Minnesota property taxes could drop for the first time in a decade

Minnesota homeowners could see their first property tax decrease in a decade next year.

The state Department of Revenue is predicting a $121 million drop in property taxes for next year, about 1.5 percent.

Gov. Mark Dayton cheered the news Tuesday, calling property taxes "the most unfair tax."

"People have to pay property taxes whether or not they have a job or their income's gone up or down, whether or not their business or their farm is making a profit," he said.

Even through the recession and housing collapse that followed, property taxes have risen every year since 2002.

Lower property taxes are supposed to be one of the payoffs of the $2.1 billion tax bill that passed the Legislature earlier this year. Lawmakers hiked taxes on wealthy Minnesotans and smokers, in part so they could steer millions of new dollars to local governments and some relief to homeowners.

Local governments can spend some of that money on road projects or extra police or other services, but Dayton has made clear that he expects most of the savings to be passed along to homeowners.

Gary Carlson, a lobbyist for the League of Minnesota Cities, predicted that much of the projected drop in property taxes will come directly from the state, through homestead credit refunds. Many communities are still reeling from years of recession and budget cuts that have forced them to cut staff and put off patching potholes. At this point, he said, it's hard to say what they will decide about next year's property tax levels.

"We've been through five pretty lean years," he said. "Many cities have been delaying their infrastructure and maintenance projects as a way to save tax dollars over the years. I would suspect that you can't wait forever to reseal-coat a street or rebuild a street."

Republicans were particularly skeptical about the projected tax break.

Senate Minority Leader David Hann, R-Eden Prairie, said he doubted whether much of the new resources would trickle down to homeowners.

"Based on history, when you give local governments additional resources, they spend it," Hann said.

Rep. Jim Davnie, DFL-Minneapolis, who chairs the House Property and Local Tax Division, said Tuesday that when House DFLers doorknocked in 2012, "they heard two strong messages from Minnesotans: one, our property taxes are too high and two, the level of government services has been deteriorating in Minnesota."

Now, Davnie said, Republicans are going to offer a lot of spin, "But what we know is when Minnesotans open their property tax statements, when Minnesotans get their property taxes will be down, their refund checks will be larger and the government services that they rely on will be more robust and enhanced."

The state will have to wait until February, of course, after cities and counties set next year's property tax rates, to see if the projections actually materialize. Dayton joked that the department that makes the property tax estimates is not the same one that predicted that electronic pulltab devices would bring in enough money to fund the state's share of the new Vikings stadium.

"The division of Revenue that makes these projections is different from the one that makes the charitable gaming," Dayton joked.