Rapidly rising home prices mean St. Paul homeowners and landlords will bear a greater share of the city’s property tax burden next year, and some of the biggest tax hikes will fall on lower-priced neighborhoods.
In every area of the city, property values have more than recovered from the 2008 subprime mortgage crisis thanks to a surge in demand for housing. Some of the last neighborhoods to do so — the low- to moderate-income Payne-Phalen, Dayton’s Bluff, Greater East Side, North End and Frogtown — can expect tax increases of 15-20 percent next year, according to a Tuesday presentation to the Ramsey County Board.
“Up until this year, we still had a couple neighborhoods that were not back to full value,” said Pat Chapman, a deputy director in the Ramsey County Assessor’s office. “Most growth (in assessed value) is coming in those neighborhoods where affordability is an issue. The market in those lesser-valued neighborhoods, the more affordable homes, is increasing rapidly to try and meet demand.”
Overall, the assessed value of residential property in the city is up about 13 percent over last year, and apartments are up 14 percent. Industrial values have risen about 11 percent, while commercial values are up by less than 1 percent.
That means residential property owners will be responsible for a greater share of the city’s revenues next year at a time when the city plans a big increase to its overall levy.
CARTER’S PLAN
Mayor Melvin Carter last month unveiled a budget proposal that called for a 15 percent increase to the city’s tax levy. Ramsey County is planning around a 4.5 percent increase to its levy, and St. Paul Public Schools — which relies on calculations from the Minnesota Department of Education to determine its maximum levy — hasn’t yet announced its number.
Each body’s levy won’t be finalized till December, and the ultimate impact on individual taxpayers will vary widely depending upon the property type and neighborhood.
Overall, a median-value, single-family home in St. Paul — a property carrying an estimated market value of $228,700 this year and $266,300 next year — can expect a 14.7 percent property tax increase, according to the county’s early estimates.
In Payne-Phalen, the median home now is worth around $235,000, which is $40,000 more than last year, for a city-leading 21 percent increase. Those homeowners can expect their overall property tax bill — including the levies for the city, county, schools and special taxing districts — to jump $568, to nearly $3,400.
Those numbers are preliminary and likely to change, given that city, county, school district budgets and tax levies are still under discussion and the school district didn’t give the Ramsey County assessor’s office an estimate.
What is clear is that St. Paul’s lower-income neighborhoods are experiencing greater valuation increases than most higher-income neighborhoods, and even more than some middle-income neighborhoods such as West Seventh Street.
St. Paul neighborhoods like the North End and Payne-Phalen can expect double digit percentage property tax increase — think up to 20%. These estimates don’t yet include the school district. pic.twitter.com/BygMrlFGp1
— Frederick Melo, Reporter (@FrederickMelo) September 6, 2022
The median Highland-neighborhood home now is assessed at $384,000, an increase of $36,000, or 11 percent. That corresponds to an estimated tax increase of $416, to $5,882.
Meanwhile, downtown-area homeowners could see some tax savings next year, with the average tax bill projected to decline by 5.1 percent.
TAX BREAK APPLICATION
City and county officials emphasize each year that many homeowners fail to collect thousands of dollars in property tax refunds. Two refunds in particular should be of special note to homeowners in St. Paul’s cheaper neighborhoods.
The first is the homeowner’s homestead credit refund. By getting their home declared their “homestead” through the county, property owners whose household income for 2021 was less than $119,790 can qualify for a refund worth an average of about $1,000.
A second refund, known as the homestead “special refund,” is not income-based. Instead, it’s targeted to homeowners whose property taxes have increased at least 12 percent from one year to the next, regardless of their household income. The maximum refund is $1,000.
Both refunds — and a separate one for renters — are available by filing the Minnesota Department of Revenue’s M1PR form, otherwise known as the homestead credit refund form. To complete the request for a special refund, be sure to flip the form over to the back side.
Homeowners who don't fill out M1PR are missing out, and in low-income neighborhoods this could make an especially big difference. $1,000 off of taxes on a Summit Avenue home is one thing, but in Frogtown? It's huge. Even Turbo Tax offers the M1PR: https://t.co/vO30SeisAk
— Frederick Melo, Reporter (@FrederickMelo) September 6, 2022
OTHER TAX TRENDS
The seven-county metro effectively shares certain tax revenue by pooling a portion of its commercial-industrial growth and distributing the funds to each county. Next year, Ramsey County is projected to receive $51.2 million from the fiscal disparities program, which is $2 million less than last year.
Countywide, overall property values are at an all-time high following a 13 percent increase. That includes an almost 12 percent increase in St. Paul and 14 percent in the suburbs.
“The values are heading north still in most of our areas, with commercial lagging a little bit,” Chapman, with the County Assessor’s office, said. “Retail, hopefully, will be the big rebound segment next year as people start going back to stores.”
NEXT STEPS
Ramsey County will host public hearings on the county budget and proposed 4.5 percent tax levy increase on Sept. 13 and Nov. 28. The county will mail property owners notices of estimated taxes around Thanksgiving.
The St. Paul City Council will host a public hearing on the city budget and tax levy at 3:30 p.m. Sept. 20 at the Como Pavilion. The next day, the council will vote to set a levy limit, or the maximum amount of property taxes the city will collect in 2023. After that, the levy can be reduced but not increased before the city council adopts its final budget Dec. 7.
The city’s budget process is further described online at stpaul.gov/councilbudgeting.
