EP Schools tax levy will increase 6.09% in 2024

Eden Prairie school property taxes will increase for many in 2024 following the school board’s approval of the district’s proposed tax levy of $60,375,139.33. This decision was made at a public hearing during the Dec. 11 school board meeting. The new levy represents a 6.09% increase, or $3,466,878, over last year’s levy of $56,908,261.

The final levy includes an inflationary increase on the operating referendum of 2.57%, as calculated by the Minnesota Department of Education. It reflects a slight increase in student enrollment and significant boosts to the capital project/technology budget and to debt servicing, among other factors.

It also incorporates an under-levy (the school district choosing to take less than its available tax increment to keep taxes lower) of $992,762.23.

2024 taxes will provide revenue for the 2024-25 school year.

The levy number represents the total funding the school district can collect from taxpayers in a given year to pay for educating students and operating the district. This amount is spread out across taxpayers, and the total amount each taxpayer is billed will vary depending on their individual property value.

How this will affect school property taxes

Based on the 6.09% tax levy increase, school property taxes for an Eden Prairie home valued at $540,000 (roughly the median value for the city) would increase $153 over last year (from $2,087 to $2,240), assuming an estimated 6% rise in property value from 2023 to 2024.

However, Jason Mutzenberger, the district’s executive director of business services who delivered the presentation, said it was important to remember that property values do not rise or fall uniformly for all homes. He said the burden of the tax levy will shift from taxpayers with lower increases to those with higher increases.

Mutzenberger said some taxpayers would see a decrease in their school tax impact if their home value had not changed.

“That’s because property value across the city is increasing, and so it re-spreads the taxes across all of those properties based on the value,” he said.

The charts below, labeled based on the estimated 2024 property value, show year-on-year estimated changes in school property taxes based on a 2% rise in property value from 2021 to 2022, 15% from 2022 to 2023, and 6% from 2023 to 2024. The numbers in the red columns reflect the total annual school property tax for the property at each value.

Mutzenberger said that to understand how much the district is levying, it would be more accurate to look at the tax impact assuming no change in property value. “That’s a solid true number,” he said. “When we start talking about value increases, it’s going to change based on individual values.”

For a home valued at $540,000 in both 2023 and 2024, annual school property taxes would drop by $24, from $2,227 to $2,203.

Mutzenberger said Eden Prairie residents had lower total school property taxes payable in 2023 than most neighboring districts, including Wayzata, Minnetonka, and Edina. The chart below compares estimated taxes paid on a $540,000 home in several districts.

Key factors that shaped the tax levy

Mutzenberger said the levy amount reflects the following changes:

• General fund: An increase of 4.22% or $2,008,994, from $47,651,257 (Taxes Payable 2023) to $49,660,251 (Taxes Payable 2024).
• Community education fund: Up 3.35% or $41,029, from $1,261,482 (Taxes Payable 2023) to $1,302,511 (Taxes Payable 2024).
• Debt service fund: Increased 17.72%, or $1,416,855, from $7,995,522 (Taxes Payable 2023) to $9,412,377 (Taxes Payable 2024).

The increases to the general fund were largely driven by an almost $800,000 increase in the operating referendum (much of which was due to inflation), increased enrollment, and increased long-term facility maintenance costs.

The biggest factor, however, was a $1,303,961 increase in the capital project levy, also referred to as the technology levy. This was for technology infrastructure, hardware, and software cost increases, as well as rising costs of maintaining an up-to-date bus fleet for student transportation.

These general fund increases were offset by a decrease in re-employment insurance costs and savings related to installing LED lighting.

Mutzenberger said the high debt service fund number, including principal and interest payments on debt, was an “unusual component of this levy,” and the district usually did not see such a large increase.

However, he said, “We did plan for this. We did know this was coming.” Mutzenberger said the district schedules out its debt repayment over time to keep the tax levy impact relatively flat or with slight increases over time.

He said the district’s debt is primarily for deferred maintenance on the district’s roughly 2 million square feet of property, and for the Designing Pathways bonds, which covered upgrades to Central Middle School and other sites, as well as security upgrades. “We do carry debt in the district, just as residents do on their properties,” Mutzenberger said.

These final levy numbers also take into account an under-levy (the school district choosing to take less than its available tax increment to keep taxes lower) of $992,762.23 due to the following proposed levy reductions included in the school district’s proposal to the school board:

• General fund: Defer property tax abatements of $791,758.
• Debt service fund: Permanently reduce property tax abatements of $201,004.

