Property taxes. Everybody hates to pay them, and they go up every year — usually.
Minneapolis residents pay some of the highest property taxes in the state. The bulk of those taxes are set by elected officials for the city, Minneapolis Public Schools, the park board and Hennepin County.
Right now, those officials are approving their budgets — how much money they'll spend — and setting their property tax levy — how much money they'll raise through property taxes. Other sources of city revenue include state and federal aid and local sales and entertainment taxes.
These five charts should help you understand how the Minneapolis City Council and Mayor Jacob Frey are wrestling with how much to tax and spend for city services, which range from police and fire to snow plowing and building inspection. These charts are based only on a median value home — $331,000 for an owner-occupied home in 2024. Half the homes in the city are more valuable, and half are less. Other taxing bodies — the school district, the park board and the county — aren't included here, although the city does send money to the park board.
How city taxes are spent
Frey has proposed raising the total citywide property tax levy — including residential, commercial and industrial properties — by 6.2% over last year. The city property taxes on that median $331,000 home would total between $1,947 and $1,957. That's an increase of $150 to $160 over last year.
The mayor and the City Council will have to agree on that figure and a city budget before the end of the year.
Here's a rough breakdown of how those tax dollars will be spent:
The takeaway: Visible services like police, fire and public works take up large chunk of city spending. But the largest single category is a catch-all that amounts mostly to people, from IT personnel to elevator inspectors. Across the city, salaries are the biggest expense.
Property taxes for homeowners have been going up for years
There have been occasional dips and plateaus in how much money the city has raised through its property tax levy, but when viewed over enough years, the increase is unmistakable — and higher than inflation.
Since the levy amounts to a pooling of all the property taxes in the city, whether your property tax bill rose or fell — and by how much — depends on whether your home value increased more or less than other properties in the city.
Other sources of revenue are volatile
The restaurant and entertainment scene in Minneapolis isn't just vibrant; it's a source of local sales tax revenue. It plunged during the COVID-19 pandemic and is now making a sharp comeback, but hasn't yet reached pre-pandemic levels.
Historically, money from these local taxes are especially vulnerable to economic downturns, making them hard to predict — and to plan for.
Important context: These taxes — about $65 million in 2022 — might be a sliver of Frey's proposed $1.8 billion budget, but they can play an important role in year-to-year budgeting. Frey's 2024 budget proposal includes $48 million in new spending — an amount that could be covered, or not, by these local taxes, depending on how many people dine out or whether Taylor Swift comes to town.
The cost of running a city keeps rising
Remember earlier when we said people are the biggest cost to the city?
The cost of salaries and benefits has historically gone up. That's been particularly the case in recent years as employers — including the city — have faced inflation and hiring struggles exacerbated by a wave of retiring baby boomers, an exodus of police officers, and new perspectives on work-life balance.
One result: rising wages.
Another: rising costs of fringe benefits, which can include perks negotiated by unions, and health insurance, which rose faster than inflation for years before the pandemic.
Other properties are feeling the pinch, too
Homeowner-occupied properties, including condos, are the engine that drive Minneapolis property tax revenues, making up about 60% of the city's market value.
But nearly 20% of that citywide value consists of commercial and industrial properties, with the other 20% encompassing apartments.
The owners of those properties are taxed, too, with costs usually passed down to tenants.
In 2023, the category that rose the fastest was commercial and industrial properties, which increased 6.1%, buoyed by a 23.6% increase in the city's limited industrial base.
What does it all mean? The steepest increase in property tax bills will be faced by owners of commercial and industrial real estate. Their bills are estimated to go up between 19.5% and 20% if Frey's proposal is adopted.
Graphics: C.J. Sinner