Guidance for Calculating Your 2014 Levy Limit

The 2014 levy limit is computed in a different manner than past levy limits, causing some confusion for cities.
(Published Aug 19, 2013)

The 2013 omnibus tax bill (Chapter 143) included a one-year property tax levy limit for cities over 2,500 in population and all counties. The 2014 levy limit is computed in a different manner than past levy limits, and these differences have resulted in many questions from city officials.

Adding to the volume of recent questions is the fact that cities will not be receiving their levy limit notices from the Minnesota Department of Revenue until around Sept. 1, only two weeks before the proposed property tax levy must be finalized.

The most significant difference in the calculation of the 2014 levy limit is that a city’s final levy limit cannot be less than the greater of the city’s 2012 or 2013 certified property tax levy. In other words, after subtracting special levies from the city’s 2012 or 2013 certified levy, adding local government aid (LGA) for the respective year, inflating the result by 3 percent, and subtracting the new 2014 LGA amount, the law states that the resulting levy limit cannot be less than the greater of the city’s 2012 or 2013 total certified levy.

For many cities, this calculation means that the final 2014 levy limit will be the greater of the city’s 2012 or 2013 certified levy.

In addition to the allowable levy under the levy limit, each city is permitted to levy all necessary “special” levies for 2014. The largest category of special levies for many cities is related to debt service and certificates of indebtedness. These levies are authorized outside the levy limit to essentially avoid having the levy limit affect the ability of the city to repay debt obligations.

Although there are other special levies, such as levies for natural disaster response, not all traditional special levies were permitted under this year’s levy limit. For example, cities have been traditionally allowed to declare levies related to pension contribution increases as special levies. However, the 2014 increase in the employer contribution for Public Employees Retirement Association-covered police and firefighters (from 14.4 percent of salary to 15.3 percent of salary) is not an allowable special levy for 2014.

If you have questions or concerns about the 2014 levy limit, please contact Gary Carlson (see info at right).

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