Twin Cities property taxes jump, cutting deep into family budgets

St. Paul homeowner Roxanne Stickney will spend 10% of her take-home pay on her property tax bill next year.

The taxes on her two-bedroom East Side home will jump more than 55 % in a year's time to more than $3,000. The single mom's frustration spilled out as she, along with dozens of other demoralized homeowners, addressed the City Council last week.

"You are squeezing us out. Why don't you buy us out, us older folks?" said Stickney, a runner for a title and escrow company. "It's just impossible."

Twin Cities residents say they're making tough choices this year to afford their rising tax bills, from cancelling trips and dinners out to working second and third jobs. The St. Paul City Council on Wednesday approved a nearly 15% property tax levy hike, the day after Minneapolis leaders signed off on a 6.5% increase. Suburban communities, too, are feeling the pain as local governments raise taxes to pay for everything from new buildings to office supplies.

Taxes levied by cities, counties and school districts make up property tax bills. Many local governments that held off on increases during the dark days of the COVID-19 pandemic are now being forced to make up for lost time. Local leaders say inflation and rising labor costs are compounding — and, in some cases, federal COVID aid is drying up — resulting in higher levies.

The levy is the total amount a local government collects in property taxes, not the amount that individual property owners pay.

St. Paul's levy saw a hefty increase after a judge ordered the city to stop assessing individual property owners for routine street work. As a result, St. Paul shifted the $13.3 million it previously collected in street maintenance fees to property tax bills, meaning the tax increases capital city homeowners are seeing may be partly offset by a decrease in their special assessments.

But the change also means tax-exempt properties such as churches, hospitals and universities no longer have to contribute to the upkeep of city streets. Plus, it only accounts for about half of St. Paul's levy hike, which officials said was also fueled by inflation and added operating expenses.

In addition, the hot real estate market and surging home prices mean many homeowners have seen their assessed values go up. In St. Paul, single-family home values increased 16.4%, compared to 15.8 % in suburban Ramsey County, according to County Assessor Pat Chapman.

Under state statute, a home's value on Jan. 2, 2022, is what determines the assessed value for 2023. Values are calculated using comparable home sales within a neighborhood.

"Some of our most modest areas of St. Paul have the biggest value increases, including the Greater East Side, Dayton's Bluff, Payne-Phalen and the North End," Chapman said.

Part of that is because values in those neighborhoods contracted the most during the Great Recession and have now finally bounced back.

Home values factor heavily into individual property tax bills.

"I live in Frogtown and my house has been assessed at over 200,000 ridiculous dollars," homeowner Cosandra Lloyd told the council, her voice raw with emotion.

Lloyd, chair of the Frogtown Neighborhood Association, said her property taxes will jump 28% next year. The nonprofit IT professional said she'll likely cancel a trip to see her nephew play college football in order to cover rising expenses.

"To see numbers like that, it really alarms me," she said. "I keep getting these increases, yet our services are not increasing in Frogtown."

Lifelong St. Paul resident Joyce Bluel, a retired accountant, used to work for the city and understands its inner workings. But she felt compelled to write a letter voicing her concerns when the property tax bill on her three-bedroom Highland Park home jumped 19%.

The market value of Bluel's home has increased by more than $100,000 in five years' time. It will jump $37,000 to $358,000 next year, and she will pay $5,400 in taxes — nearly $900 more than this year.

Bluel said it's frustrating because it's unclear how the increased taxes are benefiting residents. City streets seem in worse condition compared to the suburbs, she said, and snow plowing feels slow. Also, the older housing stock in St. Paul requires more upkeep and investment — for example, Bluel recently had an expensive sewer line replacement.

"You start looking at how long you can afford to stay in your house," she said in an interview. "I have been trying to keep my property up, but then you get a bill like this. I am trying to be a responsible homeowner. Are you being a responsible politician and looking at what you are charging your citizens?"

Calling for state support

St. Paul council members expressed empathy for the financial strain residents are facing, noting that they, too, own homes and pay taxes. And as in years past, they called on the state to step up support.

"Right now we are looking at a state Legislature that over the past two decades has been underfunding the urban core by a ton of money," said Council President Amy Brendmoen. "They are sitting on a $17.5 billion surplus and we are balancing [our budget] on the backs of our residents."

During a news conference Tuesday, Gov. Tim Walz said he thinks an abandoned legislative deal was partly to blame for local tax hikes. Lawmakers failed to finalize a sweeping multibillion-dollar package of tax cuts and funding for state schools, health care and public safety initiatives before the session ended in May.

"I think it's safe to say that the inaction that we had here in St. Paul forced local governments to have to make decisions around property taxes," Walz said. "I am going to advocate again in our budget that we increase local government aid."

Homeowners who see property tax increases of more than 12% can tap into a state property tax refund program. There's also a state program that allows older homeowners earning less than $60,000 a year to defer tax payments.

Minneapolis homeowners feel similar pain

Though Minneapolis' 2023 levy increase is not as dramatic as St. Paul's, homeowners expressed similar frustration and panic at rising taxes coupled with other expenses.

When Janet Westenberg needed to downsize from her house in Eagan in 2021, she eyed the cities for the conveniences of public transit and proximity to other amenities — as well as the inventory of modest-sized homes. She bought a house in Minneapolis' Diamond Lake neighborhood that carried an estimated market value of $318,000 but was listed at $340,000. She paid $370,000.

"I waived the inspection and did all kinds of crazy stuff to get the house," Westenberg said of the home, which required a new roof and other repairs. "Some of us back then paid these prices, but that doesn't mean it's actually worth that much. It's just what we had to pay during that time."

The assessed value of the house has shot up — and her taxes are skyrocketing with it. The total property tax bill when she bought the house in 2021 was $3,799; her estimated bill for next year is $4,830.

"And of course, my utilities and grocery bills have gone up, too," said Westenberg, who works for the state. "My income didn't go up 12%."

Not everyone paying more

Despite the wider trend of rising home prices, some pockets in both cities have seen home values fall — so much so that some homeowners are poised to pay less in taxes in 2023 than they did this year.

In Minneapolis, about 16% of residential homestead properties — a good proxy for owner-occupied single-family homes — will see their property taxes drop, according to data from the city assessor's office.

"In a city like Minneapolis, even when values are rising, it's not uncommon to have pockets where other things are happening," said David Arbit, director of research for the Minneapolis Area Association of Realtors.

Data from the association, for example, combined with city assessor figures, suggest the phenomenon is most pronounced in neighborhoods where the median home values are between $150,000 and $200,000 — although generalizations are difficult.

In St. Paul's downtown planning district, which includes a patch of the West Seventh neighborhood, the median home value fell from $188,700 to $186,400. Across Minneapolis' Ward 6, which includes the Seward, Ventura Village, Phillips West and Cedar-Riverside neighborhoods, the median home value fell from $185,000 to $183,000. That's enough of a drop to lower the city property taxes on such a house by $17.

Staff writer Ryan Faircloth contributed to this report.