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The City budget is the financial plan for the City's General Fund operating divisions for the coming year. The budget process matches estimated revenue with projected expenditures for providing basic City services for that year. It also determines the General Fund Property Tax portion of the total City tax levy. The General Fund Property Tax is the primary revenue source of Cottage Grove's main operating fund, which is called the General Fund. In any year, the total City tax levy also includes amounts in addition to that needed to operate the General Fund. Preparation of a City Budget is mandated by state statute.

Each year in November, homeowners receive a notice in the mail that outlines their proposed property tax for the coming year. The notice also lists dates for the budget hearings of the various taxing jurisdictions (county, city, school district) so property owners can participate in the process and have their questions answered.

How Taxes Are Figured
First, the county assessor sets the market value of your property. Market value is the value, for tax purposes, of a particular parcel of property [land and building(s)]. The total of the individual market values is equal to the total market value of the City.

County assessors value all property in the City annually. Notices indicating these market values for the coming year are sent out in March. In April, the City's Board of Review hears appeals, if any, from property owners. By July, market values are set. There is a lag time between when the property value is set and when the taxes are paid. For example, the market values that are set in 2007 are the basis for taxes payable in 2008.

Second, the tax capacity for each piece of property in the City is calculated by a formula that varies by property type. The formulas are set by the legislature and are subject to change. Total tax capacity, which becomes the City's tax base, is determined by adding the tax capacities of all individual parcels of property in the entire City.

For example, the tax capacity on the average $220,000 residential homestead in Cottage Grove (for taxes payable in 2008) is calculated this way: 1% of first $220,000 = $2,200
Tax capacity = $2,200

Third, the City must determine its total gross tax levy, or the amount of property tax money the City needs to operate and pay its loans (which is the debt service on bonded debt) each year. This amount is determined as part of the annual budgeting process.

Fourth, the City must calculate its tax capacity rate, which is used to calculate the amount of tax to be paid by all City taxpayers. It is determined by dividing the tax levy by the City's total tax capacity.

Proposed tax levy for 2008: $10,513,000 (net of fiscal disparities)
Total tax capacity: $29,749,335
Estimated 2008 tax capacity extension rate= 35.15%

This figure (35.15%) is the tax rate multiplied by the individual properties tax capacity (the 2,200 above) gives the gross property taxes to be paid to the City of Cottage Grove. In this example, 2200 x 35.15% equals $773. This is this gross tax due for 2008 for the cities portion of the tax bill, the State of Minnesota pays a portion of this tax through the Market Value Homestead Credit Program, which is $71 in this example, resulting in the net tax paid by this property of $702.

During 2005 a twelve (12) member taskforce was formed to anaylze the existing assessment policy, discuss new policy opportunities, write a new assessment policy and present it to Council for approval.

The City Council approved the Assessment Policy on October 5, 2005.