Property tax hikes are coming to Minneapolis
Back in May, I wrote an article titled “As council ramps up spending while commercial property values tank, Minneapolis property taxes set to rise.” This is now happening.
Council ramps up spending
In July, the Star Tribune reported:
Police union: 21.7% raise by July 2025.
Public works Laborers Union: 30% raise by January 2026
Who’s next — and is this sustainable?
The two eyebrow-raising raises are among the largest to come out of recent labor negotiations between the city of Minneapolis and unions that represent the bulk of the city’s roughly 4,000 employees.
More are coming. At least a dozen unions representing more than 1,100 city workers have recently entered or are about to enter bargaining talks with the city as their contracts expire.
Their anticipated raises — and there’s little doubt they will all get raises — are among the primary drivers of a projected $21.6 million budget deficit that threatens to increase residential property taxes more than the steady clip of tax hikes residents have already seen in recent years.
Commercial property values tank
These spending increases come at a time when tanking commercial property values are hammering property tax revenues.
Last week, Axios reported that “the value of commercial properties in Minneapolis is falling, and in the case of downtown office towers, they’re falling off a cliff.” It gives the Wells Fargo Center as an example:
By the numbers: In 2020, the city valued the building at $277 million and the landlord paid $10 million in property taxes.
This year, the landlord will pay $7.3 million in property taxes for a building valued only at $226 million.
Stunning stat: It’s going to get worse. The building was valued at only $173 million — a 38% drop since 2020.
The bottom line: Wells Fargo Center is just one of more than 20 large-scale office complexes in Minneapolis.
And most of them are in a similar position — or worse.
Furthermore:
The problem only stands to get worse. Developers have hit the brakes on building new apartments — which have added billions to the city tax base in recent years — due to high interest rates.
Any hope of a rebound in office tower values is years away. A recent Moody’s report predicted office vacancies wouldn’t peak until late 2026.
Property taxes set to rise
Residential property taxes will be hiked to close the city’s budget deficit.
Axios reports:
Minneapolis homeowners will soon face the painful reality of how much their once thriving downtown has for years protected them from higher taxes.
Why it matters: Homeowners paid 47.4% of the city’s tax levy in 2023. This year, they’re paying 51.6%. Next year is bound to be even worse.
The big picture: Mayor Jacob Frey will unveil his 2025 budget next week, and he’s already said the 6.1% levy hike he originally proposed won’t be enough.
Simultaneously, the Minneapolis Park & Recreation Board proposes a 10% tax levy increase for next year. Hennepin County and Minneapolis School Board levy proposals will also come soon.
What they’re saying: A spokesperson for Frey told Axios that the mayor is “making all efforts to keep the levy (increase) below double digits.”
Between the lines: For the first time in more than a decade, home values in Minneapolis fell slightly this year, but that won’t shield their owners from a bigger tax bill in 2025.
The Star Tribune report notes that these “stiff tax hikes…would likely hit lower-income and working-class neighborhoods the hardest.” As Axios reports:
Rising taxes will hit North Minneapolis even harder because it’s the only area of the city where property values are still going up, according to the city assessor.
As Minneapolitans open these blockbuster property tax bills, they should remember why downtown has collapsed.