MINNEAPOLIS — Minneapolis Mayor Jacob Frey gave his "State of the City" address Tuesday morning, touching on a number of topics, including progress that is being made regarding affordable housing, downtown economic activity and tourism.
The speech also shared some insight into the city’s difficult financial situation.
"Budgeting will look differently this year,” Frey said.
“We’re starting at a projected levy increase of 6.1%. Anything we add to that will only increase the levy,” Frey says.
University of Saint Thomas finance professor John Spry says the city is in this situation because less money is coming in from commercial properties and businesses.
"For the first time in a decade the tax base has shrunk.”
Professor Spry says a lot of the city's tax money comes from the large commercial properties in downtown, where owners are dealing with several issues, like low occupancy rates, lower rent payments, and higher interest rates.
Spry says commercial property in Minneapolis has lost more than 8% of its value, on average.
"The property taxes on commercial property are based on the value."
Spry says when values go down the tax rate has to increase to fill the gap.
For homeowners, he says, the rate will likely be higher than the mayor's proposed rate of 6.1%
"Residential property hasn't declined nearly as fast as commercial property, so there's going to be a rebalancing,” Professor Spry says.
During his speech, Mayor Frey cautioned city leaders that there’s a limit to how much of a tax increase homeowners and renters can take.
“We will neither be inclusive nor accessible by taxing people out of their homes,” Frey cautions the crowd.
"This is not the year to add new shiny programs. This is optimism grounded in reality."
Besides less money coming in from commercial properties, Frey says the city also has to renew 12 union contracts in the coming months that will likely raise wages for more than a thousand city employees.
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