AP NEWS

Homeowners encourage council to consider who pays taxes

December 5, 2018

Michael O’Connell encouraged the Rochester City Council to consider another factor when preparing future city budgets.

“As the budget was being presented, it looks like they are doing a really good job digging into what the city really needs, but the piece I thought was missing in it was it doesn’t talk about the capacity of the people who are paying,” the Rochester resident said during Monday’s budget and tax levy hearing, regarding the city’s $283.9 million budget, which includes a $6.1 million increase to the property tax levy.

O’Connell said the levy and the increased value of his home added up to a 18 percent tax increase, which outpaces the income for many people.

“Most the people I know haven’t seen increases in their salaries of more than a few percent every year for the last number of years,” he said.

O’Connell was one of 12 people voicing concerns during Monday’s hearing.

Council members said they appreciated the input, but noted the tax amount was based on the budget needs for the coming year.

“I think we’ve spent more focused time in the parts of the budget we can actually influence,” council member Nick Campion said of what he called an improved budget process.

In unanimously passing the budget, several council members noted the amount of planned spending for 2019 is only one factor in calculating tax bills.

Dale Martinson, the city’s finance director, said the city’s levy increase, along with levy increases by Olmsted County and the school district, actually reduces tax bills for homes with stagnant values.

As a result, a $217,000 home would see a 0.8 percent decrease in property taxes for 2019, as a $200,000 business would see a 1.6 percent decrease. However, factoring in increased market values changes things.

“There are a number of variations and this property tax system is very complicated,” he said.

While $245.5 million in new construction helped offset some impact of levy increases, Martinson said overall estimated market value in the city increased by $943 million, meaning many existing properties saw increases.

Mark Krupski, Olmsted County’s director of Property Records and Licensing Office, said that assessed increase was notable in home assessments this year, based on a “very robust, feverish” residential real estate market.

“All we do as assessors is reflect back to you what is happening in the marketplace,” he said, noting different parts of the real estate market ebb and flow at different times.

The cycle, he said, is bolstering home prices and assessments, which in turn affect taxes.

Rochester resident Suzanne Ferguson, who recently bought a home near Rochester’s downtown, said she feels overwhelmed by the current cycle.

Due to a combination of past home upgrades and rising values, she saw her assessment climb and spur a 63.9 percent tax increase.

“It’s a lot for a family with two young children,” she said, acknowledging that the house’s value had been incorrectly assessed in the past.

At the same time, she said she expects the values — and taxes — to rise.

“We will continue to see increases on the property going forward,” she said. “I just want to make sure they are reasonable.”

She joined other property owners who spoke Monday in asking about potential limits to tax increases.

Krupski acknowledged past state laws limited the potential increases in a given year, but that limit is no longer in place.

Additionally, he suggested most of the 12 property owners who spoke Monday, as well as others facing tax increases, should take a longer view, noting past years have seen businesses take a larger hit in tax increases due to rising prices. Things shifted a bit this year, he said.

He predicted owners of smaller rental complexes, such as fourplexes, could be next to see assessments increase based on sales trends.

Meanwhile, Rochester resident Barry Skolnick also encouraged the city council to consider the longer view, noting increased property taxes will have a negative impact on the ability of local businesses to recruit new workers to the area.

“I’m just concerned about the direction we are going,” he said.

AP RADIO
Update hourly