Lots of Buzz about Tax Reform as We Approach 2018

Although it may seem like very little of the political chatter is about substantive issues, tax reform has become an important issue this year for local, state and federal officials.

In Washington, efforts have begun on the first major rewrite of the tax code since 1986. Although proposals thus far have taken the form of frameworks and broad policy descriptions, the breadth of ideas under discussion are likely to include lowering corporate tax rates, changing the ways that carried interest is taxed, and reducing the burden on pass-through entities.

However, any federal tax reform would carry the risk of increasing the budget deficit, which may impact access to capital for many businesses. Because of the complexity of federal tax reform, it is likely that any action in 2017 or early 2018 would be a first step, with additional reform after next November’s elections.

On the state level, tax reform is benefiting the commercial real estate industry through the repeal of the automatic inflator on the statewide general property tax. Commercial-industrial real estate accounts for nearly all of the revenue from the statewide general property tax, so this change reflects an important step in managing rising tax burdens on commercial real estate.

However, Governor Dayton’s line-item veto of biennial funding for the Minnesota Legislature was accompanied by a demand that the legislature reinstate the automatic inflator. A court case on the constitutionality of the line-item veto remains before the Minnesota Supreme Court. Regardless of the outcome of that court case, it is likely that the repeal of the inflator will be discussed during the 2018 legislative session.

Finally, several court cases limiting the ability of cities to assess fees separate from the property tax system are having an impact on 2018 tax proposals. In St. Paul, Mayor Chris Coleman has proposed a 23.9% increase in the city’s property tax levy, primarily to fill a hole in the budget caused by a reduction in right-of-way maintenance fees.

For NAIOP members, the mayor’s proposal is a both a step forward and backwards. Increased simplicity and transparency in local property taxes are important goals for all local governments – the mayor’s proposal meets these goals. However, since any property tax increase disproportionately impacts commercial real estate, it will be important for NAIOP members to hold St. Paul city council members accountable and look for ways to reduce the cost of city services.

October 20, 2017 at 3:04 pm Leave a comment

Nov 2 Program on the Office & Industrial Markets – Insights to create tomorrow’s opportunities


Get on the list for the November 2nd headline program on the Twin Cities’ office and industrial markets.

The Office Panel includes: Doug Fulton, Emily Nicoll, Jill Rasmussen, and Brent Robertson
Some of the topics:
– More room to run in this office cycle? (Is the show over??)
– Tenants are going urban (both in downtown AND in the suburbs).
– Where, oh where, is new office development?
– Have we repositioned everything?
– Big changes in deal-making terms

The Industrial Panel includes: Casey Hankinson, Brent Masica, Adam Mullen, and Colin Ryan
Some of the topics:
– From an afterthought to a competitive advantage
– If you have $1 as an industrial tenant, where does it go?
– How capital markets and user requirements have changed
– The impact of companies and labor and how MSP compares to the national market

Guthrie Theater, 818 Second Street South, Minneapolis
3:00 pm Presentations, 4:30 pm Reception


Email NAIOP Minnesota or call the office at (952) 928-4647.

October 17, 2017 at 11:59 am Leave a comment

2017 Awards of Excellence Project Winners

Congratulations to the project winners at NAIOP Minnesota’s 34th Annual Awards of Excellence!

See the complete list of 2017 project nominees.

See the detailed list of winners along with their full project teams.

October 10, 2017 at 9:46 am Leave a comment

Oct 17 Breakfast featuring market insights from Kim Culp, Mark Rauenhorst, Bill Katter & Russ Nelson

Have breakfast with your commercial real estate colleagues on October 17 to enjoy a discussion and insights from KIM CULP (Chairman & Partner, The Excelsior Group), BILL KATTER (President & Chief Investment Officer, United Properties), RUSS NELSON (President/Principal, NTH) and MARK RAUENHORST (President, Marren Properties).

Tuesday, October 17
Golden Valley Country Club
7:45 am: Breakfast
8:00 – 9:15 am: Discussion

Details and Register Online

NAIOP: Where Minnesota Commercial Real Estate Meets

October 6, 2017 at 12:51 pm

Governor, legislative leaders square off over veto of legislative funding

On September 8th, the Minnesota Supreme Court ruled that Governor Dayton’s veto of the legislature’s biennial appropriation was a legitimate and constitutional use of his executive power. However, the issues surrounding this veto are far from resolved.

Governor Dayton vetoed the legislature’s appropriation in an effort to convince legislative leaders to return to the bargaining table on the omnibus tax bill, which had several provisions that the Governor opposed. One of those provisions eliminated the automatic inflation escalator on the statewide business property tax – NAIOP Minnesota supports eliminating the escalator, which puts state tax increases on autopilot.

Legislative leaders have argued that Governor Dayton could have vetoed the tax bill in its entirety as a method of continuing negotiations. However, the Legislature linked funding for the Department of Revenue’s operations to the tax bill, and Governor Dayton chose to preserve funding of the department’s services. By vetoing only the appropriation for legislative functions (called a line-item veto), he sought to get the legislature’s attention without risking the funding of any state agency.

Legislative leaders also argued that a veto of all funding for the legislature violated the principle of separation of powers. It was clear that the Court had some sympathy for that argument, but was unclear whether they believe the judicial branch has the authority to settle a battle over legislative appropriations. The Court ordered Governor Dayton and legislative leaders to enter mediation to attempt to resolve the dispute, and asked the parties to offer further information and arguments to help settle the different separation of powers issues.

A successful veto doesn’t reinstate the automatic escalator for statewide property taxes and Governor Dayton hasn’t publicly opposed another provision of the tax bill that reduced the impact of the statewide tax on smaller commercial and industrial property. However, any effort to reopen the tax bill puts both laws at risk.

Clear as mud? Stay tuned.

September 14, 2017 at 2:08 pm

St. Paul, Woodbury court cases on municipal fees also impact NAIOP members

Earlier this month, a Citizens League task force released a report suggesting that the City of St. Paul should explore a PILOT (Payment-In-Lieu-Of-Taxes) program for non-profits with substantial real estate holdings. A Minnesota Supreme Court decision struck down St. Paul’s expansive assessment system for infrastructure improvements, and Mayor Chris Coleman announced a projected property tax increase of nearly 24 percent to replace assessment fees. The Citizens League report recommended that St. Paul explore a voluntary PILOT system for non-profits such as health care facilities and higher education, which are exempt from property taxes but pay assessment fees. Kaye Rakow, former public policy director for NAIOP Minnesota, served as co-chair of the task force.

While NAIOP is concerned about the size of the St. Paul property tax proposal, we also strongly support more transparency in municipal taxing decisions and more limited use of municipal fees.

In a case involving the City of Woodbury, a district court judge ruled that an assessment fee on builders to pay for road improvements outside of a residential subdivision was illegal under state law. The Minnesota Court of Appeals will rule as soon as this month on the appeal of that decision, which is one of several decisions in the past two decades limiting the expenditures that cities can include in assessment fees on new development.

Either issue could be addressed at the State Capitol in the upcoming legislative session.

September 14, 2017 at 1:43 pm

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

Older Posts

For more information about NAIOP Minnesota, visit www.NAIOPMN.org.

Hillcrest Development


NAIOP MN on Twitter

RSS MN Real Estate Journal

  • An error has occurred; the feed is probably down. Try again later.