Property Tax Simulations

Simulation Policies

Simulations are available for:

• School finances – Aid and levy by spending category by school district
• Aids to local governments – Aid received by county, city, or town
• Income tax burdens – Tax burden by income class and filing status
• Property tax burdens – Tax burden by property type and geographic area

Simulation Modeling

Lead time. It is difficult to say how much lead time is required to run a simulation, because it depends to a great degree on the complexity of the proposal compared to current law and on the availability of extra data that might be required to properly model the proposal.

Confidentiality of proposal under development. An author of a proposal may request simulations while a proposal is under development. These simulations are treated as confidential between the developer of the proposal and the analyst(s).

Confidentiality of public proposal. Once a proposal becomes public, whether by being introduced as a bill, through a press release, etc., any House member may ask to have it modeled, or House Research may model it at its own initiative if it is thought to be of general interest. Oftentimes, the simulation results will be posted on the House Research web site.

Special confidentiality policy (aids to local governments and property tax models). When a simulation of a public proposal is requested, the simulation results are distributed as follows:

• First: Results are given to the House author, if there is one (even if the simulation was not requested by the author). The author may disseminate the simulation results at any time.
• Within 24 hours: Results are given to the requestor. Shortly thereafter, the results will be disseminated more broadly if they are thought to be of general interest, such as by posting them on the House Research Department web site.
• Exception: The delay periods may be shortened or eliminated if the proposal is being heard in a House committee or on the House floor within 24 hours.
• Others may request simulations that are variations of the basic proposal, or may request additional analyses of a proposal, and the author would not automatically get a copy of these simulations or analyses.

Level of detail (city aid model). Although results are provided on a city-by-city basis, the information is generally grouped by city type (i.e., center cities, older suburbs, regional centers, small cities, etc.). These groupings make it easier to generalize about the impacts of aid proposals on different kinds of cities. Printouts are also available with cities grouped geographically if specifically requested.

Level of detail (property tax simulation model). Generally, simulation results are disseminated at the regional level (the state divided into 28 geographic regions). Simulation results may be requested at a finer geographic level (individual cities, counties or school districts) in certain situations. For the 2005 legislative session:

Reason for presenting simulations at a regional level. In addition to keeping the printouts to a reasonable size, the assumptions used in making future year projections are more “robust” at a regional level than they are at a finer geographic level. The levy and valuation projections, which are developed for each jurisdiction, are based on fiscal and demographic information and standard assumptions developed in conjunction with Department of Revenue and Senate staff. We do not take into account special circumstances that might affect projections in individual jurisdictions.

Although not encouraged, we will model a proposal at the specific jurisdiction level when the comparison is between current law and a proposed alternative when both are modeled on property taxes payable in 2006. That is because the underlying (possibly faulty) levy and valuation projections are affecting both "sides" of the comparison equally, allowing the proposal’s effects to be isolated from the flaws in the underlying levy and valuation projections.

How to Read and Interpret Simulation Results

The property tax printouts published by House Research Department display the results of an effort to simulate, or imitate, the behavior of Minnesota's property tax system. While the Department strives to make the property tax simulations accurate, bear in mind that the simulations are estimates. Generally the results are most accurate on a statewide level, and tend to be less accurate as the jurisdiction under scrutiny gets smaller.

Each set of printouts is organized so as to compare conditions under two situations. One situation is called the "baseline," the other is called the "alternative." These two situations are defined at the top of each page of the printout. All figures in the tables are expressed in $1,000's, except for the tables pertaining to sample homesteads.

• The baseline generally shows results under current law for a certain year.
• The alternative shows results for a succeeding year under current law or for a proposed change in the law.
• The printout also shows the difference (change) in conditions between the baseline and the alternative, in dollar amounts and percentage change.
• The baseline or alternative may also be differentiated by the availability of data for the year. "Final" simulations are based upon final data reported to the Department of Revenue by the counties. "Preliminary" results are based on data reported by the counties in preliminary form, along with a few assumptions related more to the distribution of taxes than to the absolute level of taxes. "Projected" results are based on data and assumptions that represent "best guesses."

Simulation Page Layout

Each printout page displays results of the simulation for a geographic area, which may be the state, a region, a county, or an individual city. The upper right-hand corner names the area covered on the page. Examples: the entire state (statewide), a region (metro area or Northcentral cities), a specific taxing jurisdiction (e.g., Hennepin County), or a cluster category (e.g., hi-growth areas).

The top center of the page defines the baseline and alternative.