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Minneapolis property tax increases fueled by loss of Homestead Credit

Minneapolis homeowners will find some interesting reading in their mailboxes this week – their annual Truth-in-Taxation statements outlining proposed 2012 property taxes.

Last year, there wasn’t much good news in Minneapolis, where tax increase percentages went as high as the mid-teens. This year, it depends on where you live.

“They’re going to be mad,” predicts Council Member Betsy Hodges, who represents the southwest corner of the city, where housing values have dropped but not as much as in other areas. That means residents there would bear a relatively higher share of the city’s property tax.

In years past, the Homestead Credit could dull some of the pain of a property tax increase. No more. The Homestead Credit, abolished by the state to save $261 million, was replaced by the Market Value Exclusion Program, which shifts the property tax burden to higher-value homes, commercial and rental property.

“The Republican Legislature raised property taxes on the City of Minneapolis,” says DFLer Hodges, who expects property tax increases in her ward of 1 to 5 percent.  She is not happy. As chair of the Ways and Means Budget Committee, she is working to approve a zero increase budget for 2012. And she does so knowing it will not save many of her constituents from property tax increases.

The Republican change, though, has helped property tax payers in Council Member Gary Schiff’s ward, south of the University of Minnesota. DFLer Schiff describes it as “a ward of poor, working-class and middle-class residents.” Most of the housing stock in the ward was built between 1880 and 1940.

Lower-value homes protected
Homeowners with houses valued under $186,200 will not see an increase in property taxes. Most of the homes in Schiff’s ward fall into this category. Homeowners with houses valued above $188,800 will be paying more than a year ago. On homes valued above $400,000, 3.5 percent of the tax increase is attributed to loss of the Homestead Credit, city officials say.

Source: Office of the City Assessor

Last year, Schiff says, homeowners in his ward saw “very large increases” and were angry. But now, he anticipates fewer complaints. “This year is a bit of a sigh of relief,” says Schiff, adding a cautious “I think.”

Council Member Elizabeth Glidden, too, represents a ward where there are mostly lower- and middle-value properties. There is, however, a pocket of high-valued homes in the area west of I-35W along Minnehaha Creek.

Glidden, whose ward is midway between downtown and the southern city boundary, says she typically heard little about property taxes from residents until last year, when people “were very upset” and the conversations were “heated” with housing values dropping, major unemployment and people upset about larger tax increases than in years past.

This year, she got a round of applause at a neighborhood meeting when she told residents about the city’s proposed zero-increase budget.  Hennepin County is also working on a zero-increase budget, as is the Minneapolis Park and Recreation Board. The Minneapolis School Board, however,  is expected to increase its 2012 budget.

“It costs the same amount of money to run that garbage truck or that snowplow,” says Council Member Meg Tuthill, whose ward is south of downtown and just east of the lakes and contains a lot of low- and middle-income residents with a few high-value homes. “We wait for the phone to ring,” she says.

City bracing for questions
And ring it will. Taxpayers will be dealing with changes to the tax law and a tax bill that looks different this year. The tax increases might not be as great as they were a year ago, but there will be plenty of questions.

The 311 operators in Minneapolis have been through a special four-hour training session aimed at getting calls to the right people. You might not like the answer you get, but they can get you to someone with the information you need.

Residents also can learn about the city’s budget process and timetable here and more about the Truth in Taxation statements here.

In Hennepin County, Property Tax Manager Scott Loomer has worked with the city’s 311 operators and his own county staff to get market value calls to the correct assessor, send budget levy calls to the correct finance department staffer and take questions about changes in the tax law in his own department.

“We will walk them through the calculations,” says Loomer who is expecting lots of calls. (For tax information in Hennepin County, the number is 612-348-3011.)

Property tax public hearings and forums
Minneapolis residents can learn more at a number of events:

Nov. 29: County Board budget hearing, 6 p.m, Hennepin County Government Center, 24th Floor.

Nov.  30: City Council public hearing on levy and budget, 6:05 p.m., City Hall, Room 317.

Dec.  6: City Council Ways and Means/Budget Committee to discuss budget amendments (not a public hearing), 9:30 a.m., City Hall, Room 317.

Dec. 7: City Council Ways and Means/Budget Committee to discuss budget amendments (not a public hearing), 1:30 p.m., City Hall, Room 317.

Dec. 14: City Council public hearing, followed by adoption of budget, 6:05 p.m., City Hall, Room 317.

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Comments (9)

  1. Submitted by Kevin Watterson on 11/17/2011 - 10:37 am.

    So property tax relief has been directed toward low-income people who need it the most, and the DFL is upset? I thought that’s what they were all about.

  2. Submitted by scott cantor on 11/17/2011 - 12:01 pm.

    Um, where are you getting the above value/tax table from? They are wrong. For instance, your 2011 tax for a house valued at $399,900 is over $1000 below the actual taxes. On the $123,000 home you’re still hundreds of dollars below actual.

    Try this:

    http://apps.ci.minneapolis.mn.us/assessorapp/PropertyEstimator.aspx

    Or ask someone who pays Minneapolis taxes.

  3. Submitted by Dennis Tester on 11/17/2011 - 12:30 pm.

    A property tax is essentially a tax on wealth. It makes sense that those with modest homes should pay a modest tax.

  4. Submitted by Bernice Vetsch on 11/17/2011 - 02:57 pm.

    The article notes that taxes on rental property will rise, but does not say if the renters’ credit for low- to moderate-income renters has been eliminated.

    Not to continue this program would be highly regressive, since renters pay the landlord’s business rate (to him it’s a business expense to be passed on to his customers, the renters). If the Right has succeeded in eliminating this modest break, renters with modest incomes will take a big, big hit.

    As will the three cities/counties being “punished” by having their Local Government Aid eliminated. “Aid” being a misnomer if ever there was one, since what it is is the cities’ share of taxes collected.

  5. Submitted by Dick Novack on 11/17/2011 - 03:23 pm.

    Whew!
    Reading this article, I’m glad only homes in Minneapolis will be affected by the change in state law – not the suburbs.

    With only a small percentage of total metro residents actually living in Minneapolis, it would have been wise to reference other areas which most assuridly will be equally impacted. It is written as if only Mpls is affected.

    I expect taxes in some of the suburban areas – areas which voted more conservatively than the center city – to cause more than just a little outrage.

  6. Submitted by Don Effenberger on 11/17/2011 - 08:26 pm.

    Karen tells me:

    I got my numbers from a spread sheet prepared by the City Assessor for members of the City Council. I also talked to the Assessor, Patrick Todd, about the numbers. This list was prepared about two months ago. I think the data on the web site is older than what was given to me by Todd. The numbers in my story are the numbers they are using at City Hall.

  7. Submitted by Virginia Martin on 11/17/2011 - 08:30 pm.

    Those 3 cities–Minneapolis, St. Paul, and Duluth–are urban centers heavily populated with Democrats and working people.
    If I understand this, the homestead tax is eliminated and a complex calculation has been worked out that lowers the value of your home.
    Good job, republican legislators!

  8. Submitted by scott cantor on 11/17/2011 - 10:31 pm.

    In response to #6 by Don, if I plug in my 2010 assessed value (for 2011 taxes) into the Minneapolis web site’s calculator (see my first comment above) for the “single family/condo” category, the site overestimates my 2011 tax–before special assessments–by about $50. The table in the article underestimates my 2011 taxes by around $1K.

    I checked a couple other houses across the valuation range, low/mid/high, and the same pattern holds: The web site calculator is usually really, really close. And the above table is 15 to 20% lower than real world.

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