Finance and Operations

A property tax levy is the total amount of money a school district asks from property owners to help fund the district. These funds are used for:

• General operations like salaries, supplies, and utilities.
• Building maintenance and facility improvements.
• Special projects such as school safety.
• Operating capital to help fund curriculum, operation equipment, and technology needs

The amount a school district can levy is regulated by state law. The Minnesota Legislature limits the amount and type of levies a district can impose. The Minnesota Department of Education calculates the annual maximum levy for each district, and local school boards then decide how much to levy.

Two key property tax types are used for school district levies:

• Net Tax Capacity (NTC): Used for most school levies, such as building projects, and is based on the value of your property. Most properties are included in this calculation; the legislature has set class rates for various property types like agricultural land, commercial, homestead, residential, and rental.
• Referendum Market Value (RMV): Used for specific levies like operating referendums, which fund ongoing school needs. RMV excludes agricultural land and seasonal homes, focusing primarily on residential and commercial properties.

1. Changes in State Legislation: The state can alter how much districts are allowed to levy. If the state increases its contribution, local levies may go down. If state aid decreases, districts may need to levy more locally.
2. Voter-Approved Levies: Voters often approve or renew levies through referendums. If approved, these can raise additional funds for a district, and if they expire and aren't renewed, the levy amount will decrease.
3. Property Value Changes: When property values rise, the same tax rate generates more money, potentially allowing districts to lower the rate. If property values drop, the rate might be increased to maintain the necessary funding.
4. Debt for Projects: School districts may increase levies to pay off bonds used for large projects like new buildings. Once the project debt is paid, the levy may decrease.
5. Student Enrollment Changes: If a district experiences a rise in student enrollment, it may need additional funding, increasing the levy. A decrease in enrollment may allow the district to lower its levy, though fixed costs like maintaining buildings could prevent large reductions.

Minnesota has a Truth-in-Taxation process that helps ensure transparency and keeps taxpayers informed. Here's how it works:

1. Preliminary Notices: In November, property owners receive a "Notice of Proposed Property Taxes" from the county. This notice shows the estimated taxes based on proposed levies from various local governments, including school districts.
2. Public Hearings: School boards are required to hold Truth-in-Taxation hearings. These hearings give taxpayers a chance to provide feedback on the proposed levy and ask questions about how their tax dollars will be used.
3. Final Decision: After the public hearing, the school board finalizes the levy amount.

This process gives property owners a voice in levy-setting and ensures transparency before taxes are finalized.

Once a levy is set, property owners pay their share based on the value of their property. Higher-value properties contribute more to taxes. The county collects these taxes and distributes the funds to the school district for next year's needs.

For a deeper understanding of how property taxes are calculated and why they fluctuate, visit the Minnesota Department of Revenue's Understanding Property Tax page. It provides detailed information about the state's property tax system and how levies affect taxpayers.