Politics & Government

Homesteading

The state gives homeowners a break on the property they live in, but it has a cost to cities.

"Homesteading" doesn't always refer to Little House on the Prairie or pioneer days. Where property taxes are concerned, it simply means primary residence. 

Although the term is arcane, it has very modern implications for both you and Golden Valley.

What does it mean for me as a taxpayer?

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The state grants homesteaders a break on their property tax bill under a program called the Market Value Homestead Credit.

It does this by reducing the property tax by four-tenths of a percent of a home's market value, up to $304. The way the math works out, the credit maxes out with a $76,000 home. For homes worth more than that, the credit is reduced by about a tenth of a percent (technically .09 percent) of everything over $76,000.

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Confusing? Here's the credit on different homes, according to the League of Minnesota Cities:

  • $50,000: $200
  • $76,000: $304
  • $100,000: $282
  • $200,000: $192
  • $350,000: $57
  • $413,778: $0

What does it mean for cities?

There's one major problem with the Market Value Homestead Credit: Local taxing entities—not the state—get this tax money, so they lose out from a credit that they have little control over.

In normal times, the state makes up for this hit by reimbursing cities for the lost money. But the state abandoned these reimbursements because of the latest deficits. Here's how much money Golden Valley lost because of credits to homeowners:

  • 2011: $369,240
  • 2010: $369,240
  • 2009: $344,471
  • 2008: $185,000

Critics say the state reaps the political benefits of providing tax relief without having to make the hard choices about what to cut—all the while forcing cities to bear the cost of the credit.

So what have cities done?

Supporters of this system say cities can simply make up for the losses by operating leaner and more efficiently. Golden Valley "had to lower the cost of operations to help keep a balanced budget," said Sue Virnig, finance director.


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