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PROPERTY TAXES <br />Minnesota cities rely heavily on local property tax levies to support their governmental fund activities. In <br />recent years this dependence has been heightened due to reductions in state aids and fees from new <br />development due to the struggling economy. As a result, many cities have repeatedly been faced with the <br />difficult choice of either reducing services or increasing taxes on their already overburdened constituents. <br />Property values within Minnesota cities experienced average decreases of 5.7 percent and 8.8 percent for <br />taxes payable in 2011 and 2012, respectively, as market values have continued to slide despite recent <br />signs of improvement in other areas of the economy. In comparison, the City's taxable market value <br />decreased 9.6 percent and 3.7 percent for 2011 and 2012, respectively. The market value for taxes <br />payable in 2012 is based on estimated values as of January 1, 2011. <br />The following graph shows the City's changes in taxable market value over the past 10 years: <br />$2,500,000,000 <br />$2,000,000,000 <br />$1,500,000,000 <br />$1,000,000,000 <br />$500,000,000 <br />$30,000,000 <br />$25,000,000 <br />$20,000,000 <br />$15,000,000 <br />$10,000,000 <br />$5,000,000 <br />Taxable Market Value <br />2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 <br />Tax capacity is considered the actual base available for taxation. It is calculated by applying the state's <br />property classification system to each property's market value. Each property classification, such as <br />commercial or residential, has a different calculation and uses different rates. Consequently, a city's total <br />tax capacity will change at a different rate than its total market value, as tax capacity is affected by the <br />proportion of the City's tax base that is in each property classification from year -to -year, as well as <br />legislative changes to tax rates. The City's tax capacity decreased 13.4 percent and 3.5 percent for taxes <br />payable in 2011 and 2012, respectively. <br />The following graph shows the City's change in tax capacities over the past 10 years: <br />Tax Capacity Value <br />r� <br />ltttt �t 11111 <br />2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 <br />-6- <br />