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In comparison, Wadena taxes are lower than similarly sized cities

Property taxes in the city of Wadena are generally lower than similarly sized cities in greater Minnesota, according to 2011 data compiled by the League of Minnesota Cities.

Rachel Walker, manager of policy analysis at the League of Minnesota Cities, and Wadena City Administrator Brad Swenson said that comparisons between different towns should take different variables into account.

For example, Swenson said, Wadena is a city using municipal electric utility -- which brings in some revenue for the city -- while other towns use commercial electric utility providers.

The liquor store is another source of income for the city of Wadena, Swenson said.

"Cities vary widely in what services they offer," Walker said.

Wadena has a generally lower tax capacity than other greater Minnesota cities with populations between 2,500 and 4,999. The taxable tax capacity is $1,949,402, the total state tax capacity is $648,075 and the JOBZ/BIO tax capacity is $75,906. The averages for the 63 similar sized cities are $3,132,902; $913,801 and $31,855 respectively.

"The tax capacity is essentially the community's tax base," Walker said. "That's the tax base from which the local property tax is generated."

She said the data indicated that Wadena seems to have a smaller tax base than communities of similar size.

The state tax base is the portion of the tax base in each community which is subject to the state property tax.

"Most property taxes are levied by local governments, so by counties, school districts and cities," Walker said, adding that the state has a property tax that started in 2002 with only cabins and business properties.

JOBZ is an economic development program, and it excepts some business properties from local property taxes as long as they meet certain requirements.

"A property's tax bill is made up of the taxes that they owe to the county, plus the taxes that they owe to the city, plus the taxes that they owe to the school district, plus the taxes they owe to any special district, like a watershed district," Walker said. "The tax bill is the total of all those things."

The tax rates are applied to the taxable value of the property, also known as the tax capacity.

"Tax capacity is the portion of a property's value that is taxed for property tax purposes," Walker said.

Wadena property owners generally pay a somewhat higher percentage of tax capacity than similar sized towns.

The average total NTC tax rate for Wadena is 132.76 percent of the tax capacity while the average total NTC tax rate for similarly sized towns was 121.5 percent of the tax capacity. The total rate adds up the rates for county, city, school and special taxes.

Since the tax capacity is not the same as the actual property value, the numbers can add up to over 100 percent.

"If you have a home that's worth $200,000, you don't pay taxes on $200,000, you pay taxes on a portion of that -- what we refer to as tax capacity. The tax capacity is a percentage of the $200,000, and that's what you pay taxes on," she said. "Tax capacity numbers are usually fairly small numbers ... Since that number is small, tax rates are big."

Wadena's average city tax rate was 34.55 percent of the tax capacity, while the average city tax rate in similar sized cities was 53.46 percent.

The city of Wadena's average county tax rate was 76.80 percent while the average county tax rate for other cities was 41.93 percent. Walker said the numbers take into account cities that rest on more than one county, which includes Wadena. Part of the city limits are in Otter Tail County.

Wadena's school and special tax rates were 18.4 percent and 3.01 percent, respectively, while the averages of the group were 19.43 percent and 1.29 percent.

The school Market Value tax, on the other hand, is a percentage of the entire property tax value. Wadena's average rate was 0.2149 percent, and the group average was 0.1355 percent in 2011.

The Market Value Homestead Credit Exclusion is being eliminated for 2012.

"It's going to have very different effects in every community. It really depends on what the local tax base looks like," Walker said. She said that in areas heavy with many low value homes, and areas with other types of properties like apartments and businesses, the tax burden is likely to be shifted onto the other properties; meanwhile, areas without many low value homes and areas without many other properties will be affected less.

Walker said that areas with many low value homes will be most affected by the new tax rule.

Wadena's city net levy in 2011 was $673,586 while the average levy for similar sized cities was $1,652,072.

Cities across Minnesota dealt with state Local Government Aid cuts, as the actual LGA amount was lower than the original certified amount.

"The LGA is what the state gives us for state aid," Swenson said.

Wadena's actual city LGA was $1,195,075, and less than the certified amount of $1,307,177.

The group average actual city LGA was $710,001, and less than the certified amount of $836,315.