Many neighborhoods want restricted development, low taxes, and ample city services. The problem is that they can have only two.
In August 2014, many residents of Linden Hills, a rich neighborhood in southwest Minneapolis, voiced their opposition to a proposed four-story mixed-use building in the neighborhood’s commercial node at 43rd St and Upton Ave. The development will replace a surface parking lot and a single-story national chain barbecue restaurant. City Council approved the project. (Here’s a PDF of the city’s staff report.)
In December 2014, many residents of Linden Hills sent emails to their City Council member, Linea Palmisano, complaining about high property taxes, and asking her to cut spending.
Here’s a point about property taxes that hasn’t been made often enough: Mayor Hodges and the city council raised the tax levy, but the tax bill for the average home in Minneapolis actually fell. This is a point that seems to have escaped the understanding of a corporate lawyer who ran for mayor in 2013, but we all know what Upton Sinclair said about salary and understanding. Tax bills fell because the tax base is growing faster than the tax levy, so the burden of running the city is borne by more shoulders. (A fun factoid: the City of Minneapolis grew its tax base by 2.4% in a single year, which is equivalent to the value of all the real estate in Brooklyn Center. It’s like Minneapolis built another Brooklyn Center within its city limits in twelve months.)
Here’s how the city’s finance department explains the situation: “With the significant growth in our tax base over the last year, the proposed increase in the levy means about 57 percent of all residential properties will see no increase in the City portion of their property taxes, or will see a decrease.”
But if taxes for the median home decreased, why have taxes in Linden Hills increased? It’s because their homes are appreciating in value very quickly. According to the city assessor, the average home in Linden Hills increased in value by more than 13% from 2013 to 2014, compared to the 6.76% city-wide average. Congratulations, southwest homeowners! Your homes are appreciating at astronomical rates, and many of them have topped pre-recession prices. But yes, that means your tax bills will rise, too. Not everyone has it so good—most home prices in north Minneapolis are growing in the 0-2% range. Luckily, Minneapolis recently legalized accessory dwelling units, which give homeowners new housing options that would help them age in place.
A growing tax base is keeping property taxes lower than they would be otherwise. According to my rough math, a single new apartment building like Flux in Uptown pays $869,000 in taxes per year. So, every time a new development is shut down because the neighbors deem it inconsistent with the existing character of the neighborhood, the budget gets a little tighter, and City Hall has to choose between cutting services and raising taxes on existing property. Preserving neighborhood character is an important ideal, but it’s not all-important and it’s more complex than just an architectural style popular in the 1890s, or a ratio of homeowners to renters.
Chris Iverson recently explained how new development affects nearby rents. New development and property taxes are related, as well. Without new development, property taxes will be higher (or city services will be lower) than they would be with new development. So here’s the big question that the residents of Linden Hills (among other places) need to wrestle with: to what extent are well-funded city services and moderate property taxes a priority for you and your neighbors?