For what it’s worth: city property valuations up 10 percent

Property in Minneapolis is averaging annual 8-10 percent increases in value since 2014.* In Linden Hills, single-family home valuations went up 11.5 percent in the past year, according to city data. In Lynnhurst, valuations went up 14.7 percent. Jordan: 13 percent. Seward: 19 percent. Phillips West: 24 percent.

Property valuation increases
Image courtesy City of Minneapolis

Appeals contesting property valuations, meanwhile, shot up to about 1,400 this year, an increase of 85 percent over 2017 — and the City Assessor said he has no problem with that. In fact, he said he relies on appeals to ensure valuations are correct.

“We always assume that people are going to let us know if the value’s wrong. People say that you can’t fight City Hall. Well that’s not true,” said City Assessor Patrick Todd. “… If you don’t tell us it’s wrong, then we assume it’s right.”

Property valuation appeal heat map
Image courtesy City of Minneapolis

The city assessor’s office uses a mass appraisal system that looks at one year of comparable sales, in this case, from October 2016 to September 2017. That means they’ll use 7,000 sales to value the remaining 120,000 properties, Todd said. The method becomes more difficult in markets like this one, when there aren’t many home sales and multiple bidders hike the sale prices.

Todd said that’s one of the reasons the city saw so many appeals this year.

“Minneapolis is just the top place to live right now, and that kind of ebbs and flows. At some point it will change,” he said.

Todd said that overall assessed values are accurate, because they have to be. He said the Department of Revenue requires valuations to be in lockstep with the market. When the foreclosure crisis hit, he said the state didn’t allow the office to reduce valuations as much as staff wanted.

“Year after year, the Department of Revenue runs their statistical analysis and makes sure that our assessments are rock solid,” he said.

City assessors visit every home in a five-year cycle. If homeowners don’t invite them inside, they look for substantial upgrades that are noticeable outdoors.

Valuation stats
Image courtesy City of Minneapolis

Todd said that one factor driving more appeals this year is social media. Lynnhurst, the neighborhood with the most appeals, did not see the city’s biggest increase in value. But it did have a lively discussion on Nextdoor.

“I think it only makes sense that the area with the highest voter turnout and the highest percentage of single-family homes would have the most appeals,” said Council Member Linea Palmisano.

Lynnhurst resident Paul Ragozzino said his property valuation went up 16 percent, but he successfully appealed to land at a 5 percent valuation increase.

“There’s a lot of seniors in the neighborhood that are on fixed incomes that this really will impact,” he said.

Sandy Loescher, a real estate agent who hears appeals as part of the Local Board of Appeal and Equalization, said she listens to heart-wrenching stories: A widow in poor health who lives on valuable Lake of the Isles real estate. A homeowner of 40 years who can’t afford the taxes anymore.

She said appellants who go before the board must allow an assessor inside the house, and they have to provide information to back up their case.

“The quickest, easiest way for people to do this is to call their real estate agent … and have them do a market analysis,” she said.

Although the city appeal process is closed, residents can still appeal by April 2019 through Small Claims Court for a fee of about $150 or Tax Court for a $299 fee.

Palmisano said it’s hard to estimate exactly how the valuations will impact next year’s property taxes. As the budget chair, Palmisano said she thinks the city is already looking at a levy increase of at least 5.5 percent, without any new funding allocations.

Last year, she said, many Southwest residents saw a roughly five percent increase in their property valuations, resulting in property tax increases of less than $100 due to citywide growth in the tax base.

“If the whole city goes up in tandem, our tax base is expanding, and this isn’t going to result in the tax hikes that people fear,” she said.

Renters may also feel the effects of rising property valuations.

Cotty Lowry said he owns three small apartment buildings in Uptown and Lowry Hill and he feels forced to raise the rent because of a $10,000 increase in property tax bills this year.

“It’s going to cause turnover, it’s going to cause upheaval in people’s lives,” said Lowry, who raised rents last week by about $50 per month.

He said his Lowry Hill apartment is a century old and needs repairs all the time.

“What can I do?” he said.

Bernadette Hornig said Hornig Companies’ apartments are taxed as if rents were at the top of the market.

“This affects our ability to reinvest in capital needs, pay our mortgage and other expenses,” she said in an email. “We then need to push on revenue side (by raising rents, charging for parking, etc.) to get things back in balance. … The city is wondering why all of these properties are selling and being repositioned – this is why. The numbers don’t work.”

Todd, the city assessor, said apartments have seen a steady increase in valuation over time. City data indicate a 5.6 percent valuation increase in apartment properties this year, with a 21 percent increase since 2014.

“In my opinion, apartments as an investment strategy has been one of the best market segments to invest in for many years, therefore, values have been steadily going up,” he said in an email. “I think the increase in apartment appeals has a lot to do with the owners return on investment. As a general rule, apartment owners  have a difficult time passing 100% of the property tax increase on to their tenant, therefore it impacts the owners bottom line.”

Pat Werner, who works as a real estate agent and serves on the Local Board of Appeal and Equalization hearing appeals, said she remembers when certain neighborhoods were the city’s “best-kept secrets,” like areas around Bryn Mawr, Brackett Field Park, Phillips, Camden and Longfellow. Not anymore, she said.

Loescher said she lives in a lovely area on the North side, and there are still bargains to be had.

“I wouldn’t say that the door is closed on affordable places to buy yet, but I see it kind of narrowing,” she said.


Help paying property taxes

Help from the Department of Revenue is available for seniors, veterans, homeowners with rapidly rising tax bills, and even renters.

Homestead Credit Refund (for homeowners)

Household income must be less than $110,650.

Filing due date: Aug. 15, 2018

More info:

Special Homestead Credit Refund (for homeowners)

No income limits. Available for homes where net property taxes increased more than 12 percent or $100 from 2017-2018.

Filing due date: Aug. 15, 2018

More info:

Renter’s Property Tax Refund Program 

The state assumes that about 17 percent of a rent payment relates to property taxes. If that amount is deemed too high relative to household income, renters can receive a refund. Household income must be less than $59,960.

Filing due date: Aug. 15, 2018

More info:

Senior Citizens Property Tax Deferral Program

The program aims to prevent seniors from being taxed out of their homes. Those enrolled see property tax bills limited to 3 percent of household income. But residents must pay back the rest, with interest, when the home is sold.

More info:

Subtraction for Dependents, Seniors or Disabled Persons

Those who are 65 or older, or can’t work due to a disability, or support dependents may qualify for the aforementioned Homestead Credit and Renter’s Property Tax Refunds.

More info:

Market Value Exclusion on Homesteads of Disabled Veterans

Part of a home’s market value is not taxed for disabled veterans, as well as their surviving spouses and primary family caregivers.

Filing due date: July 1

More info:

Source: Minnesota Department of Revenue


Key dates

Valuation notices mailed: March 2018

Truth in Taxation statement mailed: November 2018. The statement indicates the maximum property tax amount a homeowner might owe, based on proposed levies for the county, city, school district and other taxing authorities, such as a watershed district. Includes public hearing dates for public input.

Final tax statement mailed: March 2019

Taxes due (first half): May 15, 2019

Taxes due (second half): October 15, 2019

Source: City of Minneapolis


*Corrected to reference the year 2014.