Empty offices could mean higher taxes for Twin Cities homeowners
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Downtown towers pay big money in taxes. Photo: Karen Bleier/AFP via Getty Images
As companies adopt hybrid work environments that require less office space, it could eventually mean higher taxes for homeowners.
Why it matters: Even if you don't live or work downtown, the Minneapolis central business district's health is important for residents of the city and Hennepin County.
- Office towers are some of the biggest property taxpayers in the Twin Cities and if they are half-empty it means that the burden for paying for services could shift more to homeowners.
The big picture: Commercial properties make up about 30% of the city of Minneapolis tax base and downtown towers send millions to pay for schools, roads, police, parks and other government services.
- The amount they pay in taxes is based on their income (mainly rent collection), as well as the downtown vacancy rate and rental rates.
- Rising vacancies and declining rent ultimately means the buildings are worth less and pay less in taxes.
By the numbers: The 16 largest office properties in downtown Minneapolis paid nearly $110 million in property taxes last year, according to the Minneapolis/St. Paul Business Journal.
- The Minneapolis Assessor's Office has already begun to lower the assessed value of downtown towers.
- For example, IDS Center is paying $11.1 million in property taxes this year, but the assessor cut the city's tallest skyscraper valuation from $319 million in 2021 to $290 million in 2022.
It's not just office towers: Hotels have been hit the hardest by the pandemic. The downtown Minneapolis Hilton's assessed value has declined from $119 million to $83 million.
Yes, but: Any blow to homeowners will be cushioned by stronger areas of real estate, said Doug Shiell, tax attorney at Smith, Gendler, Shiell, Sheff, Ford & Maher.
- New multifamily development is adding to the tax base and the emergence of e-commerce has increased the value of warehouse space.
Of note: The city is getting $281 million in federal stimulus aid, which could help plug budget holes in the short-term. But work-from-home appears to be a long-term trend.
This story first appeared in the Axios Twin Cities newsletter, designed to help readers get smarter, faster on the most consequential news unfolding in their own backyard.