The mayors of Minneapolis and St. Paul landed in similar places on proposed increases for taxpayers next year. In speeches this week, both recommended roughly 8% property tax increases to support their 2025 budget plans.

Both mayors cited inflation, labor contracts and the loss of federal COVID recovery funding as among the main drivers of their proposed increases. Though there is some new spending in the recommended budgets, the city CEOs described their plans as largely maintaining current services. To highlight investments that have paid off, they pointed to increased visits, vitality and spending in downtown areas as a result of major events hosted during the past year. And both lauded the growing numbers of people who are choosing to live downtown.

As the budget process rolls out in the coming weeks, city leaders should keep the financial struggles of taxpayers top of mind and look for ways to reduce their new contributions to the burden. After counties and school districts announce their budget plans, total tax bills will be even higher.

Minneapolis

To support the state’s largest city, Mayor Jacob Frey recommends an 8.1% property tax hike for 2025 to support a $1.88 billion budget, followed by a 9.8% increase in 2026. Under that plan, the median household, valued at $329,000, could expect to pay an additional $207 for the city’s portion of property taxes.

That’s needed, the administration says, to fund areas including continued investments in housing and economic recovery and general operations. Frey told an editorial writer that the city must spend more to comply with the new Minnesota Department of Human Rights settlement agreement and brace for an anticipated U.S. Department of Justice consent decree, both brought on by a police officer’s murder of George Floyd in 2020.

The city is also spending to bring its Police Department up to authorized officer staffing levels and to address unsheltered homelessness (sleeping in cars or encampments rather than formal transitional housing). Frey’s budget would spend just more than $1 million to leverage millions more in federal dollars for new units of public housing.

Labor agreements boosted spending, including a 30% raise for Public Works employees over three years and a 21.7% raise for police. There will be additional spending on the new South Minneapolis Community Safety Center that will replace the burned Third Precinct building and offer other services to the community.

After projecting a $21.6 million shortfall earlier this year, the administration thought a tax increase of 10% or more might be needed. Frey said his team worked on finding reductions to reach the 8% level, which included drawing $19 million from city reserves.

“I’m not expecting us to celebrate this lift, but this budget provides a way through. We’re doubling down on programs that work — where we can see the benefits, and getting rid of those that don’t.” He added that the city can provide residents with information about state and federal resources to help them pay taxes if they are eligible.

St. Paul

For the capitol city, Mayor Melvin Carter recommends a 7.9% levy increase, which translates into a property tax jump of $132 for the median homeowner in 2025. That would support an $855 million budget, with a general fund increase of $24.5 million over the current year.

The budget proposal makes reasonable requests for public safety, housing, responses to unsheltered homelessness and downtown revitalization. Those include new firefighter positions and promotions to operate a new fire station, and housing creation that includes converting more office space to residential.

In an interview with an editorial writer and in his speech, Carter emphasized the importance of housing. “From ending unsheltered homelessness, to maximizing opportunities at Highland Bridge and The Heights, to converting office buildings to residential uses downtown, every key to the future for St. Paul depends on our ability to facilitate and accelerate our housing construction goals.”

On that front, he made an important proposal that should be adopted by the City Council. Citing a slowdown in housing production, he recommended amending the city’s rent stabilization law to permanently exempt units built after 2004. It’s a nod to developers, who have said the city’s 3% cap on residential rent increases hampers their ability to finance projects in an already difficult economic environment.

“This simple change would advance our values by maintaining the overwhelming majority of St. Paul rental properties as rent-stabilized, while unlocking the critical release valve that only new housing construction can offer to us,” the mayor said in his speech.

St. Paul’s overly restrictive rent control policy grew out of grassroots effort to prevent large rent hikes from displacing tenants. Voters approved the ordinance in 2021 with Carter’s quiet support.

We objected to St. Paul’s rent control before and after it was adopted by voters, arguing that it would depress new construction and be more harmful than helpful to expanding affordable housing. Turns out that’s exactly what happened. Rental housing development stalled as developers backed away from plans. Landlords have raised rents preemptively by the new annual limit of 3%, while others have sought and received exemptions to the cap.

Softening the ordinance makes sense. As Cecil Smith, president of the Minnesota Multi Housing Association, a trade group for property managers and developers, said in a statement: “We hope the council supports what the mayor now understands.”

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The Star Tribune Editorial Board has supported some of the mayors’ recommendations, including many of the public safety measures. Generally, Frey and Carter identified priorities and provided good launchpads for budget talks. Now the public and City Council members will debate and discuss the numbers, working toward final decisions by the end of the year. Those conversations ought to include ways to reduce the tax increases and perhaps find new sources of revenue.