In Twin Cities, modest progress on property taxes

St. Paul and Minneapolis mayoral property tax bids for 2014 came in Wednesday and Thursday, respectively, and with them the strongest indication to date of how much change in Minnesota's property tax climate was wrought by the 2013 Legislature.

The change is in the right direction, but it's more modest relief than the Editorial Board had hoped for, particularly in St. Paul.

In the final budget recommendation of his three terms, Minneapolis Mayor R.T. Rybak pleased those who had been hoping for at least a small levy rollback when the state boosted aid to cities this year. He recommended cutting the city levy 1 percent next year.

While that's a small shaving from a heavy burden for many city taxpayers, it's the first reduction in city levies since at least 1996. The last two decades brought Minneapolis property owners repeated increases as the city struggled first with rising crime rates, then two recessions, deep state aid cuts and galloping employee pension costs.

Those struggles have finally eased. Crime is down, and the economy is recovering. Rybak deserves credit for getting the city's fiscal house in order, convincing the state to take over two costly closed pension funds, and improving efficiency and effectiveness in city services.

But he told the Star Tribune Editorial Board that major relief finally came from state government this year in affirmation of what he called a "partnership" between the state and the Twin Cities. A $12 million leap in local government aid (LGA) — more than an 18 percent jump — and a new exemption from the sales tax for city purchases set the table for a Minneapolis property tax cut.

The table was similarly set in St. Paul. There, Mayor Chris Coleman — who is seeking a third term this year — recommended that city levies be held flat next year. He called it a "no-drama" budget. But for St. Paul homeowners hoping for a partial reversal of the big increases in recent years, it was a disappointment. The City Council should aim lower as it sets next year's levy.

While each city's budget will benefit from a state infusion next year, the Twin Cities are not twins in city government size, scope and fiscal condition. St. Paul is in many ways the needier twin, more dependent on state aid, which was slashed in 2003 and has only this year begun to recover, and on homeowner taxes, which rose steeply in response.

This year's $10.1 million LGA increase does not quite fill the $11.5 million gap projected for next year's St. Paul budget before more state aid arrived.

"We've dug a very big hole," Coleman told the Editorial Board this week. He could have proposed a small property tax cut this year, he said, but "we've still got a hole to fill going forward." Cutting levies without addressing the city's longer-term fiscal prospects would risk a credit rating downgrade and higher borrowing costs in the future, he argued.

That situation leaves us both applauding Coleman's proposal to more aggressively pursue cost-saving redesign of services and wondering why that initiative is coming only now, after a decade of scarce resources. It has us curious about the extent to which St. Paul and Ramsey County — which is also recommending no levy increase in 2014 — could achieve cost savings by combining back-office operations. Or if the entrepreneurial strategies that have bolstered Minneapolis parks budgets could expand in St. Paul.

In both cities, mayoral reluctance to reduce property taxes further in 2014 signals that city fiscal problems aren't the result of LGA cuts alone. Both cities need more growth. More people, more jobs, and more and better housing are crucial to maintaining the quality of life of which these two cities boast, and on which the entire region depends.

Fast-rising Minneapolis and St. Paul property taxes have been the enemy of growth in those cities for too long. The 2014 levies the two cities set this fall should be the beginning of a multiyear reversal of that trend.

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An editorial of the Star Tribune (Minneapolis). Follow the editorial board on Twitter | Facebook | Pinterest | Google+