Proposed levy means higher property taxes for most Minneapolis homeowners

It’s likely most Minneapolis homeowners will see a higher property tax bill under the 2017 budget proposed by Mayor Betsy Hodges, members of the City Council’s Ways and Means Budget Subcommittee learned Monday.

Property taxes could rise on about 60 percent of the city’s roughly 100,000 residential properties, excluding apartment buildings, according to a presentation by Mark Ruff, the city’s chief financial officer. About 35 percent of households would see an increase of 5 percent or more.

Council Member Andrew Johnson (Ward 12) called it “surprising” to see nearly 35,000 households in the 5-percent-or-higher category. But Ruff cautioned committee members that those were preliminary estimates based off of Hennepin County data and would be refined in coming weeks.

Earlier this month, Hodges proposed a $1.3-billion city budget in 2017, an increase of about 7.6 percent over the 2016 budget. About 20 percent of the budget is funded directly by property taxes, and Hodges proposed a 5.5-percent hike in the city’s property tax levy for 2017.

The city’s property tax levy increased 3.4 percent in 2016.

A minimum 4.9-percent levy increase was required in 2017 after the city struck an $800-million deal with the Park Board this spring to pay for road and park maintenance and repairs. The deal’s complex funding scheme leans heavily on new property taxes.

Hodges pledged to shrink the coming levy increase if a special legislative session resulted in a boost in Local Government Aid from the state. But Gov. Mark Dayton announced earlier this month he had ended attempts to negotiate a special session with legislative leaders.

Ruff said general fund revenues were expected to rise just 2 percent after a “nominal” increase in LGA. Those revenues would be generated mainly in two areas, Ruff said: property taxes and sales and entertainment taxes, an increase driven in part by the opening of U.S. Bank Stadium, the new home of the Minnesota Vikings.

Revenues are expected to decline in several other categories, including charges for city services, fines and forfeits, the franchise fees paid by utilities and license and permits related to construction activity — “despite the fact that we have very robust economic activity in the city,” Ruff added.

On Aug. 25, the city hit the $1-billion mark in new construction permits earlier than in any previous year.

“When you have a budget that needs to increase — just basic inflation without any additional types of enhancements to that budget — and we have revenues which are either flat or declining, it’s going to put more pressure on the tax levy,” Ruff said.

Council Member Lisa Goodman (Ward 7) was critical of the amount of new spending in Hodges’ 2017 budget, which includes about $7 million in one-time expenses and $6.7 million in ongoing costs that will be carried over to future budgets, largely related to new staff positions. In her budget presentation, Hodges’ said those ongoing costs were offset by $2.7 million in “strategic cuts” to city departments. Of the balance, most of the increase is dedicated to public safety, including 15 new police officers.

Goodman said she was supportive of hiring additional officers, but questioned the impact other decisions will have on property taxes.

“There’s no real explanation for why we need $13 million more in spending other than we want it,” Goodman said.

“It’s really not all that complicated,” she said. “The bottom line is there’s $6.7 million of totally new spending, $7 million worth of new one-time spending and we’re having to increase our levy capacity or property tax amount by about $16 million.”

Ruff said city property taxes on a home with the city’s median value of $109,500 amounted to roughly $1,100 in 2016, so a 5-percent increase would equal $55.

City Council Member Lisa Bender (Ward 10) noted about 50 percent of Minneapolis residents are renters who feel the impact of rising property taxes in higher rents. Bender noted property tax assessments are sent to apartment building owners and aren’t typically shared with tenants, who she said need to be better engaged by the city during budget talks.