Minneapolis property taxes are going up — as homeowners are learning in letters from the county landing in mailboxes now — but they haven’t gone up as quickly since the pandemic as in most other major U.S. cities, according to a new report from national real estate company Redfin
Minneapolis property taxes are going up, but not as fast as most major U.S. cities since 2019
A new study by Redfin says Minneapolis property taxes haven’t increased as much as most metro areas since the pandemic. It’s about in the middle of the 50 largest cities.
The Minnesota Star Tribune
November 22, 2024 at 2:00PM
Counties are sending out proposed taxes and levy notices to property owners, letting them know how much their counties, cities, school boards and other taxing entities plan to increase — or decrease — tax levies.
The truth-in-taxation notices let people know the maximum they’ll have to pay each entity, although those numbers could change during budgeting. The city of Minneapolis has a maximum levy increase of 8.3%, for example, but Minneapolis Mayor Jacob Frey wants the City Council to keep it at his originally proposed 8.1%.
In August, Frey outlined that 8.1% levy — the amount of money raised through property taxes — to fund a $1.9 billion annual budget. That’s the biggest increase since the mid-2000s, fueled by a combination of inflation, higher city employee salaries, declining downtown property values, millions the city must invest in police reform and the loss of federal pandemic funds.
The Minneapolis school board approved a maximum levy of 4.5% as it grapples with declining enrollment and the end of federal pandemic relief funds, which required it to close a more-than $100 million budget gap earlier this year. Voters also approved a $20 million school technology levy on Nov. 5, increasing taxes by $96 per year for a $350,000 home.
The size of a property tax bill is a function of several factors, including the individual levies, the estimated market value of the property, and what happened to the values of other properties in the city.
Property tax bills have increased in almost every major U.S. city since before the pandemic, particularly in Florida, where people flocked during the pandemic, driving up home prices, and where climate disasters have driven up public spending, Redfin found.
Minneapolis’ residential property tax increase from 2019 to 2024 lies in the middle of the pack, at 26th out of the 50 largest cities. Minneapolis’ median property tax bill went up 28%, bringing the monthly tax bill to $321. The median property tax bill rose the most in Indianapolis, where the typical homebuyer pays 67% more today than in 2019, with an annual tax bill of $2,460.
That’s according to Redfin’s analysis of property tax records and MLS data for single-family houses among the 50 most populous U.S. metropolitan areas, as of August.
Impact of downtown downturn not as big as you might think
Property taxes are the largest revenue source for the city’s general fund, but with high vacancy rates and downtown office towers selling at deep discounts, downtown property is expected to generate less revenue in coming years.
A University of St. Thomas study projected that the city of Minneapolis’ tax revenue will decline nearly $10.5 million due to a $1.65 billion decline in the value of class A office buildings in the Minneapolis central business district. That equals less than 1% of the city’s total budgeted revenue of $1.7 billion.
Andrew Babula, director of the real estate program at St. Thomas, calculated that figure by estimating a potential reduction in office values of 48%, based on the LaSalle Plaza’s sale for $46 million in June 2023 compared to its assessed value of $87 million. The study applied that reduction for 39 properties with about 25 million square feet of leasable space, or over 70% of the overall office space in the central business district.
The overall impact wasn’t as big as Babula expected. The biggest issue appears to be increased city costs rather than the lower office values, he said.
“I was a bit surprised that the impact of reduced office values as we analyzed it only resulted in a 1% reduction in revenue,” Babula said in an email. “Still, that 1 percent needs to be made up somewhere — by other taxpayers and/or lowering expenses. With expenses actually increasing, many taxpayers are getting a double whammy.”
City Assessor Rebecca Malmquist said the estimated overall market value of downtown properties declined 13% from 2023 to 2024, after dropping 2% from 2022 to 2023 and nearly 2% the year before.
Minneapolis Budget Director Jayne Discenza said the drop in downtown values doesn’t necessarily affect the city’s overall review, but it will be felt by residents, who may have to pay more to make up for the lost downtown revenue.
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