A number of individuals have asked questions about the conversion from the Market Value Homestead Credit to the Market Value Exclusion, so I have included a brief explanation below.
The Market Value Homestead Credit was an underfunded state promise 9 out of the last 10 years. The state required cities to make up the funding shortfall and pay for the Market Value Homestead Credit. Therefore, 9 out of the last 10 years cities had to come up with the funds for the credit by reducing their services, increasing their property taxes, or by eating into their reserves. This year the state ended the unpredictable and aggravating practice of promising a credit and not funding it by converting the Market Value Homestead Credit to the Market Value Exclusion. The state now requires the reduction of the taxable market value of a homestead to the amount equal to the benefit of the previous Market Value Homestead Credit.
In summary, the state stopped making a funding promise it only fully kept once in the last decade. Further, cities can now more effectively plan because of the elimination of the uncertainty of how much, if any, the state would fund the Market Value Homestead Credit program. Additionally, through the Market Value Exclusion, homeowners have a reduction in the taxable market value of their property and thereby their property taxes are reduced to compensate for the loss of the Market Value Homestead Credit.
Thank you for following my work in the Minnesota Legislature. As always, you are welcome to contact me with your comments or concerns.