Ramsey Resident - 2003 - September/October

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DETERMINE THE PROPERTY'S TAXABLE MARKET VALUE $150,000 Determine the Class Rate based on property type (state statute mandates rates) Residential homestead: 1.0% Multiply taxable market value by class rate to obtain the net tax capacity $150,000 X 1.0 %= $1,500 Determine the total local tax County 38% rate by summing the tax rates City /town 37% of all jurisdictions authorized to School District /with levy property taxes upon the school levy 27% property Special Districts 6% Total 108% Multiply net tax capacity by total tax rate to determine your total property tax $1,500 X 108 % = $1,620 Multiply your total property tax by City /town share (city -town tax rate /total local tax rate) to determine the City of Ramsey share of property tax $1,620 X 37 %/108% = $567.00 6 Tx CuAcrn, Tx LEVY, Tx FREEZE - WHAT DOES IT ALL MEAN? With the 2003 legislative session recently completed, we all heard the word `tax' mentioned in several different capacities. Just what is tax capacity? What is a tax levy? What is a tax freeze (levy limit freeze)? TAX CAPACITY — Tax capacity is the valuation of property based on market value and class rates. Property taxes are determined using tax capacity. The table below provides an example on how property taxes are computed. COMPUTATION OF PROPERTY TAX $150,000 Home in the City of Ramsey (Based on 2003 Tax Capacity Rates). TAX LEVY: - A tax levy is the imposition of a tax, usually by a local unit of government. Each local taxing jurisdiction (city, county, school) certifies a levy equal to the amount of revenue it desires to raise through the property tax in the upcoming year. For example, the City of Ramsey levied $3,839,038 (net of fiscal disparities) for its General Fund in 2002 for property taxes to be collected in 2003. LEVY LIMIT — The tax levy that a local taxing jurisdiction (city, county, school) may levy for property taxes is constrained by state - imposed limits. The state mandates the maximum allowable levy based on the prior year levy and an additional allowance for inflation, household growth and commercial construction. The City of Ramsey has had levy limits in place for six of the last seven years. For payable Continued on Page 8 Don 't ever slam the door; you might want to go back. — Don Herold WHERE DOES THE MONEY GO? It has often times been mentioned that the City of Ramsey has "millions of dollars" sitting in reserves. Why can't these funds be utilized instead of collecting /raising property taxes? The answer to the question is that the City is legally restricted on how it is to report and spend these "millions of dollars." The City of Ramsey is required to segregate the money that it receives and disburses into several accounts called funds. The City of Ramsey utilizes the following funds: GENERAL FUND - The General Fund accounts for all revenues and expenditures of the City which are not accounted for in other funds. By December 30 of each calendar year, the State requires Cities to have a balanced budget: revenues equal expenditures. Revenues are primarily derived from property taxes, licenses and permits, charges for services, fines, state aids, and investment earnings. Expenditures are for the operating expenses of the various government services including: Police, Street Maintenance, Park Maintenance, Fire Protection, Engineering, Building Inspection, and General Administration. The City is required to keep in reserves an amount equaling at least 50% of that years adopted budget. For example, if the City's adopted 2003 budget was $7,000,000, the City is required to have at least $3,500,000 in reserves. As the City does not receive property tax payments until July and December, the 50% reserve policy is necessary to assure that the City has the needed funds to continue the general operations of the City. SPECIAL REVENUE FUNDS — The Special Revenue Funds are used to account for "Specific" revenue sources and whose expenditures are "Legally Restricted" for specified purposes. The City has the following Special Revenue Funds: 1. Tax Increment Financing (TIF) - Revenue source is the property tax received from Tax Increment Districts in the City. Expenditures can be only on those improvements as outlined in a document known as a TIF Plan. A TIF Plan authorizes how the City may utilize the tax increment Continued on Page 9