The last column described the city’s budget process and the math in calculating mill levies. You may recall that a mill levy is determined by dividing the total budget amount by the value of a mill (one-thousandth of a municipality’s total taxable value). The city of Mandan’s preliminary budget for 2010 is $3,211,518 for the general fund, which will allow the city’s share of the mill levy to be reduced to 98 mills, down from 102 levied for the 2009 budget. Other taxing authorities making budget decisions that will impact the consolidated mill levy are the Morton County Commission, Mandan School Board and Mandan Park Board.

That’s enough about how property taxes are determined. This week’s column takes a look at how exemptions work. First, the math: any property tax exemptions granted by the city are subtracted from the property valuation base before the value of a mill is calculated.

Exemptions are mostly for new and expanded commercial buildings or primary residences (owner occupied homes). These are property improvements that didn’t previously exist. Thus the city, county, school and park district are not giving up any current tax collections or raising anyone’s taxes, but rather adding time to the equation between now and the date when taxes will be collected.

The overarching purpose of a tax exemption is to generate and attract economic and community growth and investment that might not otherwise occur. Granting an exemption today may translate into larger public benefits in the future that stem from a bigger and better project.

The length of tax exemptions can be up to two years for the first $75,000 in value of a new primary residence, up to five years and 100 percent of the improved value of a commercial property, and in extraordinary circumstances, up to 15 years on a commercial property through tax increment financing.

To be considered for an extended exemption, a project must meet established development or redevelopment objectives resulting in public benefit. And the project has to generate a minimum future increase of $25,000 per year in property taxes for all jurisdictions combined. This translates to hard construction costs of approximately $1 million or more.

Other types of property tax exemptions granted in Mandan are the homestead tax credit for senior citizens or disabled persons and the Renaissance Zone.

The Homestead Tax Credit program provides a property tax deduction for owner occupants or a subsidy for renters who are either 65 or older, or permanently and totally disabled, with a household income of $26,000 or less. If you believe you are eligible, call the City Assessing Department at 667-3230 or the Office of the State Tax Commissioner. The State of North Dakota refunds the city for any property tax loss under the homestead credit program.

The Renaissance Zone is a combination state and local program aimed at revitalizing blighted areas. Most North Dakota cities have established downtown Renaissance Zones. The program provides local property tax and state income tax exemptions to commercial property owners and homeowners who meet minimum investment requirements in rehabilitation, expansion or new construction of buildings. In Mandan, the Renaissance Zone is a 28-block area encompassing most of Main Street and some blocks to the north.

The property tax exemption for a Renaissance Zone project can differ from the standard property tax exemption available for new and expanding businesses in that the exemption is on the value of the building as improved, rather than the improved portion only. The theory behind the program is that revitalizing a blighted area takes some extra incentive. Mandan has 16 rehabilitation projects approved to date under the Renaissance Zone program, but five are not yet complete. The owner does not receive the exemption until the project is completed. The increase in value of the completed project often speeds the number of years until the public is recouping more taxes than were forgone.

If you have questions about the property tax exemptions or city finances, points of contact for more information include the Assessing Department at phone 667-3230, the Finance Department at 667-3213, or the Business Development Office at 667-3485.