Property tax hikes average 10.2%

11/24/2005

Increase would be biggest in a decade; backlash predicted

BY BILL SALISBURY
Pioneer Press

Property taxes will increase an average of 10.2 percent across Minnesota next year, unless taxpayers persuade local officials to trim their levies during “Truth in Taxation hearings” next month, Pawlenty administration officials said Wednesday.

If enacted, those property tax hikes represent the biggest in more than a decade, and some predict they could provoke an angry response from voters.

“That 10.2 percent falls into the category of getting ready to spark a property tax revolt,” said David Strom, president of the Taxpayers League of Minnesota.

In St. Paul, homeowners face a proposed 19 percent property tax increase, state Revenue Commissioner Dan Salomone said during a news conference at the St. Paul Downtown Airport.

Increases on homes in a cross-section of other cities would vary from 7 percent in Duluth to 25 percent in Hibbing. The average tax increase on metro-area homes would be 12.9 percent.

The state Revenue Department announced the projected 2006 property tax increases Wednesday, and Salomone and another administration official immediately flew to five cities around the state to remind taxpayers “they don’t have to accept these levy increases.” They can go to their local truth-in-taxation hearings between Tuesday and Dec. 20 and encourage local officials to roll back their levies.

Cities, counties and school districts must set their final levies by Dec. 31. Property owners should have received notices about local truth-in-taxation hearings by now. Statewide, property tax levies typically drop about 0.5 percent after those hearings, Salomone said.

“Property tax increases are, by and large, a local decision, and it’s important to hold local officials accountable for them,” he said.

But Senate Tax Committee Chairman Larry Pogemiller, DFL-Minneapolis, said that after previous cuts in state funding, school boards and cities are “being forced into these property tax increases to maintain a modicum of services. I don’t know any school board member or city council member that likes to raise property taxes.”

The projected 10.2 percent overall increase marks a significant change from the past two years, when property taxes rose an average of about 6 percent.

Schools account for nearly half of the total statewide levy increases. School taxes would increase 18.4 percent next year under the preliminary levies.

City levies are projected to rise 9.2 percent, while county levies would go up 6.8 percent.

In St. Paul, levies would increase 3 percent for the city, 5.7 percent for Ramsey County and 22.7 percent for the St. Paul school district.

School districts are proposing double-digit property tax increases, in part, because they can under a controversial education-funding plan passed by the 2005 Legislature and signed by Gov. Tim Pawlenty.

Democratic-Farmer-Labor lawmakers proposed a highest-in-the-nation income tax increase on the wealthiest Minnesotans to provide more money for schools, but Pawlenty and his fellow Republicans in the Legislature rejected that plan. Instead, the two sides agreed to a bipartisan compromise that increased state aid and gave school boards more discretionary authority to raise property taxes over the next two years.

Through the budget negotiations, DFLers managed to hold down property tax increases, “but we weren’t able to eliminate them,” Pogemiller said.

“There’s no way you can put lipstick on this elephant,” he said. Double-digit property taxes are the wrong path for the state, and he called the Pawlenty administration’s state-local fiscal policy a failure.

The school levies probably will come down some, said Chas Anderson, deputy state education commissioner. In September, many school districts proposed levying the maximum amount permitted by law. Typically, those districts lower their levies in December, she said.

School property taxes across the state will still be lower next year than they were in 2001, when lawmakers and then-Gov. Jesse Ventura greatly increased the state’s share of education funding, Anderson said. Proposed school property taxes for next year total $1.6 billion, compared to $1.9 billion in 2001.

The state paid 74 percent of K-12 education costs in 2002-03, the second-highest share by a state after Hawaii, Anderson said.

While property taxes have been a “second-tier political issue” for several years, said Strom of the Taxpayers League, “I think the pain level caused by next year’s increases will turn it into a top-tier political issue in 2006.”