Municipalities raising taxes despite boost from state money

When Minnesota State Revenue Commissioner Myron Frans held a news conference today to highlight the efforts of cities that will reduce property taxes, he didn't have many to choose from.

According to the latest list of preliminary tax levies, only about 11 percent of Minnesota cities plan to reduce their tax rates. Indeed, many cities and counties are raising taxes, even though the state boosted their funding by a total of $120 million.

With that in mind, Frans used a brightly-colored tool box and tools to demonstrate the initiatives passed into law this year to try to reverse a decade-long trend of rising local property taxes. He credited Gov. Mark Dayton and DFL state lawmakers for providing a sales tax exemption for cities and counties, tax credits for homeowners and renters and increased state funding for cities, counties, school districts and townships.

"We wanted to solve the state and local fiscal relationship," Frans said. "We wanted to step up and rebuild the partnership and be real partners in what we're doing going forward."

But even with a boost in state aid, Circle Pines, where property taxes are expected to decrease by 2 percent, still had to balance a need for more spending, Mayor Dave Bartholomay said.

"Every city basically faces the same dilemma, how to manage a list of important needs put off for years because of declining state investment in local communities," Bartholomay said. "Property tax reduction is on the list, as is replacing a snowplow or fixing old or broken playground equipment, or perhaps refilling the rainy day fund to limit tax increases in the future."

Preliminary levy data released this month showed 93 Minnesota cities planning to lower property taxes, 223 holding steady and 537 planning increases. Out of 87 counties, only seven planned reductions, 13 planned no change and 67 were looking at increases.

"I have a feeling that when you make promises and you don't live up to your word that those things come back to haunt you."

In Minneapolis, which plans a 1 percent levy reduction, it took a long time to turn the property tax corner, Mayor R.T. Rybak said.

He thinks others will eventually do the same.

"It's taken 12 years to get out of a hole, while we were being whac-a-mole'd back in by the tax strategy of the past governor and legislature, frankly," Rybak said. "So, every city is different."

In July, Dayton and other DFL leaders were confidently predicting property tax reductions throughout the state. In light of the preliminary levy numbers, they've been adjusting their message and lowering expectations.

House Minority Leader Kurt Daudt said Democrats made a big promise of property tax reductions during the 2012 campaign and are now getting nervous heading into 2014.

"I have a feeling that when you make promises and you don't live up to your word that those things come back to haunt you," said Daudt, R-Crown. "So my guess is that it probably will be a big deal, not only on the campaign trail, but when people get their property tax statements and see that their property taxes have gone up."

Dayton said this week that local government leaders are accountable to voters, so he trusts their tax and spending decisions. The governor, who is up for re-election next year along with members of the state House, also said it was not a mistake to make the earlier prediction of property tax decreases.

"The sequence is what the sequence is. Those were the numbers in July, then I think we said they were preliminary. That was good news," Dayton said. "These numbers are still good news. It's still significantly less than what they've been heretofore. Let's see how the final numbers come out and then we'll pass definitive judgment."

Local officials will set their final levies by Dec. 27, following the truth-in-taxation hearings that allow for taxpayer feedback. The state will release its final information in February.

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