Lower property taxes? No guarantees
By Don Davis
Forum News Service
ST. PAUL — The Dayton administration predicts Minnesotans’ property tax bills will fall next year.
Maybe so, maybe not.
Local government officials are considering what to do with property taxes, including looking at whether they need to increase spending, and taxes, after a decade-long funding drought.
If they decide that government responsibilities such as road work have been neglected too long, officials may raise taxes so that delayed work can begin.
“It is hard to have a one-size-fits-all answer,” Kent Sulem of the Minnesota Association of Townships said.
Local officials throughout the state will make up their own minds.
“Eighty-seven counties, 87 county boards, 87 very distinct situations ... ” said Beau Berentson of the Association of Minnesota Counties. “After 10 years, there are some tough decisions to be made out there.”
Officials at each of the state’s 853 cities, 1,790 townships and 337 school districts also need to make decisions about whether catching up with delayed work is important enough to raise taxes.
For most local governments, it will be a month before preliminary tax decisions are made.
“They were being extremely frugal because during the great recession, they knew people were struggling,” Gary Carlson of the League of Minnesota Cities said about local officials.
Officials are considering reversing a trend of budget cuts now that the state is sending cities, counties and townships $130 million a year more than they got in the past year. A new law also will save cities and counties $172 million annually by eliminating sales tax they now pay.
Dayton and legislative Democrats frequently play up their property tax-reduction efforts this year, the first time in 22 years the party has controlled the House, Senate and governor’s office.
Late last month, Dayton and Revenue Commissioner Myron Frans told reporters that this year’s efforts should reduce property taxes $120 million. However, when pressed, they admitted that they will not know the property tax situation until levies are set later in the year.
“These are local decisions,” Senate Minority Leader David Hann, R-Eden Prairie, said, so state officials have no way of knowing what will happen to property taxes.
Not even local officials know what they will do.
“There are a fair number of cities that still are considering taking on some of the improvement projects ... ” Carlson said, “things that have been delayed the last several years.”
Streets are a good example.
“You cannot defer maintenance costs indefinitely,” Carlson said. “You can do it in the short term, but ultimately, the cost is going to come back and haunt you. ... If we want to see good roads and public safety, we really are going to have to reinvest.”
Townships are set to receive state aid for the first time since 2002. But their budgets for next year were pretty much set in March, Sulem said, so there likely will be no immediate tax cut. And maybe not one in 2015.
“The aid frequently helps keep the property tax from going up even more,” Sulem said. “It does not necessarily mean we will have a reduction.”
Counties “have held the line, held the line, held the line on their property tax levies ... ” Berentson said. “They do have significant needs.”
Local governments can raise property taxes only so much since lawmakers imposed a 3 percent cap this year.
Some governments may not raise property taxes, but could hit pocketbooks in different ways.
In Moorhead, for instance, officials are considering a $3-per-month streetlight fee on utility bills as a way to plug a $500,000 deficit. They say they cannot raise taxes enough to get that much, and probably will raise taxes as much as allowed.
“The streetlight utility generates a lot of revenue quickly without a lot of pain,” City Manager Michael Redlinger said.
In Bemidji, the school board is considering cutting taxes nearly $600,000.
“It does provide a significant amount of tax relief and the state is picking up the cost of that tax relief,” Business Services Director Chris Leinen said, pointing to new money the Legislature is sending schools.
In some cases, counties and cities within them may be headed in different directions.
Like some other counties, the state’s $40 million county aid increase will not help Stevens County, because property values there are increasing. A higher tax base means less state aid, making the county more likely to raise property taxes.
However, leaders in the Stevens County seat, Morris, are looking at the possibility of lowering taxes.
“We did have a pretty favorable outcome at the Legislature with additional local government aid and the (sales) tax exemption we got,” City Manager Blaine Hill told City Council members. “As I put this (budget) together, what I looked at was how we would incorporate those two things into the budget.”
Many taxpayers, like those in south Washington County, may not see large property tax increases or decreases after school, city and county levies — both slightly higher and lower — are combined.
Duluth Mayor Don Ness said the extra money lawmakers sent cities could help the city to keep taxes from rising.
The state’s Local Government Aid to Duluth is to rise 5.8 percent, to $29 million, next year. It will get up to $300,000 more thanks to the sales tax exemption.
“My goal is to have no property tax increase in 2014, as long as we’re able to accomplish that with some of the additional support coming to us from the state,” Ness said.
Reporters Erik Burgess, Bethany Wesley, Kim Ukura, Scott Wente and Peter Passi contributed to this story.