Taxes take a back seat in Minneapolis, St. Paul mayor's races

That bread-and-butter promise of municipal politicians — to hold down property taxes — has largely been absent from the mayoral races in Minneapolis and St. Paul.

St. Paul faces an unprecedented 24 percent levy increase in 2018, but the mayoral race has centered on parks and recreation, police-community relations, job growth and the future of the former Ford assembly plant site. Minneapolis faces a 5.5 percent levy increase, but candidates for mayor have focused on policing, racial inequality and affordable housing. Property taxes have barely come up.

"It should have come up more frequently, but it didn't, in forum after forum with the various candidates," said Joe Spartz, president of the Greater St. Paul Building Owners and Managers Association. "The pitchforks aren't out. I think when people start getting their real bills then there's going to be more people grousing."

The mayor, with council approval, sets the property tax levy — the amount of money collected overall — and the county sets the rates to reach that amount. City taxes make up less than half of a homeowner's tax bill, with the school district, county taxes and special taxing districts accounting for the other chunk.

Tax collection has grown, on average, by 3.2 percent annually in Minneapolis over the past four years, but that hasn't always meant higher bills. The city has issued more than $1 billion in construction permits each of the past five years, and all that new tax base means the levy can go up without causing increases in property tax bills.

"This is just a good time to be a mayor or a council member because you've got this expanding tax base," said Jay Kiedrowski, a fellow at the Humphrey School and former budget official in Minneapolis and at the state level. "I'm a resident of the city, and I haven't seen any appreciable increase in my taxes, and I think that's generally the case."

In St. Paul, the major levy increase comes in response to a Minnesota Supreme Court ruling last summer that determined the city could no longer charge right-of-way assessments to all properties, including those that are tax-exempt.

Since tax-exempt property accounts for 23 percent of St. Paul's tax base, losing the assessment revenue was a financial blow and forced outgoing Mayor Chris Coleman to cover about $20 million in street maintenance costs with property tax revenue. That accounts for most of the city's levy increase. The remainder would pay for the cost of inflation, Coleman said.

At a recent mayoral forum, Pat Harris said he would have handled the problem differently.

"I would have tempered it over a couple of years instead, and I would not have added a 4.9 percent increase on top of that as well," Harris said. "The city needs to manage their budget as responsibly as possible."

Melvin Carter said the city needs to work with businesses during the right-of-way assessment transition. He proposed simplifying St. Paul permitting for businesses and finding ways to make sure business owners don't feel "villainized."

Dai Thao and Elizabeth Dickinson suggested the city should pursue a payment in lieu of taxes program, where tax-exempt organizations such as universities and hospitals would voluntarily chip in for the city services they use.

"The neighborhood has been very focused on the Ford site," Carruth said.

In Minneapolis, tax collection outpaces inflation because the city is taking in less money in other ways, said Mark Ruff, the city's chief financial officer. Local government aid from the state has shrunk by nearly a fifth since 2006 and revenue from parking tickets and franchise fees — a pass-through cost for utility customers — are down.

The proposed 2018 Minneapolis budget would raise the levy by 5.5 percent. According to calculations prepared by the Board of Estimate and Taxation, a home whose value doesn't change will see a slight tax break.

One worth $200,000 that rose in value to $210,000 in 2017 would pay about $20 more in city taxes, a 1.7 percent increase.

Nekima Levy-Pounds said the city should use "sound decisionmaking and reasoning" about what it raises property taxes for, and should not do it to hire more police officers. "Raising property taxes should be a last resort," she said.

Tom Hoch said voters beg him for a break on their property taxes, and he would "hunt for efficiencies in the system" to keep taxes down so Minneapolis is more attractive to property owners.

"It's not the driver of the election, but it could easily become one next year or the year after if we're not really sensitive about the price we ask people [to pay] to live in the city," Hoch said.

Mayor Betsy Hodges said her proposed levy increase for 2018 pays for parks and streets funding, hiring community liaisons in the Police Department and keeping city services at the same level taking inflation into account.

The campaign hasn't been about taxes, she said, because her opponents don't understand the city budget.

"Of course they don't want to talk about taxes," Hodges said. "Jacob and Tom would absolutely raise taxes above what's proposed right now, because they have been stumbling around in the dark, contradicting themselves, making huge promises, with no way to pay for them."

Commercial, industrial and utility property accounts for a third of Minneapolis' tax revenue, and the majority of that comes from downtown office buildings.

Thanks to rapid growth in assessed value, tax bills have risen 25 to 50 percent since the recession, said Kevin Lewis, executive director of the Building Owners and Managers Association of Greater Minneapolis.

"Members are concerned the mayoral candidates have not sent a clear message on how they could rein in city spending to hold down commercial property taxes," Lewis said.

Spartz said St. Paul building owners plan to work with the next mayor and City Council to help make city services more efficient, since much of the cost of the change in how St. Paul funds street maintenance will fall on them.

"It's the small business owners that are renting space that end up paying for that," Spartz said.