Cities and counties should do more explaining.
Across Minnesota, city and county governments have been getting real this month about property taxes for 2014. Decisions are due to be reported to the state by Dec. 30. Their preliminary estimates, from which they can deviate downward but not upward, have been out for months. They revealed an appetite for higher taxes big enough to give heartburn to state politicians who thought this year’s state aid hikes would lead to levy restraint.
Voters evidently share that appetite when schools are the beneficiary. In the Nov. 5 election, 88 percent of school levy requests won approval in referendums.
State officials say they won’t know the aggregate result of this month’s county board and city council actions until late February. But anecdotal reports from Truth in Taxation hearings to date have been unremarkable, suggesting that the usual shrinkage of 15 to 30 percent from preliminary to final levy decisions will prevail this year. Local officials felt little pressure for deeper reductions.
The bottom line: Despite post-session claims to the contrary, total property tax bills will be up again in 2014, as they have been every year since 2002. Property owners may not be complaining yet. But politicians can expect to hear from them come March, when bills arrive.
The howls may not come from homeowners, however. As this newspaper reported Dec. 8, homeowners may not see much change from 2013 — particularly if recent trends in property valuations continue. Home valuations have stabilized, and in some places rebounded, from their Great Recession lows. But home valuations took a bigger hit than commercial/industrial property during the recession, and both have been left in the dust by climbing farm land values (see adjacent box).
Those valuation changes have shifted property tax burdens back toward business property, partly reversing a trend toward higher homeowner burdens that began with tax reform measures in 2001. And that’s bound to energize the state’s business lobby at the Legislature, which resumed pleading for property tax relief only a few years after winning major concessions in 2001.
One business group’s pleas will include a call for more disclosure about the drivers of local government spending changes. It’s a call that deserves heed. The Minnesota chapter of NAIOP — the Commercial Real Estate Development Association — has been asking since 2012 for the Legislature to require that local governments regularly report not only how much they spend on programs such as police, fire and water treatment, but how much they spend by operational category, such as wages, benefits and contracted services.
Such a requirement was included in the Republican-designed 2012 tax bill vetoed by DFL Gov. Mark Dayton. At least in concept, the idea now has bipartisan backing, which ought to spur its reconsideration next session.
Local-government advocates at the League of Minnesota Cities and elsewhere resist the NAIOP proposal as an unfunded mandate. They note that they already make public reams of data about their taxing and spending decisions. But that information is seldom presented in a way that would allow, for example, an average taxpayer to inspect the trend line on debt service or employee benefit costs over the last five years.
“You can tell me you put your budget online, but when you put 500 pages online, you haven’t reached a meaningful definition of ‘transparent,’ ” noted state Rep. Jim Davnie, the Minneapolis DFLer who heads the House Property and Local Taxes Division.
NAIOP and its partner in this proposal, the Center for Fiscal Excellence (formerly known as the Minnesota Taxpayer Association), convinced Dakota County to conduct a pilot project in preparing and presenting budget data both by program and category. The county also presented its revenue data to display how loss of state aid affected the bottom line from 2009 to 2013.
The result was a clearer picture of who bore the consequences of more than $46 million in state aid cuts in Dakota County between 2009 and 2013. It wasn’t property taxpayers, who saw only a 0.9 percent increase. It was primarily county employees who lost jobs and wages, and the county’s capital equipment budget, which took an $18 million hit. That information puts tax increases into perspective, and leads to questions about the sustainability of the county’s budget changes over the past four years.
The extra staff time required to prepare the report was well-spent, said deputy county administrator Matt Smith, a former state revenue commissioner. “There’s benefit in producing as much budget information, sliced as many ways as we can for the public,” Smith said. “It’s our job to help people get their heads around what we do.”
It is indeed. Local officials who understand the importance of accountability to a functioning democracy should see the value in reporting their spending by category as well as program, particularly as they are opting for higher property taxes. For those who don’t, a legislative nudge is in order.
The Opinion section is produced by the Editorial Department to foster discussion about key issues. The Editorial Board represents the institutional voice of the Star Tribune and operates independently of the newsroom.