State Budget: Repeal of the Statewide Business Property Tax may be at risk

NAIOP Minnesota members and the industry are potentially impacted by the court case that has continued the budget debate between Governor Dayton and legislative leaders. Following a district court ruling that the Governor’s veto of the two-year funding for legislative operations was unconstitutional, the Governor acknowledged that his veto was intended to bring legislative leaders back to the bargaining table on several issues in the tax bill, rather than a concern about funding. The judge’s decision stated that vetoing the legislature’s appropriation because of an unrelated objection violates the principle of separation of powers.

For you and our industry, this court case is important. Governor Dayton has targeted the recent repeal of the inflator for the statewide business property tax as an item he wants renegotiated. Repealing this inflator, which previously placed the state business property tax on autopilot, was an important legislative victory for NAIOP Minnesota and other business organizations in 2017. Ultimately, an appeal means that the Minnesota Supreme Court is likely to make the final decision on this court case.

August 17, 2017 at 12:44 pm Leave a comment

PILOT Discussions Continue in St. Paul

PILOT stands for “payment in lieu of taxes,” a method used by local governments to receive revenue from organizations that are exempt from property taxes, yet still receive the benefits of local services.

One year ago, the Minnesota Supreme Court ruled that right-of-way assessments in St. Paul were taxes, not fees, meaning that non-profit organizations were exempt from the assessments. In response to a potential loss of tens of millions of dollars in tax revenue, city leaders have been exploring ways to use PILOT or SILOT (services in lieu of taxes) to replace the lost revenue, rather than immediately increasing the property tax levy or cutting the city’s budget.

NAIOP Minnesota works tirelessly to keep local governments accountable for property tax levels or increases. The Supreme Court decision has been a welcome victory for transparency in local taxation. Efforts by the City of St. Paul to find a reasonable and public solution to this revenue issue have improved taxpayer understanding of how local budgets work.

In August, a Citizens League task force is expected to complete its work analyzing potential solutions for the City of St. Paul. Kaye Rakow, formerly having championed NAIOP Minnesota’s public policy initiatives, is co-chairing the task force.

August 17, 2017 at 12:39 pm Leave a comment

State Tax Receipts Down Slightly

According to Minnesota Management & Budget (MMB), July state tax receipts totaled $975 million. This amount was roughly $66 million below forecast, and follows an agency report that revenues for fiscal year 2017 were 0.5% lower than projections.

Variations in month-to-month tax receipts are not unusual, as the timing of tax collections can be hard to predict. In October, MMB will release a three-month economic update that will provide a closer look at the trendlines in tax receipts, and a late November budget forecast will set the stage for the 2018 legislative session.

August 17, 2017 at 12:13 pm Leave a comment

July 25 breakfast: Investor’s objectives with commercial real estate

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A headline-making NAIOP breakfast on how investors are underwriting commercial real estate, objectives with returns and with hold periods, underlying sources of investors’ capital and the motivations for buying. This program features speakers from Eagle Ridge Partners, Meritex, Schafer Richardson. Colliers, Brennan Investment Group (Chicago) and MLG Capital (Milwaukee). Details & registration at www.NAIOPMN.org.

Tuesday, July 25, 2017
7:45 breakfast – 8:00-9:15 am program

June 30, 2017 at 3:51 pm

July 18 Closer Look Lunch with Jean Kane

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The popular Closer Look lunches, available exclusively to NAIOP members, continue with a July 18 discussion with Jean Kane, CEO – Minneapolis|St. Paul of Colliers International.
Enjoy a bite to eat with your NAIOP colleagues by taking one of the 35 seats for a discussion with Jean, as her industry contributions are both long-standing and substantial. In her position with Colliers Minneapolis|St.Paul, Jean oversees the company’s extensive real estate services, including brokerage and real estate management, construction, architecture, capital and facility services.

