New Ulm holds line on property tax rates

By RON LARSEN

Journal Staff Writer

NEW ULM -- While state-mandated local government aid cuts left a big hole to fill in New Ulm's city budget and the amount of levy-back allowed to fill that hole was capped, New Ulm's net property tax levy for 2004 will be only $65,686 less than that of 2003.

How can that be when the city's tax rate for 2004 was 4.3410 units fewer than 2003's 62.9290 units?

The answer is in the continued growth of the city's total tax capacity, Assistant City Manager Tom MacAulay says.

Each year MacAulay produces an analysis of the taxes payable for the ensuing tax year, total tax capacity and preliminary property tax calculations.

In a report to city councilors, MacAulay said he tries to answer the many questions about how the property tax system works and what it means in dollars and cents to homeowners and businesses alike.

"I started this five or six years ago because I found that a lot of people, even members of the City Council didn't know where the property tax numbers come from."

The key to the tax puzzle is the city's total tax capacity. Each year the Brown County Assessor's office calculates the city's tax base or its total tax capacity.

The assessor's calculations showed the city's tax base in 2004 would be $6,689,876, approximately 5 percent higher than in 2003, MacAulay explained. That meant the city could collect $3,647,496 as its net property tax levy for 2004.

With that increase in the city's total tax capacity, only 58.5880 TCR units would produce nearly the same amount of revenue as 62.9290 units produced in 2003.

So, how do you come up with Tax Capacity Rate units?

"The property tax levy divided by the City's Total Tax Capacity yields the Tax Capacity Rate (which replaced the "mill" some years ago)," MacAulay explained.

When the city's net property tax levy for 2004, totaling $3,647,496, is divided by its total tax capacity, $6,225,630, the city's tax rate of 58.5880 is obtained.

"But, that really doesn't mean anything to the average homeowner so I then applied property tax calculations to several different market values of property within the five property classifications to give homeowners, for example, an idea of what the city's portion of their property taxes will look like," MacAulay said.

(Those classifications are Residential Homestead, Residential Non-Homestead, Residential Rental, Apartments, and Commercial/Industrial.)

While his 2004 calculations were based on the city's preliminary property tax levy, it allows individual taxpayers to compare 2004 with the previous two tax years.

So, for example, the owner of a residential homestead with a taxable market value of $50,000 would be looking at a city's-portion tax of $293 which would be $22 less than paid in 2003 and $9 more than paid in 2002.

The owner of a commercial/industrial property with a market value of $150,000 would be paying $1,318 in 2004, $98 less than in 2003 and $42 more than in 2002.

These figures are obtained by multiplying the taxable market value by the property classification rate (for residential homestead, it's 1 percent below $500,000 and 1.25 percent over) and then multiplying the resulting number by the 2004 TCR of 58.5880, MacAulay explained.

"It's certainly not rocket science (in determining the tax.) I'd call it more calculator science."