Perham sets final tax capacity levy at 16.36% increase; almost 15% lower than original prediction

PERHAM — The Perham City Council had much to discuss at their meeting on the evening of Monday, Dec. 12, including the finalized 2023 city budget and tax capacity levy increase. The approved tax capacity levy is an increase of 16.36%, which is lower than the first prediction of 30.42% and the second prediction of 24.75% .

The two biggest items that influenced the tax capacity levy increase were an increase in Perham Police Department wages — to help maintain officers — and the city's tax reimbursement to Perham Health. Perham Health was determined to be tax-exempt and eligible for refunds from 2015 and beyond in a Minnesota Supreme Court case earlier this year .

City Manager Jonathan Smith reported that one big reason for the decrease in the tax capacity levy from the original prediction was that the liquor store contributed more toward funding than usual from its reserves in order to keep final levy rates as low as possible.

In a presentation during the meeting, Smith explained that the tax capacity levy increase doesn't necessarily determine a homeowner's residential tax increase. What determines how much residents are taxed is the 2023 tax rate, which is 50.79% — almost 2% lower than in 2022.

"Obviously, in theory, if that rate goes down, then your property taxes go down as well," Smith explained in the presentation.

However, this is just a theory. Between 2022 and 2023, many homeowners saw their property evaluation increase. This is what caused the increase in taxes many Perham-area property owners saw in their preliminary tax statements, Smith said.

Without the property evaluation increase, a homeowner with property worth $163,000 would have seen a decrease in taxes of $21.76. However, Smith provided a real example of someone's property that was previously worth $163,000 in 2022 and increased to $207,300 in 2023. While the homeowner gains $44,000 in equity, their taxes also increase by $223.56.

Because the increase in property value will fluctuate between homeowners, this tax increase will also likely look different for each person. Property tax relief programs are available for people in need of assistance. For more information, go to the Minnesota Department of Revenue website at www.revenue.state.mn.us .

At the meeting, the council also discussed:

• The city of Perham approved an ordinance to both regulate the usage and mitigate the risk of THC while also opting out of a potential THC ban from the county .
• City Engineer Jade Berube presented the preliminary report for street and utility improvements on Perham's Main Street in 2024. More details will be included in the Thursday, Dec. 22 issue of the Perham Focus.
• The next regular city council meeting is scheduled for Monday, Jan. 9, 2023, at 5:15 p.m., and the next committee of the whole meeting is scheduled for Wednesday, Dec. 28, 2022, at 5:15 p.m.