Submitted by Sharon Hanson, Marshall City Administrator

By law in Minnesota, the fiscal year of a city and all of its funds must be the calendar year. Thus, for cities, a budget is one year of estimated money coming in, or revenue and expenditures or money going out. Budgeting is basically planning and prioritizing goals for the coming year based on experiences in the past year or years. All cities are required to prepare and adopt an annual budget and the City of Marshall has begun their 2019 budget and levy process. The process of annual budget preparation occurs within the framework of the state property tax system. Property taxes are generally the primary revenue source for Minnesota cities.

How are property taxes calculated? First, the assessor sets the market value of your property. Market value is the value, for tax purposes, of a particular parcel of property (land and buildings). Notices indicating these market values for the coming year are sent out in March. In April, the City’s Board of Review hears appeals, if any, from property owners. By July, market values are set. There is a lag time between when the property value is set and when the taxes are paid.

Second, the tax capacity for each piece of property in the City is calculated by a formula that varies by property type. The formulas are set by the legislature and are subject to change. Total tax capacity, which becomes the City’s tax base, is determined by adding the tax capacities of all individual parcels of property in the entire City. For example, the tax capacity on the average $165,000 residential homestead in Marshall is calculated this way:

$165,000 (estimated market value) - $22,390 (homestead market value exclusion) = $142,610 (taxable market value)

$142,610 (taxable market value) x 1% (tax capacity percentage) = 1,426 (tax capacity)

Third, the City must determine its total gross tax levy, or the amount of property tax money the City needs to operate and pay its loans (which is the debt service on bonded debt) each year. This amount is determined as part of the annual budgeting process.

Fourth, the City must calculate its tax capacity rate, which is used to calculate the amount of tax to be paid by all City taxpayers. It is determined by dividing the tax levy by the City’s total tax capacity.

Finally, the City tax on a given property is calculated by taking the tax capacity rate times the tax capacity of the property:

$1,426 (your tax capacity) x .55391% (City tax capacity rate) = $790 (your City property tax)

How does the City of Marshall compare to others? Below is tax rate and property tax data that indicates the City of Marshall compares favorably to other cities:

2018 tax rate comparison

Property taxes are your share of the total cost of local government, and they are used to help support a variety of valuable resources in the city. The City of Marshall is committed to managing that share wisely and transparently.

If you have additional thoughts or questions, you can reach me directly at 507-537-6761.