When Hopkins homeowner Mark Jensen sat down to talk during the city’s budget hearing, his comments came down to a single question: Why does he pay so much more in property taxes than homeowners in neighboring communities?
Finance Director Christine Harkess and City Council members talked about tax rates, state redistribution programs, property classes and other arcane matters. The subject is undoubtedly complicated.
Yet Jensen’s question had a very simple basis in reality.
Hopkins has the second-highest residential tax bills among seven west metro communities that Patch surveyed and the highest taxes among its immediate neighbors. The owner of a $250,000 home in Hopkins will pay $1,549 in 2013. That same home just across the border in Edina would have a tax bill of $701—about half the Hopkins tab.
Why are Hopkins homeowners like Jensen paying so much more?
City tax bills for select home values$150,000 $250,000 $350,000 $450,000 Eden Prairie $536 $894 $1,252 $1,610 Edina $421 $701 $982 $1,262 Golden Valley $871 $1,453 $2,034 $2,616 Hopkins $930 $1,549 $2,169 $2,789 Minnetonka $571.30 $952.17 $1,333.04 $1,713.91 Richfield $960.08 $1,600.13 $2,240.18 $2,880.23 St. Louis Park $717.33 $1,195.55 $1,673.77 $2,151.99
NOTE: None of the tax amounts in this story take into account the homestead market value exclusion, which lowers the tax bill for owner-occupied, primary residences worth less than $414,000. The amounts cover only the city portion of the property tax bill.
Taking the weight off homeowners
On its face, taxation comes down to government spending. Each year, cities approve budgets that they use to determine how much to levy from taxpayers. These budgets vary from community to community based on what amenities residents want, how well they want those amenities maintained and how quickly they want services delivered.
Art centers and water parks will drive up the cost of government—as will extra public works employees to plow the streets or police officers to patrol the community. Every city will strike its own balance between affordability and amenities—a balance that will be reflected in individual tax bills.
Yet Minnesota property taxes aren’t like an income tax, in which people pay a fixed portion of what they make. Instead, cities levy a specific dollar amount and use property values to divvy up each taxpayer’s share of the total.
Click here for a detailed explanation of how property values and property taxes work.
That means an individual tax bill is hugely dependent on the other types of property in a city. When a community has a lot of valuable commercial and industrial property, that takes some of the burden off homeowners. Conversely, homeowners in communities without these types of property must pick up a bigger share of the tax bill.
“A lot of it depends on the value of the city,” Harkess said.
Eden Prairie, for example, has the second-lowest residential tax bills among the surveyed cities and has the highest amount of commercial-industrial property per household, according to the Metropolitan Council. Properties like Eden Prairie Center and the retail sites surrounding it, plus major business locations, cushion the tax impact on Eden Prairie homeowners.
On the other end of the spectrum, Richfield has the highest tax bills and the lowest amount of commercial-industrial property per household.
See the first PDF above for a look at the correlation between tax bills and the amount of commercial-industrial property in a community.
Overall city government spending appears much more comparable between communities when looked at on a per person basis. While the highest tax bill was more than twice the amount of the lowest tax bill, the highest per person spending is only 29 percent greater than the lowest.
Per person city spendingCity Per capita budget Eden Prairie $637.23 Edina $654.05 Golden Valley $742.41 Hopkins $593.17 Minnetonka $575.09 Richfield $576.77 St. Louis Park $693.08
NOTE: Values were calculated by dividing 2013 general fund expenditures by the American Community Survey's latest population figures. For cities that haven't yet formally approved a budget, Patch used the most recent budget figures in the 2013 planning process.
The same cities don’t even come out on top. Where Hopkins was the highest among its neighbors in terms of its tax bills, it was the second lowest in terms of per-person spending. Richfield, which had the highest tax bills overall, had the second lowest per-person spending.
“We do what we can with the resources we have, and we know that times are tight for a lot of people,” Harkess said.
This may not be a coincidence. When commercial-industrial properties alleviate the burden on homeowners, those homeowners may be more inclined to use tax money to buy additional services—and less inclined to press their government for lower taxes. Golden Valley, for example, had the most commercial-industrial tax base per household of the cities surveyed and the highest per capita spending.
See the second PDF above for a look at the correlation between general fund spending and the amount of commercial-industrial property in a community.
Harkess wouldn’t go so far as to say the pressure decreases with additional commercial-industrial property. She noted that “lean government” is a phrase heard all over these days. Tax bills are also affected by a variety of other factors—such as economies of scale and programs like fiscal disparities, which redistributes tax base across the metro.
Still, Harkess said it’s clear Hopkins residents are paying attention: “Hopkins is four square miles, you know,” she said. “Hopkins is a small town, and we feel like it’s a small town, so it’s easier to feel engaged.”