 1995, and borne exclusively by C-I property through the area-wide pool. This levy would not exist in the absence of the Fiscal Disparities law.CHANGING THE LAW?Fiscal Disparities has worked quietly, under taxpayers’radar,because it was designed to operateon a structural level. Based on just a few basic principles, it has been shielded from politicalmaneuvering and the annual legislative battles over taxing and spending. Over the years, billshave been introduced to change Fiscal Disparities, usually by large net contributors to the tax-base sharing pool.Recent proposals to use Fiscal Disparities tax base to fund public and privatedevelopment or to exempt specific projects from tax-base sharing would potentially increaseproperty taxes on all commercial-industrial properties throughout the metro area.AN INSURANCE POLICY FOR LOCAL TAXING DISTRICTS AND GENERAL TAXPAYERS…With Fiscal Disparities, business owners and local taxing districts know that the tax rate on as much as 40% of the taxable value,or tax capacity,of every parcel of business property will be identical.Whether it is a downtown office tower, suburban shopping center or vacant developmentland, no matter where in the metro area it is located, the rate on that portion of its value will be the same.Consider it an insurance policy.Your premium is that you share up to 40% of the increased value of business property within your community.Yo u r
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<br /> er or not it islocated in your community.AREA-WIDE TAX BASE IS SETAll contributions to the poolare aggregated by theAuditor’s office, creating anew area-wide tax base. 29AREA-WIDE TAX RATE IS SETThe Administrative Auditordetermines the amount of taxrevenue to be distributed toeach local taxing unit fromthe area-wide tax base pool.Th e A u d it o r t h e n t o t a ls t h e sedistributions to determine anarea-wide levy, the amount of money to be raised, which in turn determines thearea-wide tax rate.7COUNTIES APPLY APPROPRIATE RATESTO DETERM IN E FIN A L TA XTh e n e w a re a -w id e t a x ra t e is a p p lie donly to the portion of C-I tax base valueit contributed to the area-wide tax basepool…up to 40%. Th e 60% o f C -I v a lu e it re t a in e d , a s w e ll a sall other property, is taxed using the localunit’s previously set local tax rate.In a separate calculation, the full valueof the C-I property (up to 40% inexcluded value as well as 60% ofretained value) is taxed at thesta te w id e g e ne ra l ta x ra te , a sp e c ia lsta te ta x p a id o nly b y b usine ss p ro p e rtyowners and cabin owners.OTHER TAXINGDISTRICTSSCHOOLDISTRICTSCOUNTIESCITIES AREA–WIDETA X BA SE PO O L483AREA-WIDE POOL OFVALUE IS DISTRIBUTEDThe new tax base pool isdivided and distributedamong all local taxing unitsusing a formula based mainlyon population, adjusted forwhether the unit’s tax base percapita is higher or lower thanthe metro area average.
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