Tax-base sharing designed to achieve six goals
The Minnesota Legislature created the metro area program in 1971, and tax-base sharing began in 1975. State law defines six goals of the program:
- Sharing resources produced by growth of the metro area
- Making orderly development more likely
- Working within the existing system of local governments and local decision-making
- Giving incentives for all to work for growth of the seven-county metro area as a whole
- Helping communities in different stages of development and redevelopment
- Encouraging environmental protection
How tax-base sharing works
Local taxing jurisdictions contribute part of growth in commercial, industrial, and public utility property tax base to a shared pool of tax base. Local property tax administrators then distribute tax base from the shared pool.
Taxing jurisdictions include cities, townships, counties, school districts, and special taxing districts. Property tax base (net tax capacity) equals the taxable value of property multiplied by its class rate. Each class of property, such as commercial/industrial/public utility, has one or more class rates. The net change from tax-base sharing is the distribution from the shared pool minus the contribution to the shared pool.
Figure 1. Explanation of how tax-base sharing works
A community with below-average property value per person receives a somewhat larger share of the areawide pool of tax base. A community with above-average property tax value per person receives a somewhat smaller share.
How much tax base the program shares
The Fiscal Disparities Program shared $500 million in tax base for taxes payable in 2021. This represents 33% of total commercial, industrial, and public utility property tax base and 10% of total tax base in the seven-county metro area.
How much revenue the areawide pool shares
The program shared over $697 million in tax revenue for taxes payable in 2021.
How tax-base sharing impacts communities
A total of 179 communities participate in the program. More communities gain tax base (110 net recipients) than lose tax base (69 net contributors). Top net contributors concentrate near major highways and job centers.
Tax-base sharing narrows the gap between communities with the highest and the lowest commercial, industrial, and public utility property tax base per person. For communities with over 10,000 people, the ratio of the highest to lowest is 6 to 1 with sharing and 14 to 1 without it.
How tax-base sharing affects commercial-industrial property
Part of a commercial, industrial, or public utility property is taxed at an areawide rate, and the rest is taxed at the local rate. The areawide tax rate reduces differences in tax rates across the metro area.
For more information, visit the Metropolitan Council’s website at Fiscal Disparities: Tax-Base Sharing in the Twin Cities Metropolitan Area.