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[ RECEIVED 07/25 12:94 1995 AT 61ZS959SZI PAGE 6 (PRINTED PACE 6) 1 JUL-25-1995 1209 AMSD 866 6462 P.06 House Research Department Sepmmber 1994 bficnesota School FU snca Page 11 Overview of M16esota's Property Tax System In order to understand the education finance it is important to have some familiarity with the former property tax terminology. 1. Each individual parcel of property is valued by an assessor. This value is referred to as market value. Marimt value is the value, as the name implies, that the property would bring in a sale on the open market. 2. The legislature has established tax capacity perermtages or class rates for different types of property(e.g. homestead, commercial, residential rental, etc.)and the assessor applies the appropriate percentage to each parcel of property. The resulting value is called tax capacity. Tax capacity is the value of the property that the property taxes will be levied against 3. The property tarter levied agatast each parcel of property are Computed by the courdy auditor who adds up the total dollars of property tax levied by each local unit of govem"Imt and determines what rate of taxation needs to be applied to the tax capacity of the taxing jurisdictions in order to raise that dollar amount. 4. The rate of taxation is renamed tax capacity rate. The tax capacity rate is expressed as a percentage of taxable value. A 50%tau capacity percentage therefore raises 0.5 dollars (50 cents)for each dollar of taxable value. Because tax capacity is much smaller than assessed value, a much higber race of taxation is neeesw y under the tax capacity system to raise the same amount of revenue. 5. The property taxpayer receives a statement listing the total tax capacity raze levied by each taxing jurisdicgon and the total dollar amount of taxes owed TOTAL. P.06