Business property taxes heading for an increase

Business owners in Minnesota are going to take some of the biggest lumps when they open their property tax bills next year.

For example, the way things stand now, the owner of commercial property valued at $300,000 in St. Paul can expect a tax bill of more than $11,000, an increase of more than $1,000. In Minneapolis, that same business owner can expect a similar bill, up more than $850.

Outstate, the bills may be smaller but the increases are of similar magnitude. In Hibbing, in fact, the owner of a $300,000 business is heading for a property tax bill of $11,000, up more than $1,300. (These are figures that could decrease when local officials set their budgets in December.)

This is why local officials and business leaders were gathering in Bemidji Thursday morning, to learn about and brace for changes in the system. MPR News reporter Tom Robertson was there and filed a report for All Things Considered.

Robertson’s report marks the beginning of a Minnesota Public Radio News project called “Forced to Choose.” It’s going to be a several-month exploration — both online and on the air — of how Minnesota communities are determining what they are willing to pay for in these more austere times.

For a lot of people the question is simply how much they have to pay in property taxes, and the state made a shift in the law this year that is affecting virtually every taxpayer in the state. While that law change is pushing down taxes for some owners of low-value homes, it’s shifting the burden toward businesses.

We asked county auditors around the state to give us the numbers for a $300,000 commercial property in selected cities. What was the tax this year and what will it be next year, based on preliminary plans made by school, city and county officials?

Here’s a sampling of what they told us for a dozen cities. The estimates could be reduced before the bills go out next year.

City 2011 tax 2012 tax Increase % increase
BLOOMINGTON $9,651 $10,284 $633 6.56%
BROOKLYN PARK $10,217 $11,008 $791 7.74%
DULUTH $8,802 $9,588 $786 8.93%
GRAND RAPIDS $9,809 $9,785 (-$24) (-0.24%)
HIBBING $9,782 $11,090 $1,308 13.37%
MANKATO $5,326 $5,804 $478 8.97%
MINNEAPOLIS $10,559 $11,416 $857 8.12%
MINNETONKA $9,442 $10,147 $705 7.47%
PLYMOUTH $9,253 $9,882 $629 6.80%
ST. PAUL $9,954 $11,044 $1,090 10.95%
STILLWATER $9,037 $9,724 $687 7.60%
WOODBURY $9,344 $9,882 $538 5.76%

If you’re curious about that Grand Rapids decline, it’s because a power plant expansion and a new oil pipeline from Canada substantially boosted the tax base in Itasca County, says auditor Jeffrey Walker.

In all these cities, many homeowners are going to see lower percentage increases or even decreases in their taxes.

What’s going on here? The simple answer is that the means by which the state gives a break to owners of homes worth less than $413,800 is cutting into the total tax base local governments can use to generate property taxes. That means business property owners pay a larger share of the total tax take.

“Our economy is already taking a hit from everything,” cabinet-maker Chris Keenan told Robertson. “I’ve watched my taxes increase. I’ve watched the regulations change. And it’s just getting harder and harder to stay in business,” he said.

The bulk of our reporting for the Forced to Choose project is being done by Robertson and fellow reporters Curtis Gilbert and Jennifer Vogel. Although they’re diving into tax rates and budgets, the deeper question is that some communities are starting to have a conversation about how they define themselves. (See the Ground Level post last week about planner-engineer Chuck Marohn’s ideas about thinking differently.)

Here’s how St. Peter city administrator Todd Prafke put it to Vogel in an email this morning:

“We all forget it is about all of us. Not state vs. local. Not people or taxpayers against the government at any or all levels. It really is about how do we want to pay for the service, infrastructure, amenities that we want within our collective community.”

Stay tuned while we shed light on that this fall.

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