Taxpayers are upset about property taxes, and they should be. They rightly want to know, why are my property taxes going up? There’s no one easy answer to that question, but I want to tell you what we at the City of Minneapolis are doing to slow the growth of property taxes, give you some background about the outside budgetary pressures we’re facing that have contributed to big increases for many residents, and suggest what you can do to help.
What we’re doing to slow the growth of property taxes
1) Shrinking government. Above all, we’re shrunk the size of City government. Over the last 10 years, City spending has declined in constant dollars: after adjusting for inflation, my proposed budget for 2011 is 7 percent smaller than the City’s budget in 2001. The City will have fewer full-time employees in 2011 than at any point in the last 10 years.
2) Paying down debt. Nine years ago, Minneapolis was deeply indebted, but since then, we’ve paid down $139 million in debt. Just like when you pay down your credit card, this means that we have more money every year to fund core services like police, fire and roads, and more money to help hold down property taxes. And as a result of paying down that debt, we’ve restored the City’s triple-A credit rating. Just like when you have a good credit rating, this also means that when the City borrows money, it costs taxpayers less.
Outside budgetary pressures
1) Overcharges from closed pension funds. Every penny of the 6.5% tax increase that I proposed — a total of $17.4 million — goes solely to pay for the skyrocketing costs of three closed pension funds. If not for these charges to the taxpayers, we could have actually cuts property taxes slightly next year.
We don’t manage these closed pension funds. Rather, under State law, the pension funds are managed by their own boards, and those fund managers have been overcharging the City taxpayers. We had to take the funds to court to defend taxpayers from being overcharged — and we won: a judge sided with taxpayers and that’s how we were able to decrease taxes by $10 million last year alone. But the Court has also ruled that taxpayers were overcharged over many years to the tune of tens of millions of dollars.
If the State had by now reformed the closed pensions as we have asked them to do, years’ worth of tax increases could have been avoided and we would never have had to go to court. I encourage you to urge your state legislators to enact pension reform that balances the needs of both retirees and taxpayers.
2) Cuts to Local Government Aid. In the past three years alone, the State of Minnesota has cut $54 million in Local Government Aid to the City of Minneapolis. To put it in perspective, that amount could pay for the entire Fire Department for one year.
Let me be clear about one thing right off the bat: Local Government Aid (LGA) is not a handout. Because Minneapolis is the economic engine of the state of Minnesota, we contribute far more to the State in sales, property and income taxes than we get back from the State. But as the State has lurched from one budget deficit to the next, it has chosen to pass down its problems onto property-tax payers in the form of LGA cuts — meaning that at the City of Minneapolis, we’ve had to solve the State’s problems by making difficult decisions about core services and property taxes.
Despite the cuts of recent years, my budget for next year is premised on our receiving all the LGA that the State has promised us in law for next year. But if they break their promise and cut us mid-year again, I have submitted a plan to make another $21 million in cuts to City spending.
3) Balance between residential and commercial property values. Think of property taxes as one big pot that we’re all responsible for filling: when one person contributes a lot to fill up the pot, you have to contribute less; but when another person contributes less, you have to contribute more to make up the difference. The latter scenario is exactly what has happened recently to the balance between residential and commercial property values: because commercial property values have fallen faster than residential values in the economic downturn, residential property owners have had to pick up a greater share of the overall burden. In addition, other changes to State law about 10 years ago also lightened the burden on commercial property owners and put more of it onto residential owners.
4) Recertifying special taxing districts. The reason that most taxpayers saw no increase in their property taxes last year but are seeing big increases this year is that the City recertified a special taxing district to help pay off debt on the Target Center that we inherited many years ago and to pay for neighborhood programs. This recertification accounts for about one-third of the overall increase you are seeing this year.
Keeping the tax increase down
The Truth in Taxation statement that you received in the mail was based upon a maximum 7.5% tax increase, higher than the 6.5% increase I initially proposed in the budget that I sent to the City Council in August. However, because there is some reason to think that the State budget deficit will not get significantly worse than the $6 billion hole it is already in, I believe we will be able to keep the tax increase to 6.5% — even though, because of the other outside pressures I described above, for many people the increase in the amount that you pay will be higher.
But I’m also looking for ways to bring down the tax increase farther than that. I’m meeting with top elected and budget officials on this topic almost every day, and I want to hear from you, too.
What you can do
1) First, if you believe the assessed value of your home is too high, you can appeal it. Go to the City Assessor’s website to learn more about how to do that.
2) Attend a City Council public hearing on budget adoption on Monday, December 13 at 6:00 in Room 317 of City Hall and tell us how you feel.
3) Above all, please share your ideas with me about how to keep property taxes down, because I am working every day on this issue and want to know what you think. You can reach me anytime at email@example.com or by filling out this form. I will read every message I receive.
A final note about the timing of your Truth in Taxation notice
Many of you received your supplemental Truth in Taxation notices in just the past few days, and as a result, you did not have much or any notice about last night’s public hearing on the budget. For that, please accept my apologies: we at the City of Minneapolis supplied the document to Hennepin County many weeks ago, but the County — whose responsibility it is to send the notice out — failed to mail it in a timely manner.
I will do my best to keep balancing our community’s needs and the pressures we face in an effort to keep your taxes as low as I can. But I’m going to need everyone’s help, so please stay in touch with me.