Mutzenberger said the choice to under-levy was a strategic one that the district had also made to lessen the impact on taxpayers in previous years. However, he said the practice may not be sustainable in future years.

Josh Swanson, EP Schools’ superintendent, said the under-levy allowed the district to be “responsible with taxpayers” and still maintain the district’s long-term financial health. Without this under-levy, the school property tax increase for 2024 would have been 7.84% instead of 6.09%.

Taxpayer options

Mutzenberger reminded Eden Prairie taxpayers that they have the right to appeal their property valuation to the local board of appeal and adjustment and the Hennepin County board of appeal and adjustment each spring.

However, for taxes payable in 2024, the only option left is to appeal their property valuation to the Minnesota tax court by April 2024 by contacting info@taxcourt.state.mn.us or (651) 297-8737.

Mutzenberger noted that Minnesota also has two state property tax refund programs and one state property tax deferral program. These tax refund programs are a regular homestead credit refund and a special homestead credit refund, and the tax deferral program is for people aged 65 and over (see slides below for details).

These programs may reduce the net tax burden for local taxpayers, but only if taxpayers complete and send in the forms, Mutzenberger said. He advised people who need help with the forms or want to learn more to talk to their tax professional, or visit the Department of Revenue website.

As of Dec. 29, Mutzenberger departed his role as executive director of business services to pursue another job opportunity. He will be replaced by Andrew Adams, who will begin on Feb. 5. In the meantime, specific questions about the school district tax levy can be sent to Matt Hippen, director of finance, at mhippen@edenpr.org.

Board discussion and vote to certify tax levy

After Mutzenberger’s presentation, board chair Aaron Casper requested public comment, as required by state law. However, there were no requests to comment.

After a break to carry out other parts of the school board meeting, Mutzenberger answered questions and issued clarifications about the tax levy; a board discussion followed.

Board member Charles “C.J.” Strehl proposed reducing the $1,303,961 capital project/technology levy by $300,000 to reduce the individual taxpayer burden amid current cost-of-living increases. He said he ideally would like to reduce the 2024 levy increase to get it into the 5% range.

However, board member Kim Ross disagreed. She said it was important to consider the future impact of the suggested cost cuts, given the district’s need to pay for an up-to-date bus fleet as well as its planned transformation from a technology lease model to a purchase model. Ross said the reduction would translate to a “negligible” impact for each taxpayer but, added up, would result in a significant shortfall for the district.

Casper said that he appreciated Strehl’s desire to reduce taxpayer burden. Still, he noted that the district was already under-levying by almost a million dollars this year and had under-levied by about $700,000 last year.

When board member Debjyoti “DD” Dwivedy asked how Strehl’s suggested $300,000 cut would affect the district, Mutzenberger said he was concerned this additional under-levy would result in a snowball effect that might cause a higher tax impact next year. He said the district stood by the $1,303,961 number, which not only reflects an increase in costs for buses and technology equipment but also would build some protective fund balance.

Board member Steve Bartz also noted that voters had “overwhelmingly” approved the technology levy, and approving the district’s requested number was necessary to keep a strong financial position in the future.

The board voted 5-2 against Strehl’s motion to reduce the technology levy by $300,000. Strehl and Dwivedy voted in favor, while Casper, Bartz, Dennis Stubbs, Abby Libsack, and Ross opposed it.

Ultimately, the board voted 6-1 to certify the final levy amount of $60,375,139.33, a 6.09% or $3,466,878 increase over last year’s levy of $56,908,261. Casper, Bartz, Ross, Dwivedy, Stubbs, and Libsack voted in favor, while Strehl opposed.

Financial report, audit results

At the same meeting, the school board approved the district’s financial audit report for the year ending June 30, 2023, which was prepared by Malloy Montague Karnowski Radosevich & Co., P.A. (MMKR).

For the internal control and compliance financial audit, MMKR found no material weaknesses or instances of noncompliance in the current year.

In terms of Minnesota Legal Compliance, MMKR found three instances of noncompliance, related to:

• Payment of invoices.
• Withholding affidavits.
• Contract performance and paying bonds.

MMKR gave a clean opinion for the single audit of federal awards, and found no material weaknesses or instances of noncompliance reported in the current year.

The presentation also doubled as the district’s year-end financial report to the school board. The general fund finished with an unassigned fund balance of $17,090,264, which represents 13.9% of the district’s annual expenditures and a decrease of $550,189 from the prior year.

For more detailed information, view the Dec. 11 school board meeting agenda, supporting materials, financial audit results, and the district’s proposed tax levy presentation here. The video recording of the meeting is available here.