TWIN CITIES PIONEER PRESS
Published: April 8, 2014
Homeowners who might wonder why we pound the drum here so hard on behalf of a strong business climate need look no further than their property tax bills.
More than 70 percent of all St. Paul homeowners will get at least a small tax break this year, the Pioneer Press reported this week. The average savings will be $100, although assessments and fees could nibble away at individual reductions.
Yes, increases in state aid to cities and counties — from a tax of a different kind, and still our tax dollars — account for part of the relief. But homeowners are getting particular relief because business and commercial properties, including apartment buildings, are gaining value faster than residential properties.
The business share of the property-tax burden helps keep taxes stable for homeowners. In Minnesota, commercial and industrial property taxes generally are double what they are on residential property.
The “mix” matters.
A growing, prosperous city is one in which the tax mix of revenue to the city includes a strong commercial and industrial base, said Matt Kramer, president of the St. Paul Area Chamber of Commerce.
Support for a strong mix is evident in a 2012 study by a national consulting group commissioned by the St. Paul Port Authority.
For every dollar the industrial tax base sends to the city, it uses only about 60 to 70 cents in services, Port Authority President Louis Jambois explained.
For every dollar the residential tax base sends to the city in taxes, it uses between $1.06 and $1.15 — for public safety, parks, bike trails and other amenities and services that benefit people in a community.
“What that means is that the industrial tax base in St. Paul subsidizes services to the residents,” Jambois told us. “That speaks very strongly to the importance of industrial development as one — one — of the vital land uses in a vibrant urban core.”
Certainly we don’t want the entire city to be industrial property, he said. “but as one vital land use, industrial land should be preserved.”
If all you have is residential properties, then yours is a “bedroom” community, Kramer said.
They can be nice places to live, he said, “but they don’t have the amenities and the level of service that we associate with St. Paul. And the great news about St. Paul is the mix of a growing industrial tax base.”
The Port Authority’s expenditures-to-revenue data help make the case for reinvesting in commercial and industrial growth, which bears watching in a “built-out” city in which development means redevelopment.
When it comes to the former Ford Plant site in Highland Park, for example, “I’m sure many advocates are going to believe that housing is a strong use,” Kramer said. “But at the same time, we have to recognize the commercial and industrial tax base is what pays for the great neighborhood and great amenities.”
Development should represent a mix, Kramer said.
Yet, because commercial-industrial properties subsidize homeowners in our system, it is “clearly in the interest of communities to make sure that their levies remain affordable and businesses are not unduly burdened,” Mark Haveman of the Minnesota Center for Fiscal Excellence said in an email.
Tax increases will be modest for the city’s business owners this year, the Pioneer Press’ Frederick Melo reported. The typical commercial property will pay one-fifth of 1 percent more in property taxes than last year, or about a $6 increase.
It’s also important to remember that commercial property taxes affect everyone, said Mark Nordland, a developer, property owner and president of the Minnesota chapter of NAIOP, the Commercial Real Estate Development Association.
People think of businesses as “faceless entities they can push the burden onto,” he said. But property taxes typically are passed through to apartment and commercial tenants. Higher rents can burden individuals, and businesses paying more “have less money to pay employees, hire new people and make investments in things that will help grow their businesses,” Nordland told us.
It’s a delicate balance, and one to be appreciated in a community made healthier by its strong businesses.