From the mundane to the out-there, wonks on Minneapolis’ tax board have ideas for reining in your property taxes

Minneapolis, as elsewhere, needs more money (again).

That’s the message property owners are expected to hear by the end of November, when “truth-in-taxation” notices arrive in mailboxes detailing estimated 2026 property taxes.

Precisely how much money depends on the city’s final budget, set to be voted on by the City Council on Dec. 9. Leading up to the vote, the council is hearing public comment on Mayor Jacob Frey’s proposed budget, which increases property tax rates by 7.8% — the maximum limit set by the city’s Board of Estimates and Taxation, or BET.

Traditionally, the BET has been a bit of a wallflower. But if Minneapolis residents want to know if property taxes stand a chance of coming down in future years, they should pay it some attention.

The board, which has existed for more than a century, comprises two directly elected officials, two council members, one member of the Park and Recreation Board and the mayor. It is most well-known for setting Minneapolis’ maximum tax levies each year. Think of the BET like parents during a family budgeting process, and the city’s revenue like the family’s income. The BET says, “Here’s how much we have, and here’s how much we need, to pay for the things this family wants.” 

But the BET plays a larger role, too, as a sort of adviser to the city on how to finance its $2 billion budget without an overreliance on residential property tax revenue. Due in part to steep declines in downtown real estate values and the resulting loss in commercial property taxes, Minneapolis homeowners will cover about 54% of property tax collections this year, up more than 4% since 2019.

Related: Why is most of the North Loop excluded from the special Minneapolis downtown sales tax district?

“Neither the mayor nor the City Council want to raise taxes,” said Eric Harris Bernstein, who won a seat on the BET in elections earlier this month. He’ll be joining returning member Steve Brandt as one of the board’s two directly elected members.

To raise money without raising taxes requires some creativity. Going along with the parent analogy, part of the BET’s role is to suggest other money-making options — a lemonade stand here, a garage sale there, maybe an income tax on kids’ allowances (an admittedly unpopular idea). 

To a city wonk, these moves to make more money without loading the average resident with higher property taxes are called “diversifying your revenue.”  

Bernstein and Brandt — both proud city wonks — ran for their seats on the BET with big ideas to diversify revenue. From the incremental to the out-there, here are a few they’d like to put up for debate: 

• Extend the downtown liquor, lodging and restaurant tax district to cover more of the North Loop. Right now, the district — created to fund stadium construction — covers most of downtown and parts of the East Bank but excludes the North Loop above the Cedar Lake rail trench. Some local officials want to extend it to Plymouth Avenue.

• Impose a city income tax on high earners. Brandt has proposed a 1% city income tax on households earning more than $200,000 per year. In an interview, he said the BET first needs to study other cities that have imposed similar taxes to weigh their impact. A February report commissioned by the Philadelphia City Council called that city’s 3.74% wage tax a source of “deep dissatisfaction” that drives nearly half of city residents to commute to jobs outside the city limits. Myron Orfield, director of the Institute for Metropolitan Opportunity at the University of Minnesota, told MinnPost that a Minneapolis income tax could backfire in a similar way. It would make more sense to impose such a tax across the entire seven-county metro area, he said.

• A land value tax that could encourage more productive land use. On his campaign website, Bernstein said he is “interested in exploring” a separate tax on the value of land itself, rather than buildings and other improvements. Some economists say land value taxes discourage property speculation while spurring development. One study found the number of vacant properties in Harrisburg, Pennsylvania, declined more than 80% in the 30 years after it enacted a modified land value tax.

• Voluntary payments in lieu of taxes, or PILOTs, by tax-exempt nonprofits and congregations that receive city services despite not contributing to the tax base. The National Council of Nonprofits, a lobbying group, strongly opposes the idea, but Brandt said tax-exempt entities like his own church — which remains in one piece thanks to quick action by the Minneapolis Fire Department a few years ago — might be willing to pay up. In Massachusetts, the “national capital” of these arrangements, about one in five municipalities received PILOT payments. But nonprofits generally pay far less under them than comparable for-profit entities would pay in property taxes: In 2009, payments by four large Boston-area universities ranged from 0.08% to 8.53% of their theoretical property tax burden.

• A local transfer tax on Minneapolis real estate sales, similar to taxes already imposed by the state and Hennepin County. With thousands of properties changing hands in Minneapolis each year, even a small levy would add up, Brandt said.

• More income-producing facilities on public property. The city and Park Board are already on the right track with park “refectories” like Sea Salt, a major warm-season draw and income source for Minnehaha Park, Bernstein said. Last year, the Park Board netted more than $1 million from its restaurants, golf courses, ice rinks and other facilities.

• Invest more ambitiously in what Bernstein calls public goods, like social housing. Bernstein singles out the Housing Opportunities Commission of Montgomery County, Maryland, which pulls triple duty as a public housing authority, housing finance agency and not-for-profit housing developer. It has created “hundreds of units of high-quality housing at minimal ongoing cost,” his campaign website said. In fiscal year 2024, the commission earned about $143 million in non-grant revenue, mostly though rent payments.

Unfortunately, Brandt said, discussion of diversifying revenue comes with a big asterisk: The Minnesota Legislature would likely need to approve any significant changes to Minneapolis tax policy, including much if not all of the above.

That puts the city at the mercy of the legislative calendar in a statehouse split evenly between the DFL and Republican parties. Even relatively straightforward ideas are languishing there, he said, like a proposal to expand the downtown liquor tax district that has idled at the Capitol for two years.

“At best, 2026 would be a ‘laying the groundwork’ session to get us ready for 2027,” Brandt said, when an expanded DFL majority could give the city’s more ambitious revenue-raising proposals their due. 

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