Tuesday, July 18, 2017
11:45 am lunch, 12:00-1:00 pm discussion
Rojo Mexican Grill

Details & registration at www.NAIOPMN.org or contact NAIOP.

 

June 28, 2017 at 9:04 am

MnCRE property tax relief approved but still in limbo

Just three years ago, tax relief for commercial property owners in Minnesota was unthinkable. The consensus among state legislators, the news media, and the general public was that tax relief for commercial property taxpayers would only benefit the wealthy. Any legislation introduced, which sought to ease tax burdens, was therefore doomed.

Since 2014, NAIOP has worked very hard to shift the paradigm concerning commercial property taxes. We have communicated with audiences at all levels, explaining who actually pays commercial real estate property taxes in Minnesota. Most of the people we have talked with were surprised to learn that property taxes are paid by the small business owners who rent space in commercial or industrial buildings and not the building owners. And with some of the highest commercial property taxes in the nation, tenants must raise prices to cover their overhead costs. In short, we all pay.

At the end of the 2016 legislative session, our communications efforts began to bear fruit. We argued strongly for the elimination of the mechanism that automatically increased taxes on the state’s commercial properties, based on the rate of inflation. Because of its complexities, however, removal of the automatic inflator was dropped. Lawmakers ultimately passed a tax bill that, among other things, exempted the first $100,000 of assessed property value from the state’s commercial property tax. The measure clearly benefitted owners of smaller, often rural properties but it was a solid stride forward for our cause. Unfortunately, Governor Dayton vetoed the bill for unrelated reasons.

Following the 2016 elections, we knew that opportunities for tax relief would be better. Throughout the 2017 legislative session, NAIOP worked very hard to communicate the need for tax relief. Through special events, newsletters, blog posts, tweets, and face-to-face meetings, we called for property tax relief. NAIOP’s lobbyists met personally with business leaders, property managers, reporters, legislators and more, and orchestrated speakers at key legislative hearings to clearly communicate the need for relief and the economic benefits that will come to Minnesota as a result.

Now that the legislature’s special session is done, I am very pleased to report that our efforts paid off – sort of. Within the tax bill finally approved by the House and Senate is the relief we fought so hard to convince legislators on both sides of the aisle to include – the elimination of the automatic property tax inflator, effectively freezing the levy at 2018 levels. The bill also contained language to exempt the first $100,000 from a property’s taxable value – a provision that was lost at the end of last year’s session. The Governor signed the tax bill late Tuesday evening, after signing other budget bills, but used his line-item veto authority to de-fund House and Senate operations. He said he would call another special session to restore the Legislatures funding if lawmakers agreed to revisit several issues that he opposed in the signed bills, including the removal of the automatic inflator. As of May 31, it is not clear what steps legislative leaders will take next. Many speculate the courts may have the final say in the matter.

If the removal of the auto-inflator and a small exemption are retained, they will become significant steps in the right direction. This issue illustrates how we need to continue to educate public officials and community leaders about the importance of commercial property tax relief, the burden of which falls on small business tenants. If we can accomplish this goal, greater economic prosperity will follow for everyone.

May 31, 2017 at 1:21 pm

June 22 Lunch – Taking a Closer Look at the Custom House Transformation

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NAIOP members have the opportunity for a lunch discussion, insights and tour of the Custom House project, which transformed the former Post Office building in downtown St. Paul into 202 upscale apartments and a 149-room Hyatt Place hotel. Herb Tousley of Exeter and Mitch Osterholt of Frana will detail the ins-and-outs of this unique project.

Thursday, June 22, 2017
Custom House, 180 East Kellogg Boulevard, St. Paul

The program includes a site tour as well as a discussion on design challenges, market feasibility and the complexity of completing apartment and hotel components simultaneously and with separate ownership and financing structures.

This exclusive opportunity is available to the first 30 registered NAIOP members
Details and registration at www.NAIOPMN.org

May 24, 2017 at 12:17 pm

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