Those who are homeowners in Minneapolis will very soon have to face the harsh reality that their prosperous downtown has protected them for years from higher taxes, homeowners paid 47.4% of city taxes in 2023, this year, they are paying 51.6%, next year, it will surely be even worse.
In the big picture, Mayor Jacob Frey will unveil his 2025 budget next week, and he’s already indicated that the 6.1% tax increase he originally proposed isn’t going to be enough.
At the same time, the Minneapolis Parks and Recreation Board is recommending a 10% tax rate increase for next year. Tax proposals from Hennepin County and the Minneapolis School Board are also coming soon. What a spokesman for Frey has said is that the mayor is “making every effort to keep the rate increase below double digits.”
Minneapolis Property Taxes Skyrocket
For the first time in more than ten years, Minneapolis home values declined slightly this year, but that won’t protect their owners from a bigger tax bill in 2025.
This is because the value of commercial properties in Minneapolis is falling and, in the case of the downtown office towers, they are falling apart, the increase in taxes is going to affect north Minneapolis even more because it is the only area of the city where property values continue to increase.
Cities across the country need more money to pay for their employees’ pay increases, meant to keep up with inflation:
- Minneapolis police officers are getting a 22% pay raise over the next three years.
- Public works employees will get a 30% raise during the same period.
- Park workers will be looking at a 10% raise plus an hourly adjustment of $1.75 for three years.
Steve Brandt is a member of the Minneapolis Board of Estimate and Taxation, which has the power to decide how much the city can collect in taxes, Frey said in June urging him to keep the 6.1% increase.
“I reminded the mayor that next year is an election year, so whatever tax is adopted, people will have to run for re-election based on it.”
Brandt suggested that Frey could ease the pressure on landlords by putting new dates on debt payments at Target Center, using money from a special fund that sends sales tax revenues to various city properties in the city center and minimizing the $10-12 million in annual spending on the maintenance of the Minneapolis Convention Center given the reduced use at the time of the pandemic.
Tax Increases in Minneapolis — Could Homeowners Survive the Storm?
The problem can only get worse. Developers have slowed down the construction of new apartments, which have added billions to the city’s tax base in recent years, due to high interest rates.
A recovery in office tower values is years away. A recent Moody’s report predicted that office vacancies would not peak until the end of 2026.
In 2020, the city valued the building at $277 million and the owner paid $10 million in property taxes. This year, the owner is going to pay $7.3 million in property taxes for a building that is valued at only $226 million.