Minneapolis' next property tax increase could be biggest in more than a decade

Minneapolis Mayor Jacob Frey is proposing the largest city levy increase since at least 2008 in next year's budget.

Why it matters: The 8.1% jump, announced Wednesday, would raise property taxes by around $200 for the median homeowner.

• The collapse of downtown commercial property values means a larger share of this year's property tax burden will fall on homeowners .

The big picture: Bills are coming due at city hall for inflationary costs and rising salaries as federal pandemic relief funds sunset at the end of this year.

• The city also must hire more staff and invest in new infrastructure to fulfill court-ordered police reforms .

Plus: Frey is proposing to ramp up efforts to reactivate downtown, including Nicollet Mall upgrades and an existing workgroup looking to fill downtown storefronts .

• The mayor also wants to add $8 million in new investments in rental housing and homelessness response.

What they're saying: "My administration worked to find ways to do more with less, and I'm really proud to say that we did," Frey said in a speech Wednesday.

• "I'm not expecting us to celebrate this lift," he added, "because our residents have a new lift of their own — in property taxes — but this budget provides a way through."

Context: These are not the only tax hikes expected around the Twin Cities.

• This week, St. Paul Mayor Melvin Carter proposed a 7.9% levy increase .

The fine print: Minneapolis ' increase could be larger than 8.1%, depending on what happens with the Park & Recreation Board's own budget request.

• The city's current forecast assumes the parks levy is set at 7%, but the park board is pushing for a 10% increase.

Between the lines: Ultimately, a separate elected body — the Minneapolis Board of Estimate and Taxation — has the power to determine how much taxes can increase.

• The city and other taxing authorities will negotiate with the board over the final number.

The intrigue: The mayor plans to draw $19 million from city reserves — a move that kept this year's levy increase from spiraling to 12 or 13%, budget officials said.

• Frey also minimized the tax hike by transferring funds from local taxes on hotel stays and on liquor and restaurant sales downtown.

What we're watching: City Council president Elliott Payne told Axios that the next step will involve digging into the details of how the mayor was able to keep the levy increase under 10%.

• If the mayor's budget cuts key investments, or the council wants to spend on new priorities, Payne said he's open to revisiting the levy limit.

What's next: The city's preliminary 2026 budget calls for an even higher levy increase: 9.8%.

Editor's note: This story and its headline have been corrected to reflect that the tax increase could be the biggest in more than a decade (not in a decade) and that the Park and Recreation Board does not set its own budget.