Minnesota Legislature
Office of the Revisor of Statutes
Minnesota Administrative Rules
8100.0700 EQUALIZATION.
Subpart 1.
In general.
After the apportionment of value referred to in part 8100.0600 has been made, the values of structures valued by the commissioner must be equalized to coincide with the assessment levels of commercial and industrial property within each respective county receiving a share of the apportioned utilities value. This equalization will be accomplished through the use of an assessment/sales ratio.
Subp. 2.
Assessment/sales ratio computation.
A comprehensive assessment/sales ratio study compiled annually by the sales ratio section of the Local Government Services Division of the Department of Revenue will be used in this computation. The portions of this study which will be used for purposes of this part are known as the "County Commercial and Industrial Sales Ratio."
This commercial and industrial (C & I) sales ratio is computed through an analysis of the certificates of real estate value filed by the buyers or sellers of commercial or industrial property within each county. The information contained on these certificates of real estate value is compiled pursuant to requests, standards, and methods set forth by the Minnesota Department of Revenue acting upon recommendations of the Minnesota Legislature. The most recent C & I study available will be used for purposes of this part.
The median C & I sales ratio from this County Commercial and Industrial Sales Ratio study will be used as a basis to estimate the current year C & I median ratio for each county.
The process used to estimate this current year median ratio will be as follows:
The State Board of Equalization abstract of market value will be examined. The current estimated market value of commercial and industrial property within each county will be taken from this abstract. The amount of the value of new commercial and industrial construction ("new" meaning since the last assessment period), as well as the value of commercial and industrial property which has changed classification (for example, commercial to tax exempt property) will also be taken from the abstract. The value of new construction will then be deducted from the estimated market value, resulting in a net estimated current year market value for commercial and industrial property within the county. The value of commercial and industrial property which has changed classification will be deducted from the previous years estimated market value to arrive at a net estimated previous year market value for commercial and industrial property within the county. The net current year value will be compared to the net previous year's estimated market value for commercial and industrial property within the county and the difference between the two values noted. This difference will be divided by the previous year's net estimated market value for commercial and industrial property to find the percentage of increase, or decrease, in assessment level for each year. This percent of change will be applied to the most recent C & I median ratio to estimate the current year's C & I median ratio. An example of this calculation for a typical county is shown below.
| 1990 E.M.V. for Commercial and | ||
| Industrial Property | $12,000,000 | |
| Less: New Construction | 1,500,000 | |
| _ | ||
| 1990 Net E.M.V. for C & I property | $ 10,500,000 | |
| 1989 E.M.V. for C & I property | $10,250,000 | |
| Less: Classification changes | 250,000 | |
| _ | ||
| 1989 Net E.M.V. for C & I property | 10,000,000 | |
| Difference 1989 vs 1990 E.M.V. | 500,000 | |
| Percent of change (500,000/10,000,000) | 5% | |
| 1989 Median C & I ratio | 88% | |
| 1990 Estimated Median C & I ratio (88% x 105%) | 92.4% | |
This same calculation is performed for each Minnesota county. If there are five or fewer valid sales of commercial and industrial property within a county during the study period, these few sales are insufficient to form the basis for a meaningful C & I ratio. Therefore, the median assessment/sales ratio to be used for purposes of the example computation in this subpart will not be the median C & I ratio but will be the weighted median ratio of all property classes within the county for which a sales ratio is available. This weighted median ratio is computed in the same manner using the same procedures and standards as the C & I ratio. In addition, the example computation in this subpart will not be performed using the commercial and industrial estimated market value but will use the estimated market value for all property within the county. All other aspects of the calculations are identical except for this substitution.
| Class of Property | Amount of Value | Percent of Value | Median Ratio | Weighted Median Ratio |
| Residential | $ 20,000,000 | 20% | 86% | 17.00% |
| Agricultural | 55,000,000 | 55% | 95% | 52.25% |
| Seasonal - Recreational | 5,000,000 | 5% | 90% | 4.50% |
| Commercial Industrial | 20,000,000 | 20% | 85% | 17.00% |
| Total | $100,000,000 | 100% | 90.75% |
Subp. 3.
Application of the estimated current year median assessment/sales ratio.
After the estimated current year median ratio has been calculated under subpart 2, it is used to adjust the apportioned estimated market value of utility structures valued by the commissioner. The value of these structures is reduced by the difference between 95 percent and the median ratio as adjusted in subpart 2. This is done by subtracting the current year median ratio, as adjusted, from the 95 percent provided for in Minnesota Statutes, section 278.05, subdivision 4, to arrive at an equalization factor. The estimated market value of utility structures is multiplied by the equalization factor to arrive at the reduction amount. The reduction amount is subtracted from the estimated market value of the utility structures to arrive at the equalized market value of structures. In no instance will any adjustment be made if, after comparing the current year median sales ratio as adjusted to the assessment level of utility structures, the difference between the two is ten percent or less. An example of this adjustment is as follows:
| County A | County B | ||
| Estimated Level of Assessment for Utility Property* | 100.00% | 100.00% | |
| 95 percent provided for in Minnesota Statutes, section 278.05, subdivision 4 | 95.00% | 95.00% | |
| County Commercial/Industrial Sales Ratio | 87.00% | 93.00% | |
| Equalization Factor | 8.00% | 0.00% | |
| Estimated Market Value of Structures | 1,000,000 | 1,000,000 | |
| Reduction in Value | 80,000 | 0 | |
| _ | _ | ||
| Equalized Market Value of Structures | 920,000 | 1,000,000** | |
| ========== | ========== |
*For purposes of this example, assume that utility property is assessed at 100 percent of market value.
**No adjustment is made because the Estimated Current Year Median Sales Ratio is within ten percent of the assessment level of utility property.
All utilities operating within a particular county will be equalized at the same percentage. No adjustment for equalization will be made to machinery or personal property.
These equalized estimated market values of utility structures valued by the commissioner will be forwarded to the county assessor denoting specific utility companies and taxing districts together with personal property and machinery values pursuant to Minnesota Statutes.
History:
15 SR 2190; L 2005 c 151 art 1 s 114
Published Electronically:
June 4, 2007
Official Publication of the State of Minnesota
Revisor of Statutes