For those with sticker-shock about their school property tax bill, Trevor Peterson said of school tax levies, that it's like "one giant puzzle."
Peterson, business director for the Alexandria School District, sat down with the Echo Press to explain why taxpayers are seeing what appears to be a large increase in their school taxes.
On tax statements that were recently mailed out, Peterson said property owners in the school district will see an overall proposed increase of 22.89 percent for taxes payable in 2018, although each property will vary.
This represents a steeper hike than normal.
However, the hike follows a drop in taxes payable in 2017, what Peterson called an anomaly that included a 12.7 percent decrease from taxes payable the previous year.
Peterson said that percent increases cannot be compared to percent decreases.
"In other words, they are not direct inverses," he said.
He then gave an example that might help:
He said if a man has $100, but gives away $50, he is left with $50, which is a 50 percent decrease. But then, the man is given the $50 back, so he ends up with $100 again. This would be a 100 percent increase, he said.
Peterson said that the payable 2016 levy was about $13 million. The payable 2017 levy decreased to $11.4 million, which was a 12.7 percent decrease. The district is proposing a total levy of $13.91 million for 2018.
If the levy would have gone back up to the 2016 levy amount in 2017, Peterson said there would have been a 14.54 increase. So there would have been an increase no matter what, he said.
However, there was an anomaly that included a 12.7 decrease due to a large adjustment to how much the school district spends to pay off debt. The adjustment was mandated by the Minnesota Department of Education.
"The district would certainly prefer spreading out large increases or decreases over time instead of in one large chunk like 2017, but we aren't in control of that," Peterson said of the state mandate.
So now, he said, the 2018 levy jumped back up to the 2016 level, as well as an additional $950,777 or 8.35 percent.
If you look at it this way, he said, the increase of $950,777 is actually covering two years - 2017 and 2018 and would average out to about 3.4 percent increase each year, which is considered normal.
"This is a key piece of information the public needs to know," he said.
There are many factors that cause property tax changes, he said, including:
• Voter approved referendums.
• Changes in enrollment (the district has seen this skyrocket, which played a major role in the tax levy).
• Levy adjustments to prior years.
• Legislative changes.
• Changes in market values, which is indicated by "Estimated Market Value" on property tax statements.
• Changes in class rates (The amount of tax each property classification is used to determine net tax capacity. For example: If you have a $200,000 property, classified as "residential," the class rate is 1 percent up to $500,000 and 1.25 percent if it's more than $500,000. The net tax capacity of that homestead is 1 percent of $200,000 or $2,000. If those rates change, so does the net tax capacity.).
• Changes in property classification.
Peterson will be presenting more detailed information at the school district's Truth in Taxation meeting, which is set for 7 p.m. Monday, Dec. 18.
Comparing area districts
District property tax per $209,000 home (the average price) for Alexandria and surrounding districts:
Alexandria - $749
Brandon-Evansville - $527
Minnewaska - $686
Osakis - $848
Parkers Prairie - $903
West Central Area - $1,174
District property tax per $209,000 home (the average price) for districts comparable in size to Alexandria:
Alexandria - $749
Detroit Lakes - $539
Fergus Falls - $781
Bemidji - $799
Willmar - $820
Brainerd - $827
Sartell-St. Stephen - $1,348