Taxes in Minneapolis are all about location

  • Article by: STEVE BRANDT , Star Tribune
  • Updated: September 26, 2011 - 3:22 PM

Depending on the neighborhood, mayor's "frozen" property levy could mean a higher or a lower bill.

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Neighborhoods on Minneapolis' North Side, such as those areas hit by the May tornado, should see their taxes stay the same or drop.

Photo: Jim Gehrz, Star Tribune

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Whether your Minneapolis property taxes will go up next year depends on your neighbors -- or more precisely, your neighborhood.

In 11 neighborhoods across the North Side and the near South Side, Mayor R.T. Rybak's no-tax-hike budget proposal means every homeowner should see taxes stay the same or drop in 2012.

In 10 neighborhoods, primarily in southwest Minneapolis, Rybak's frozen levy still will mean higher tax bills for two-thirds or more of homestead owners. In the Prospect Park/East River Road neighborhood, more than three-quarters of the homes likely will see a tax hike, although much smaller than last year, according to new projections.

"Oh, boy, we'll complain about that," said one Prospect Park homeowner, Elizabeth Zerby. "On the other hand, it's probably a sign that our neighborhood is in better shape than other neighborhoods."

She's right. In general, the zero levy hike is generating increases in home- owner bills more frequently in the city's higher-income areas. That's because those homes, often along water or parkways, hold their value better. That also means they also shoulder more of the city's tax burden when homes in foreclosure-plagued areas plunge in value. Higher-value homes, along with apartment buildings and businesses, also are getting socked hardest by the state's change in how it gives lower-value homesteads a break from some taxation.

The neighborhood-level tax analysis was created for the city's Board of Estimate and Taxation, which earlier endorsed Rybak's no-tax-hike proposal. The data is based on about 55,000 homesteads, representing 90.4 percent of all such parcels in the city. The analysis doesn't take into account homes in unusual circumstances, such as those whose values jump as the result of additions.

Neighborhoods where two-thirds or more of homestead owners face larger bills in 2012 are places such as King Field, Hale, West Calhoun, Diamond Lake, Field, Linden Hills, Northrop, East Calhoun and Keewaydin.

The neighborhoods where every homestead owner should see flat or falling city taxes are Folwell, Beltrami, Jordan, Near North, Harrison, McKinley, Sumner Glenwood, East Phillips, Midtown Phillips, Ventura Village and Downtown East.

Concern over possible effects

Buzzy Bohn, who lives in Folwell, said she's glad for any tax break that helps her with household finances. But as a public school worker, she worries about what it will mean for city services. Rybak's budget doesn't lay off any police officers, but reduces the ranks by 17 officers through attrition. "Lord knows, we don't need fewer police in north Minneapolis," Bohn said.

The owner of a $216,000 home that held its value, as a median-value home did in the West Calhoun area, would pay 4.4 percent more next year, or $64. But if that home lost 5 percent of its value, as a median-value home in Near North and Jordan did, the city tax will fall 1.7 percent, or $24. If it lost 10 percent, as a median-value home did in Hawthorne, the tax cut is 7.8 percent, or $113.

Next year's tax bills will also be shaped by the Legislature's elimination of the homestead credit, under which the state paid a portion of the gross property tax for many owner-occupants. It was replaced by a system that excludes a portion of a home's value from taxation, mostly for lower-value homes, but none for homes worth $413,800 or more.

Because the exclusion lowers the overall tax base, the city has to charge a higher tax rate to raise the same amount of revenue. That higher rate falls more heavily on homes not protected by the exclusion and non-homesteaded property, including businesses.

In the Lynnhurst neighborhood, for example, the median value home is $414,500. But that was offset because the median home price there fell 4.9 percent, or slightly more than the citywide average of 3.4 percent. So about half of homeowners there will get flat or lower city bills next year, while the other half will see increases of no more than 2.5 percent.

The biggest tax hikes -- of 10 percent or more -- will affect a small number of homeowners in Lowry Hill. More than half of the area's homesteaders will see their taxes hold flat or drop.

Steve Brandt • 612-673-4438

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