Minnesota’s annual property tax early warnings — officially known as Truth-in-Taxation notices — have landed in homeowners’ mailboxes. Our guess is that many householders are feeling a wave of sticker shock. On average, the state’s preliminary forecast says, Minnesota property taxpayers will be asked to pony up 5.7 percent more in 2019 than they did this year.
If the state’s many local jurisdictions — counties, cities, townships, schools and special taxing districts — stick with those intentions, Minnesotans on average next year will see the biggest one-year boost in their property tax bills since the Great Recession began in 2008.
State Revenue Commissioner Cynthia Bauerly advises that if the usual pattern holds, next year’s actual tax bills won’t be that high. Under state law, preliminary property tax figures serve as a ceiling on local taxing ambitions. Final levies, which must be set before Dec. 28, are often lower. Last year was typical: A 5.2 percent increase was forecast, and actual levies rose 4.6 percent.
That was still more than double the expected rate of inflation in 2018, and higher than the statewide 10-year average increase of 3.1 percent per year. And while the recent experience is not a return to the rough ride taxpayers endured from 2003 to 2008, when average annual increases exceeded 6 percent for six consecutive years, the financial discomfort that recent increases are causing property owners with low and/or fixed incomes warrants the attention of 2019 Legislature.
Property tax relief and reform isn’t the top item on tax policy to-do lists for the next legislative session. Federal tax conformity (which should have been enacted last year) takes precedence, and we’d rank the need for an increase in long-term transportation funding high, too. But legislators and Gov.-elect Tim Walz should also consider taking steps to slow the property tax escalator, including these:
• Local government aid to cities should be increased at least $30 million per year — that is, to at least the level at which it was funded in 2002. LGA cuts in 2003 and the failure to restore them have been the single biggest reason for city property tax increases in the past two decades, according to a recent report by the North Star Policy Institute.
That report notes a key reason for the recent property tax uptick. Many cities deferred capital expenditures during the Great Recession and its immediate aftermath. The equipment and facilities backlog that was created then is being cleared now, with local decisionmakers anxious to act before another recession arrives.
• Income-based property tax refund programs for both homeowners and renters are due for a boost. Those programs have particular value at a time when the lack of affordable housing is being deemed a crisis in many parts of the state. If sufficiently robust, those refund programs can help keep homeownership affordable and keep low-income people in stable rental housing, both of which benefit the larger community.
• State K-12 funding needs substantial work in coming years. Minnesota’s 50-year-old policy goal should be reaffirmed: The quality of a child’s education should not depend on the property wealth of his or her district.
Lawmakers should seek to ease the property tax burden that some of the state’s districts have willingly shouldered, while not punishing those communities (mostly in greater Minnesota) that have voted down school property tax referendums. Next year’s property tax bills will reflect the decisions by voters this year in 40 districts to raise taxes for school operations or capital projects; voters in 14 other districts said no to higher school property taxes this year.
Shifting more of the school funding burden from local to state taxpayers may seem like moving money from one pocket to another. Taxpayers pay it all. But state revenues rely primarily on income and sales taxes, two revenue streams that grow automatically with the economy. Property taxes don’t. Action by local governments is required to raise levies, and unless a jurisdiction’s tax base grows at a pace exceeding levy growth, higher property taxes for homeowners result. That plus the fact that the property tax is not based on ability to pay makes it the least popular among the major ways in which governments raise revenue.
Truth-in-taxation notices provide more than an early warning about 2019’s tax hit. They also tell property owners about their chance to advise their elected officials about next year’s levies before they’re set. The mailers include information about tax hearings in coming days; state law requires such meetings for cities with populations over 500, counties, school districts, regional library authorities and metropolitan taxing districts.
In Hennepin County, a meeting is planned for 6 p.m. Tuesday at the Hennepin County Government Center’s boardroom; in Ramsey County, the meeting will be 6:30 p.m. Monday at Union Depot. Check with local jurisdictions for other meeting times and places.