Posts filed under ‘Public Policy | Government Affairs’

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

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

Tax bill to be negotiated

House and Senate conference committee members came to an agreement at the end of April, to seek $1.15 billion in tax relief during the next two-year budget cycle. The compromise was a little less than what the House had initially proposed and slightly more than the Senate’s plan. Legislators must now work with members of the Dayton administration, whose budget called for much less tax relief, to craft final language that will be acceptable to everyone.

The current bill calls for a change to the state general levy to exclude the first $150,000 in market value for commercial and industrial properties. The bill would also eliminate the automatic inflator for both C/I and cabin properties beginning in 2018. NAIOP Minnesota’s public policy team has been working tirelessly to obtain needed tax relief and is pleased with the progress.

Senate Majority Leader Paul Gazelka and House Majority Leader Joyce Peppin joined commercial real estate professionals at the May 4 Coffee & CREam event to discuss the tax bill and the budget and transportation bills. Both Gazelka and Peppin said the tax relief package has been prepared to move forward with input from the Governor. Gazelka admitted that negotiations with the Dayton administration could impact elements within the bill, such as the property tax exemption, which he and Peppin acknowledged would likely benefit commercial property owners in rural areas more than those in metropolitan regions. But Gazelka added that he would work hard to eliminate the automatic inflator in the state’s general property tax levy.

Peppin, who has negotiated legislative packages with Gov. Dayton in the past, said leaders will be meeting with the Governor as much as possible to come to a budget and tax resolution before the end of session on May 22, adding that no one would win if there were a government shutdown. She and Gazelka urged members of the commercial real estate sector to engage in the process by communicating with the Governor’s office about the importance of commercial property tax relief. Peppin added that small business tenants could provide greater benefit to the effort by contacting the Governor’s office about how they would benefit from property tax relief.

“This is not a political winner for us,” said Gazelka about the portrayal of tax relief for businesses in the state. “We need to shift the narrative that business is really good for Minnesota.”

 How to contact your legislator – and Gov. Dayton

Much remains to be accomplished before session ends, so we urge our members to contact their legislators and the Governor’s office to reiterate the need for commercial real estate tax relief. You can easily find your state representative by clicking here and your state senator by clicking here. Each listing features an email address you may use to communicate your thoughts and opinions. To contact Gov. Dayton, you will need to draft your remarks within this online form. Your voice does matter, so please take a moment and let your opinions be heard.

May 15, 2017 at 10:38 am

Back from Break to Budgets and Bills

By Quinn Cheney, Director of Public Policy

When Minnesota lawmakers return from spring break on April 18, they will be faced with some major decisions. With five weeks left until the end of legislative session on May 22, there remain many hurdles to cross to achieve the House and Senate’s top priority this year—tax relief.

First, House and Senate members will begin to work out differences between their budget bills in conference committees, and then they will start the process of compromising with Governor Dayton. The governor has warned that only if budget numbers “add up” can negotiations begin, noting that several current provisions in omnibus budget bills could draw his veto. And the Governor’s staff has been publicly discussing legislative budgets in disparaging terms, setting the stage for potentially difficult discussions to find a compromise.

Governor Dayton proposes about $300 million in tax relief. The House bill proposes $1.3 billion in tax cuts, while the Senate bill cuts taxes by $900 million. A key provision in both bills is a freeze on the annual inflator in the state general levy. The House provides an exemption of the first $200,000 of commercial-industrial property from the state general levy and freezes the annual inflator at the 2017 level. The Senate reduces the first-tier income tax rate from 5.35% to 5% by 2018. You can find a detailed comparison report here.

With one of the highest property tax rates in the country, Minnesota lags other states as tax burden restricts growth and investment. The majority of Minnesota businesses and job creators are located in commercial real estate buildings, and Minnesotans see an 114% return on investment for every $1.00 spent by the state’s commercial real estate industry. Tax relief not only benefits property owners and businesses—it benefits workers and consumers far more.

Commercial real estate in Minnesota deserves tax relief, but it is not clear whether current proposals will make it into law. NAIOP Minnesota has been deeply engaged in this year’s tax and budgeting process, but it may require more input from the MnCRE community, not only to legislators but also to the Governor’s office. We need to remind them how important tax relief really is. If you have any questions or need help contacting your legislator, feel free to contact me.

April 19, 2017 at 3:39 pm

Day at the Capitol a Capital Success

Momentum continues to build among state lawmakers for a greater understanding of the value that Minnesota’s commercial real estate industry brings to the state.

Momentum continues to build among state lawmakers toward a greater understanding of the value that Minnesota’s commercial real estate industry brings to the state. It’s a constant effort to ensure that policymakers understand how the commercial real estate sector operates and how it benefits the state’s economy. It is safe to say positive change is continuing. During the Minnesota Commercial Real Estate (MnCRE) Day at the Capitol, key policymakers acknowledged the important role commercial real estate has within Minnesota’s economy and announced the formation of the Minnesota Commercial Real Estate Legislative Caucus.

“We don’t hear enough from our industry. People here don’t completely understand real estate issues, so it’s great to have you all here,” said Rep. Roz Peterson (R-Lakeville) who explained the purposes behind the caucus during the MnCRE activities held on April 4.

Sen. Ann Rest (DFL-New Hope) worked with Rep. Peterson to develop the MnCRE Caucus and has been recognized by NAIOP Minnesota in the past for her work on behalf of the commercial real estate industry.

The MnCRE Caucus will provide state lawmakers with a platform from which to learn more about the industry and more clearly discuss policy issues of importance to commercial real estate professionals. The key to long-term success within the caucus will be the extent to which lawmakers and MnCRE professionals can engage in a thoughtful exchange of information and ideas.

Rep. Kelly Fenton (R-Woodbury) applauded Rep. Peterson for her efforts to initiate the caucus and expressed the importance of hearing about business needs that at times go unnoticed or may not be fully understood by lawmakers. She urged commercial real estate professionals to engage with policymakers and play a critical role in working with the new caucus.

During DAC activities, several legislators met with the approximately 50 commercial real estate professionals in attendance, including Speaker of the House Kurt Daudt (R-Crown) and Rep. Steve Drazkowski (R-Mazeppa). Rep. Drazkowski, who has supported MnCRE positions concerning property taxes, expressed relief that the House passed legislation to repeal the automatic property tax inflator that commercial property owners have opposed for several years. He also voiced pleasure about a new exemption in state property taxes for the first $200,000 of assessed property value.

NAIOP Minnesota will continue to support the MnCRE Caucus and will continue to urge legislators to join and learn more about commercial real estate issues.

April 6, 2017 at 1:54 pm

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