Empty offices could mean higher taxes for Twin Cities homeowners
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.
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