Property tax assessment season is in full swing in Minneapolis, with people receiving jaw dropping notices regarding how much their taxes have gone up. In my case, the bump is 16.3%. Ouch.
As I understand it, the challenges here is that proposed tax increase numbers thrown around at a city level are considerably different by the time they’re put into place. Steve Brandt explains this well at the Minneapolis Issues List:
A 7.5 percent increase in the city levy translates to tax increases of 13 to 17 percent on homes, depending on value. That’s because the city’s commercial tax base is shrinking faster than its loss of residential value, throwing more of the burden on homes.
Chances are pretty good that when you hear 7.5% you’re not actually thinking 13-17%. That could certainly be communicated more accurately to residential property owners.
Additionally, Brandt explains that quite a bit of property in the city is not contributing to the property tax base:
A big factor there is the decision by Rybak and the City Council to lock up millions of dollars in commercial property in tax-increment districts designed to finance the debt of Target Center and neighborhood programs.
As I understand it, two examples of city properties that residential property owners are making up the difference for are Target’s downtown headquarters and retail store, and Block E. Both were projects that received generous funding from the city under former Mayor Sharon Sayles Belton.
That’s not necessarily good or bad. It’s certainly great to have a Target store and thousands of employees working downtown. With the exception of Block E, downtown is as vibrant as I’ve ever seen it, and I believe that tax incentives helped get us to where we are today. Carol Becker talked about this 10 years ago on the Minneapolis Issues List:
Minneapolis downtown is thriving, with an office growth rate equal to that of the suburbs, with a thriving night life, with a booming housing market, with wonderful shopping and cultural opportunities. I also see a place that pays about 50% of the tax bill in Minneapolis.
But, it’s good to understand the costs of tax incentives like this. Corporations have gotten very good at getting cities to supplement the cost of new buildings. Projects like this deserve very close analysis.
One way to look at this: With Tax Increment Financing, you’re not giving away something for free. Instead, you’re making everyone else pay.
The StarTribune has an excellent story today by Steve Brandt looking at the inequities of our city’s property tax assessments. The story explains that many people in some of the most economically depressed neighborhoods in the city are paying property taxes based on assessed property values well above what they actually paid for their homes. Ouch. One example is Nigerian immigrant, Idowu Odunlade, who’s paying taxes on her home in the McKinley Neighborhood based on a $90,000 assessment. However, she bought the place for $22,000.
I’d like to personally thank Idowu for her financial support, since my property’s tax assessed value in the Cooper Neighborhood is for less than my property’s purchase price as her’s is above. Thanks for making up the difference.
When it comes to taxes, people:
1. Don’t like surprises
2. Want it to feel like the taxes are fair (both by rate and distribution)
3. Want to know that they’re getting their money’s worth.
Minneapolitans generally feel pretty good about #3, but this week has been a rough one for #’s 1 and 2. But, they’re both solvable problems that should receive the attention they deserve.
Updates [2:45pm]: Bob Collins is asking readers to post their tax increase or decreases in the comments on his site. One trend I see is that Bob has a lot of Longfellow living readers.
Update [4:25]: Mayor Rybak has sent out an email explaining why the increases were made and what he’s doing to avoid them. It’s also published to his blog here.