Property taxes less of a worry for Downtown commercial landowners

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February 14, 2005 // UPDATED 1:52 pm - April 26, 2007
By: Scott Russell
Scott Russell

State changes reduced burden; now, some push for new spending

Once upon a time, Downtown commercial property owners leaned on local politicians to rein in spending to keep property taxes low.

Today, Downtown's commercial landholders are pushing for economic development to boost property values and for better public safety services. The property tax complaints have disappeared, city officials say.

Talk to current and former city leaders about what issues Downtown property owners pushed during their years in office and responses range from big to small. They include a baseball stadium, the controversial 1980s redevelopment of the Nicollet Mall's south end, special assessments flaps and building-specific concerns about street repaving.

Former Councilmembers such as Steve Cramer (1983-1994) and Jim Niland (1991-2001) recall property tax concerns were a regular agenda item. Councilmember Lisa Goodman (7th Ward), who represents much of Downtown today, said complaints have shifted.

"Fairly or unfairly, we don't get any calls these days from commercial property-taxpayers because they are paying less," she said. "We are getting more calls from residents because the burden has shifted to residents and they are paying more."

The twist now is that the city has cut basic services so far that Downtown property owners are eying new special assessments to pay for extra police services.

The problem, if not the cause, is familiar to most city homeowners. The commercial land values have dropped with the economic downturn. With residential values rising, they carry more of the property tax load. Further, the state shifted the property tax burden, reducing residential property's preferential treatment by cutting business and commercial rates.

As one example, the Wells Fargo Center's assessed value dropped from $187 million to $141 million between payable 1999 to payable 2004. The state rate cut dropped its taxes even more during that period, from nearly $10 million to $5.8 million, or 42 percent.

For comparison, a randomly chosen condo on the eighth floor of Loring Green West, 1235 Yale Place, saw a market value increase of 48 percent between 1999 and 2004, from $209,000 to $309,500. Its property taxes have increased more slowly: 11 percent during the five-year period. Still it is an increase of $552 in five years, from $4,343 to $4,895.

It would take 7,500 condos paying similar tax increases to offset the $4.1 million property tax loss from the Wells Fargo Center.

What they want now

Business organizations such as the Building Owners and Managers Association (BOMA) and the Downtown Council

are the main vehicles for business lobbies, city official say.

To hear city leaders tell it, there are few if any brewing battles between Downtown property owners and policymakers that might require heavy lobbying.

Mayor R.T. Rybak once worked for the Downtown Council; he talked about the ongoing need to improve marketing and attract new businesses to the city.

Rybak said he and Council President Paul Ostrow have a monthly lunch meeting with leaders from the Downtown Council, Minneapolis Regional Chamber of Commerce, and the Greater Minneapolis Convention and Visitors Bureau.

"We have had to work together under some pretty serious assaults from the [State] Capitol, everything from cutting basic aid to cutting the proposed Nicollet Mall [bus] Circulator," he said. "When you are in a bunker battling together, you don't have a lot of time to argue with each other."

The biggest disagreement he's had with Downtown property owners concerns state policy, not city policy. Rybak describes himself as an "extremely outspoken" critic of the state property tax shift. "I am sure it doesn't please some of the [business] folks whose property taxes have gone down," he said.

Goodman, who also chairs the Council's Community Development Committee, said if she had to pick one issue over which Downtown commercial property owners contact her more than any other, it is support for a new baseball stadium.

"All the property owners in the area of the Rapid Park site certainly would love to see a baseball stadium built because it would increase their value," she said.

Niland recalled Downtown property owners and business leaders pushing economic development projects such as Block E, the Target store and stadium plans. He called the projects "corporate welfare" and said he believes Downtown property owners and their organizations wield too much influence at City Hall.

Development debates at City Hall are evolving. Gone are city subsidies to leverage new projects. Goodman said a strong Downtown real estate market has given the city new leverage and could minimize future business/resident conflicts. The city is not as desperate for new developments as before and could demand more "urban-friendly" projects, she said.

During her first term, Goodman dealt with what she calls the "debacle" of the Target headquarters high-rise. Residents focused on design issues and how the tower fit into the community. The business community focused on keeping jobs Downtown - and the Target headquarters eventually got built.

Goodman said she believed the interests of Downtown residents and commercial property owners are more aligned today than in the past, focusing on improving transit, transportation and the growing public safety concern.

The city has 150 fewer cops than it did during its peak in the 1990s, in part the results of federal and state aid cuts.

Rybak and Goodman both said they are talking to the Downtown Council about crafting a new "Special Service District" to increase police services and make other improvements Downtown.

The model is the Nicollet Mall special service district, wherein mall property owners pay special assessments for more amenities, such as more frequent street cleaning.

The Downtown Special Service District would be a much larger, complicated version. All Downtown property owners would pay new taxes for more police, beautification and marketing.

Goodman and Rybak said the Downtown Council is working to create the district and are supportive. Rybak said he is out actively promoting it, but "I want to make sure we get it right."

If history is an indictor, it could be a difficult negotiation. Cramer served on the Council when it created the Nicollet Mall Special Service District. Getting people to agree to the financial plan was a big issue, he said. Property owners were not unified.

"BOMA had its point of view about that, but individual property owners that were in different categories of assessment had their own point of view, too," he said.