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Don Davis, Forum News Service, Published August 17 2013

Gov. Dayton's administration predicts fall in property tax rates

ST. PAUL – The Dayton administration predicts Minnesotans’ property tax bills will fall next year.

Maybe so, maybe not.

Local government officials are considering what to do with property taxes, including looking at whether they need to increase spending and taxes after a decade-long funding drought.

If they decide government responsibilities such as road work have been neglected too long, officials may raise taxes so delayed work can begin.

“It is hard to have a one-size-fits-all answer,” said Kent Sulem of the Minnesota Association of Townships.

Local officials throughout the state will make up their own minds.

“Eighty-seven counties, 87 county boards, 87 very distinct situations ...” said Beau Berentson of the Association of Minnesota Counties. “After 10 years, there are some tough decisions to be made out there.”

Officials at each of the state’s 853 cities, 1,790 townships and 337 school districts also need to decide whether catching up with delayed work is important enough to raise taxes.

For most local governments, it will be a month before preliminary tax decisions are made.

“They were being extremely frugal because during the Great Recession, they knew people were struggling,” Gary Carlson of the League of Minnesota Cities said about local officials.

Officials are considering reversing a trend of budget cuts now that the state is sending cities, counties and townships $130 million a year more than they received in the past year. A new law also will save cities and counties $172 million annually by eliminating a sales tax they now pay.

Gov. Mark Dayton and legislative Democrats have frequently played up their property tax-reduction efforts this year, the first time in 22 years the party has controlled the House, Senate and governor’s office.

Late last month, Dayton and Revenue Commissioner Myron Frans told reporters that this year’s efforts should reduce property taxes by $120 million. But when pressed, they admitted they will not know the property tax situation until levies are set later in the year.

‘Local decisions’

“These are local decisions,” Senate Minority Leader David Hann, R-Eden Prairie, said, so state officials have no way of knowing what will happen to property taxes.

Not even local officials know what they will do.

“There are a fair number of cities that still are considering taking on some of the improvement projects,” Carlson said, “things that have been delayed the last several years.”

Streets are a good example.

“You cannot defer maintenance costs indefinitely,” Carlson said. “You can do it in the short term, but ultimately, the cost is going to come back and haunt you. ... If we want to see good roads and public safety, we really are going to have to reinvest.”

Townships are set to receive state aid for the first time since 2002. Their budgets for next year were pretty much set in March, Sulem said, so there likely will be no immediate tax cut.

“The aid frequently helps keep the property tax from going up even more,” Sulem said. “It does not necessarily mean we will have a reduction.”

Counties “have held the line, held the line, held the line on their property tax levies,” Berentson said. “They do have significant needs.”

Hitting pocketbooks

Local governments can raise property taxes only so much since lawmakers imposed a 3 percent cap this year.

Some governments may not raise property taxes, but could hit pocketbooks in different ways.

In Moorhead, for instance, officials are considering a $3-per-month streetlight fee on utility bills as a way to plug a $500,000 deficit. They say they cannot raise taxes enough to get that much, and probably will raise taxes as much as allowed.

“The streetlight utility generates a lot of revenue quickly without a lot of pain,” City Manager Michael Redlinger said.

In Bemidji, the school board is considering cutting taxes nearly $600,000.

“It does provide a significant amount of tax relief and the state is picking up the cost of that tax relief,” Business Services Director Chris Leinen said, pointing to new money the Legislature is sending schools.

Reporter Erik Burgess contributed to this story.