Raw tax data doesn't tell the whole story

Citizens League offers budget

balancing option

By FRITZ BUSCH

Journal Staff Writer

NEW ULM -- Thanks to the state takeover of the education levy, most Minnesota homeowners saw significant property tax reductions this year.

Property taxes on 32 non-metro communities fell an average of 9.4 percent last year, according to the Citizens League's annual Homestead Property Tax Review. Metro communities got an even bigger savings with taxes on an average value home falling 13 percent this year. Homeowners in 88 of 108 communities surveyed saw property taxes fall this year.

Property taxes on a $100,000 New Ulm home fell 6.4 percent this year to $1,100, which is the 12th highest rate among 32 non-metro cities surveyed. The average assessed market value of a New Ulm home was $88,802, 4.9 percent higher than a year ago. It carried a tax of $934, right in the middle -- 16th -- among non-metro cities.

Cloquet had the highest taxes ($1,467) on a $100,000 home. Hutchinson wasn't far behind at $1,381. Elk River had the highest average assessed value ($143,198). Brainerd had the lowest taxes ($699) on a $100,000 home and the lowest taxes on an average value home ($414 on a home valued at $71,104. Bemidji had the lowest average assessed market value ($61,701).

New Ulm City Manager Brian Gramentz said raw tax data alone is an interesting way to compare cities but doesn't tell the complete story about what places have to offer.

"There are lots of things that go into the tax levy for any community," Gramentz said. "Raw data assumes that all communities are providing the same level of service but they don't. You can't really say that one community is a better steward than another. You have to look underneath the sheets to understand what is going on in each community. There are lots of ingredients in the soup. Some cities have schools bursting at the seams while others have classes averaging 19 students."

Gramentz said Bemidji has a lot of resort property that draws people for only several months of the year, so it doesn't need to provide as many services as some other communities.

Other items to consider are recreational facilities, whether cities are on interstates, the average age of citizens, parks, declining school population, average class size, whether or not the community has tall buildings requiring expensive hook and ladder fire trucks, Gramentz said.

Minnesota has a very diverse group of non-metro cities from International Falls to the Iowa border with a vast array of services that are far from equal, according to Gramentz.

The property tax reduction has many school districts bent on ways to find more funds. One alternative is being able to increase tax levies without passing a referendum.

Minnesota is not on the list of top 10 states with the biggest budget gap, but challenges are on the horizon.

The 2003 Minnesota Legislature will be back on the budget roller coaster with a 2-year projected deficit of $4.56 billion. The task list includes balancing the budget for at least 2 years and creating a long-term reform agenda for public programs.

Minnesota budget balancing rituals have typically included raising taxes, spending cuts or using short-term budget gimmicks. The Citizens League has promoted a new option -- redesigning taxing and spending mechanisms for public services.

Key principles for improving the long-term financial health of the state are targeting, competition and long-term eceonomic growth support, according to Citizens League President Lyle Wray.

Targeting would funnel public subsidies more directly to the needy rather than subsidizing institutions. Higher education students themselves -- not the schools -- would receive state aid. Institutional subsidies would be reduced. Targeting would also help the most needy local governments at half the cost of the current system.

Competitive sourcing would shake up bureaucracies and improve citizen performance. Competition with charter schools and managed competition for public services could create major performance improvements and cut costs. This has been done in Indianapolis and Phoenix.

While Minnesota ranks high in personal income -- largely due to multiple jobs per worker and long hours -- there are concerns. Only half of high school freshmen will finish high school on time. Low-income students' access to post-secondary education is not improving.

Improving the state's e-government service could save money. Minnesota rnaked 20th and 37th in surveys of overall depth and quality of e-government services.

For more information, visit www.citizensleague.net