Property Taxes to be Raised in Minnesota

This won’t be great news for those contemplating a Minnesota mortgage.

Property tax levies in the state will increase an average of 8.2 percent in 2007 if proposed local levies are adopted later this year, the state Department of Revenue announced today. This compares to last year’s increase of 9.2 percent and an average increase of 7 percent over the past three years.

The average tax increase levied on existing homes is estimated to rise by 6.6 percent. This won’t help the housing slump that has inflicted most of the Minnesota housing market.

Such residential property taxes became an issue in this year’s election season, as homeowners complained that their taxes were rising faster than inflation or income. Moreover, many homes have seen their market value erode as the real estate market has cooled; thus explainging the slowdown in sales and local home loan applications.

The proposed increase is based on levy amounts proposed by local governments for annual Truth-in-Taxation hearings beginning next week. If those hearings result in a decrease in proposed levies, the projected growth will be smaller.

Historically, local jurisdictions have reduced their levies by $20 million to $30 million after these hearings. In 2006, the final statewide average property tax levies were 1 percent lower than originally projected following the Truth-in-Taxation hearings.

Increases will vary by community and by property type because of differences in budget and tax decisions affecting school, city, county, town and special districts.