CORRECTED: City's Market Value Dropped $300 Million in Four Years

The total market value of all private and commercial properties in Inver Grove Heights has decreased by roughly $300 million since 2009.

In 2009, the total market value of property in Inver Grove Heights stood at roughly nearly $3.58 billion, according to statistics posted by the Dakota County Assessor's office. Flash forward two years, and the total market value of the city currently stands at roughly $3.1 billion.

The decline had a ripple effect in the city's own finances, according to city officials, whose budget is almost entirely made up of revenue from local property taxes.

Surprised by the speed at which property values, Market Value Homestead Credit payments from the state and fee revenues were dropping in 2009, the city called for a mid-year budget adjustment. As a result of the adjustment, several staff positions were cut, and a number of staff took voluntary furloughs, City Administrator Joe Lynch said. Thanks to those cuts, he added, the city ended the year with a surplus, rather than a potential budget deficit of as much as $400,000.

In 2010, the Inver Grove Heights City Council approved a 3.38 percent tax-rate hike for most private and commercial property owners in the city. The hike helped compensate for the city's shrinking tax capacity and bolstered property tax revenue for the city in 2010, Lynch and Finance Director Ann Lanoue said.

Despite the increased tax rate, most residential property owners still saw a decrease in their taxes in 2010 because of drastically lower property values, Lynch said. Property taxes made up 85 percent of the city's general fund revenue in 2010, according to an independent audit report of city finances.

“We have the same number of homes, the same number of businesses, but they’re all worth less," said Lynch. To collect the same amount of money as previously collected, tax rates have to go up, he added.

The council chose to hold the line on its levy in 2011, but to do so, the city again had to increase its tax rate by 1.41 percent to compensate for declining property values.

The city is preparing for as much as $300,000 in cuts in 2012, Lynch said, and will hold a meeting in August to discuss departmental budgets.

Although there's not necessarily a link between city spending and budget setting and declining property values within the city, many cities in the county are reducing their budgets, said Dakota County Assessor Bill Peterson.

There is a misperception in the public that if the market value goes up, the taxes necessarily increase, but that’s not the case, Peterson said. The city can set its expenses independently of the tax base or market values, he added, and it can increase or decrease its tax rate to compensate for changes in those values.

“If they’re choosing to spend less money, that's what typical of what is happening everywhere in government today,” Peterson said.

*Statistics courtesy of the Dakota County Assessor's office and the city of Inver Grove Heights.

**This chart only represents the tax rates of some Unique Taxing Areas (UTAs) within Inver Grove Heights. Other areas of the city may have different rates.

Correction: This article has been changed to reflect an inaccuracy. The city's total market value in 2005 was roughly$2.68 billion. In 2007 the market value was roughly $3.4 billion. There is no direct relationship between the market value of property in the city and the amount the city levies for each year.