City Council has no answers as the property tax burden shifts to homeowners

In 2016 the Ameriprise Financial Center in downtown Minneapolis sold for $200 million. Just 9 years later, earlier this year, it sold for $6.25 million. In those few years it lost 97% of its value.

That’s probably the extreme case, but still one that illustrates the large decline in commercial property values, and in particular downtown property values.

If they are aware of this at all – hard to know, they never speak about it – the DSA majority of the Minneapolis City Council will say, Big Capitalists invest in Big Real Estate, they take their chances, if property values decline, that’s their problem, it has nothing to do with the rest of us.

One obvious fallacy of this line of reasoning is that commercial real estate investors are not necessarily Big Capitalists. In the main, they are institutional investors – typically pension funds and 401(k) managers, investing for the retirement of teachers, mail carriers, truck drivers, nurses. Regular people hoping to have assets to support a good life in their later years are the beneficial owners of those tall buildings downtown.

For those of us who own homes in Minneapolis, the decline in downtown property values is very much something that affects us. If downtown property values go down, so do the taxes paid by those properties. And where is that tax revenue made up? One place and one place only: on residential property.

And it’s not just a dollar-for-dollar shift. Commercial property is taxed at about twice the rate of residential property. So every dollar of decline in commercial tax value hits residential property by two dollars.

Just from 2023 to 2024, according to the city assessor’s office, commercial property value declined by 8.8%. Rental housing declined by 9.5%. Owner-occupied housing stayed pretty flat, though even there value fell by 1.2%. This math quickly shifts the property tax burden to homeowners; just in the last few years residential property values, recently making up 47% of the total, now make up 53% of the total. Add the two-for-one difference in tax rates between the two categories, and you can see why many homeowners are seeing double-digit annual tax increases even though the taxing jurisdictions – the city, the county, the school board and others – are not increasing their budgets commensurately.

Buildings don’t vote. People do. And a lot of people own homes. Even if they don’t, they pay property taxes as part of their rent.

So with this large shift in property tax burden from commercial to residential real estate, certainly our Minneapolis City Council majority is addressing the matter aggressively, creating strategies to better protect homeowners, their constituents. Their campaign websites surely are full of substantive public policy proposals to address the situation. This must be the case, right?

If you look at the campaign websites of the Council majority, you will be disappointed, deeply disappointed. You will see little recognition of the problem, you will see very few strategies to improve the situation, and those that you do find do not come close to the scale required for effective intervention.

CM Cashman in Ward 7 wants to make retail leases affordable. (She doesn’t say how; leases are set by property owners.) And like several of her colleagues, she wants to help small businesses navigate regulations, licenses and permits.

CM Chavez in Ward 9 points to revitalization on Lake Street – good as far as it goes – and to numerous other mostly low-impact projects.

CM Chowdhury in Ward 12 is in favor of litter cleanup and graffiti removal, and she wants to “activate,” whatever that means, vacant properties that need improvement.

CM Chugtai in Ward 10 has taken the bold position that Uptown should be revitalized. Of course, it is obvious that Uptown’s actual trajectory has been in the opposite direction during her entire tenure on the city council.

Well, at least these four CMs have something to say about importance of the commercial sector, small-bore though their ideas may be. They say nothing at all about big businesses, though, and as Willy Sutton reminded us, that’s where the money is – or currently, isn’t. Their colleagues, CM Payne in Ward 1, CM Wonsley in Ward 2, CM Osman in Ward 6, if judged by their campaign websites, don’t even seem to perceive that there’s a problem.

Where are the big ideas? Where is the sense of urgency? It’s too much, probably, to expect big ideas or urgency from a political movement whose platform is blatantly anti-capitalist: https://www.dsausa.org/dsa-political-platform-from-2021-convention/

DSA adherents, including those who make up a majority of the Minneapolis City Council, seem unable to connect the dots between business success, employment, sound city finances, and property taxes.

David Therkelsen has been a homeowner in Minneapolis for 50 years, and attentive to city and school affairs for all of that time. Professionally, he headed two American Red Cross field units, and at one time was co-chief of staff to the President of American Red Cross. Later he was executive director of Crisis Connection, a state-wide mental health counseling agency. Dave held faculty appointments at the University of Minnesota School of Journalism and Mass Communication, and recently co-authored a book about the history of transfusion medicine and blood banking.