Rural Minnesota business see rise in property taxes
The MTA’s annual 50-State Property Tax Comparison study, released Thursday, shows that outstate Minnesota has the third-highest commercial property taxes of any rural area in the country, based on 2007 taxes payable for a typical $25 million property.
Last year’s study placed Minnesota at the No. 8 spot in that category.
The average 2007 property tax for a $25 million commercial property in rural Minnesota was $956,919, compared with the U.S. average of $500,063, the study noted. The study used the Minnesota town of Glencoe as a “typical” rural city.
Mark Haveman, executive director of the Minnesota Taxpayers Association, said business property taxes in rural Minnesota continue to be “an area of concern.”
“They have trended chronically higher for many years,” Haveman said in a phone interview. “This is not new. We have called them ‘stubbornly higher’ for a very long time.”
The study looked at urban and rural properties at three different value levels: $100,000, $1 million and $25 million.
A $1 million commercial property in rural Minnesota has the fourth-highest tax burden and a $100,000 property is ninth-highest in the nation, according to the study. Last year, rural Minnesota ranked ninth and 18th, respectively, in those categories.
The study also compared property taxes for homestead, industrial and apartment properties.
Residential property taxes remain “modest” compared with neighboring states and are below the national average, according to the report. Property taxes on a median-valued home in Minneapolis were up 1.9 percent in 2007, but remain 6.8 percent below the national average.
Urban commercial properties in Minnesota didn’t make the top 10 nationally. However, taxes on a $1 million commercial property in Minneapolis are 35 percent higher than the national average, the study noted.
Minnesota was closer to the middle of the pack when it came to apartment properties (urban and rural both ranked No. 29). For industrial properties, rural Minnesota ranked ninth and urban Minnesota was No. 18.
Charlie Weaver, executive director of the Minneapolis-based Minnesota Business Partnership, said the numbers are “brutal” for rural Minnesota businesses.
“The rural business property tax continues to be a significant problem, especially since that is where we are having the hardest time finding jobs,” Weaver said. “Rural Minnesota is trying to maintain that job base. It doesn’t help when their businesses are being taxed out of the state.”
Weaver said he’s most concerned about small- to medium-sized businesses.
“For them, the property tax burden is a significant part of their bottom line,” he added. “They end up having to lay off workers over these kinds of rates.
“The bottom line is, businesses do make decisions based on taxes, and this should be a wake-up call for legislators who are thinking about raising taxes.”
State Rep. Loren Solberg, DFL-Grand Rapids, said “we are all concerned” about property taxes. He noted that the overall tax burden in Minnesota – for things like schools and local government – has been shifting from the income tax to the property tax.
“That affects businesses as well as homesteads,” Solberg said. “But there is also, at least in some parts of rural Minnesota, a shift from commercial/industrial to homeowners. Power plants have received a very large tax decrease,” and other properties are picking up the slack.
MTA conducted its study in cooperation with other state members of the National Taxpayers Conference, which MTA describes as a “national organization of public finance research and taxpayer groups.”
More information about the study is available at www.mntax.org.
