Changing tax base, pensions behind jump in Mpls. property tax rate
The Minnesota Department of Revenue released a report this week with good news -- sort of -- for taxpayers.
On average, property tax increases proposed for 2011 will be the lowest in nearly a decade, but many Minneapolis residents could see double-digit increases next year.
Revenue department officials say in 2011, Minnesotans can expect to pay about 2.6 percent more in property taxes than they did this year. The numbers are based on the maximum proposed tax levy increases for each city. Of cities with populations of 50,000 or more, Rochester has proposed the highest increase in property taxes at 8.4 percent.
Minneapolis ranks number two at 7.5 percent. However, if Mayor R.T. Rybak has his way, property taxes will go up by only 6.5 percent.
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But some city residents, like 10-year resident David Sadler, may see a much bigger hike. Sadler told a budget hearing at City Hall that he's gotten used to seeing his property taxes go up. But he says the current bump is just too much.
"We've averaged almost 11 percent a year on property tax increases -- every year," Sadler said. "Ours this year went up 16 percent."
This property tax rollercoaster was created in part by the death and rebirth of a tax increment finance, or TIF, district. City council member Betsy Hodges said for 20 years the district dedicated tax revenue to neighborhood groups, not the city's general fund. So when the district expired in 2009, Hodges said the city's tax base grew.
"So all the properties came back onto the tax base for one year, which meant the burden to all other properties decreased for that one year," Hodges said. "And if folks look at their 2009 to 2010, most people saw either a decrease or it stayed about the same."
The TIF district was re-certified for 2011. Which means, once again, a smaller group of properties will share the property tax burden. And Hodges said that makes the increase many taxpayers are seeing from 2010 to 2011 look more severe than previous years.
Hodges said another major factor responsible for the tax hike is the tens of millions of dollars the city pays into closed pension funds for retired police officers, firefighters and their dependents. The city successfully sued the funds for overcompensating fund members and overcharging the city. But Hodges said the case is still tied up in court.
"In the absence of the city's closed pension fund obligations, the mayor would have called for a 1 percent levy increase as opposed to a 6.5 percent increase," Hodges said.
But that's apparently no comfort for residents who say they're being taxed out of their homes. More than one person told council members at the recent budget hearing that they were considering leaving the city. Mike Matthews told council members he's had enough.
"I just came to introduce myself and say 'hi' and I'm also saying 'good-bye.' Because we're going to be moving to Edina, across the street to a little rambler. I just can't afford these taxes anymore," Matthews said.
Edina is proposing a little more than 1 percent property tax increase for next year.
The Minneapolis City Council will start amending the proposed 2011 budget next month.
Residents have one more chance to speak out on the budget, during a final public hearing at city hall on December 13. Following the hearing, council members will adopt the new budget.