After having decreased last year, median property taxes in ECCO and CARAG will increase 9.0% and 12.5% respectively in 2011.(Median is the middle value, similar to an average). The ECCO median tax increases from $6,025 to $6,568, and CARAG from $3,603 to $4,055. The citywide percentage is 12.1%. Individual properties differ from the median with respect to what happened with their individual assessed valuations.
The increase comes about despite the median property valuations decreasing for 2010 to 2011 by 4.5% in ECCO and 2% in CARAG; from $413,500 to $395,000 in ECCO and from $257,000 to 252,000 in CARAG.
The biggest component increase in the median taxes come from the City of Minneapolis, increasing 16.8% across the City. The City has explained this increase due to increasing obligations to three closed pension funds, a decrease in Local Government Aid from the State, the recertification of Tax Increment Financing Districts and the paying down of the City’s old debts. This percent increase in property taxes is higher than what the City actually will receive to its budget in total, due to these factors. The City originally was going to increase its budget by 7.5%, but decreased this to 4.7% after a lot of complaining. The City cut its workforce by 80 people, including 32 firefighters and 24 police officers.
A big reason for the steady increase in residential property taxes in Minneapolis is the change in classification rates by the Legislature that resulted in a shift of property taxes from commercial and industrial properties to residential properties. Classification rates pertain to what percentage of assessed value is used to create taxable value. In Payable 1997, residential properties paid 39% of the property taxes – in Payable 2011 the percentage is 56%. This is partly due to decreases in the assessed values of commercial and industrial properties from Payable 2010 to 2011 (-9.6% and -11.3%), while residential properties decreased only 4.2%. This is probably due to more aggressive seeking of adjustments by businesses.
Local Government Aid (LGA) from the State was once the largest single source of revenue to the City’s General Fund, but today property taxes are. In 2003 LGA accounted for 40%, but in 2011 will provide only 22%. Thus, property taxes went from 29% to 44%. Over the last three years, Minneapolis has lost $54 million of LGA. Of course, what will happen with LGA in this session of the Legislature is vital to what will happen to our property taxes.
City payments provided from property taxes for the three closed pension funds will increase from $15.5 million in 2010 to $23.0 million in 2011. Closed means there are no new members, and cover police, firefighters, and Minneapolis employees. New employees are now in State funds. The increased contributions are due to poor investment returns and perhaps excessive benefits which is in litigation.
One reason for the decrease in Payable 2010 property taxes in the City was that TIF (tax increment district) revenues went in that year to the General Fund. However, the 2008 Legislature restored that these funds can be held out for the Target Center and neighborhood revitalization efforts (NRP), beginning in 2011. This then resulted in increases in taxes on non-TIF properties. However, the City is trying to keep part of the NRP monies for its budget so it can reduce property taxes, but this is in dispute.
A suit has been brought in Hennepin County District Court asserting that property values are inflated in neighborhoods with high foreclosure rates, which does not include the lakes areas. If successful, this would shift property taxes to other neighborhoods. Citizens can appeal their property assessments by following the process provided at the City Assessor website.
Gary Farland lives in ECCO.