Opinion ID: 2175184
Heading Depth: 1
Heading Rank: 6

Heading: steps in tax base sharing

Text: 1. Determine net growth in commercial-industrial assessed valuation in each community in the metropolitan area over 1971. Take 40 percent of the result. This is the amount of assessed valuation which each community will share with the entire metropolitan area. Example: (Edenvale Village) 1972 commercial-industrial value: $40 million 1971 commercial-industrial value: 35 million ___________ net growth: $ 5 million 40 percent of net growth: $ 2 million Thus, Edenvale contributes $2 million to the metropolitan pool of valuations, with the remaining $38 million of the $40 million staying local. The $2 million represents 1/20th of Edenvale's total commercial-industrial valuation. So 1/20th of every piece of commercial-industrial property in Edenvale becomes part of the metropolitan pool of valuations, and the remaining 19/20ths remains local. 2. Add together each community's contribution to the metropolitan pool of valuations to arrive at the total metropolitan pool, and then divide the metropolitan pool among all communities. (The law provides that each community's share shall be based essentially on its population except that communities with assessed valuation below the metropolitan average per capita will receive a slightly larger per capita share and those communities with above average valuation, a slightly smaller share.) Example: Assume the metropolitan pool of valuations totals $250 million and that under the formula for sharing Edenvale is entitled to receive $3 million. Thus, Edenvale is a net gainer, contributing $2 million and receiving $3 million, for a gain of $1 million. 3. Determine each community's official assessed valuation for purposes of levying taxes. This is the sum of adding (a) all residential value, (b) all commercial-industrial value, except 40 percent of the growth, and (c) the community's share of the areawide tax base. Example: Assume Edenvale has $60 million in residential valuation $ 60 million residential ____ + 38 million commercial-industrial, exclusive of 40 percent of the growth $ 98 million total local valuation + 3 million (share of the metropolitan pool) ____ $101 million (total official assessed valuation) 4. Community determines the amount of dollars it wants to levy on its official assessed valuation. (In Minnesota each community certifies this dollar levy to a county official called the County Auditor.) Example: Assume Edenvale decides to levy a tax of $5 million on its assessed valuation of $101 million. 5. The dollar tax levy is divided by the County Auditor in two parts: (a) that which will be raised on the local portion of the assessed valuation and (b) that which will be raised on the metropolitan pool of valuations. The levy is divided in the same proportion as the community's share of the metropolitan pool bears to the local valuation. Example: Valuation Dollar Levy Local $ 98 million $4,851,500 Areawide 3 million 148,500 ____________ ___________ Total $101 million $5,000,000 6. The local levy is divided by the local valuation to arrive at the local tax rate. $ 4,851,500 levy Example: _____________________ = 4.95 percent (49.5 mills) $98,000,000 valuation 7. The other part of each community's levy, that is, the levy which will be raised on the metropolitan pool of valuations, is added together with the comparable levies from every other community to arrive at the total dollar levy on the metropolitan pool of valuations. Example: $ 148,500 levy by Edenvale on the metropolitan pool +10,000,000 total levies of all other communities on the metropolitan pool ___________ $10,148,500 total levy on the metropolitan pool of valuations 8. The total levy on the metropolitan pool of valuations is divided by the total value of the metropolitan pool to arrive at the areawide tax rate. $ 10,148,500 levy Example: ___________________ = 4.06 percent (40.6 mills) $250,000,000 value 9. The tax rates as determined in steps 6 and 8 above are applied to each piece of property. All residential property has the tax rate as determined in step 6. For commercial-industrial property, the local valuation takes the rate in step 6, and the areawide valuation takes the rate in step 8. Example: Returning to step 1, we see that in Edenvale 1/20th of each piece of commercial-industrial property takes the areawide rate and 19/20ths, the local rate.