Lawsuit Brought Against City of Minneapolis for Inflated Housing Values

After the housing bubble burst, many foreclosed properties in Minneapolis sold for bargain basement prices, yet the city is being accused of assessing them at much higher values so as not to lose revenue from property taxes. Of course, the most highly targeted neighborhoods are Near North and Philips. A group of these homeowners, some of them paying taxes based on assessments over 300% higher than their purchase price, are banding together in a lawsuit against the City which may reach class-action status.

On a personal note, while my house isn’t in any of the neighborhoods specifically mentioned in this article, I’m in the same boat as these folks. When I bought a foreclosed property in 2009, it was appraised by HUD at $101K. I bought it for $73K. I think my tax value is still something like $162K. I understand that property tax value assessment is a tricky procedure, but my house will probably never be worth $162K again so it would be nice if I didn’t have to pay taxes on value I don’t have.


4 thoughts on “Lawsuit Brought Against City of Minneapolis for Inflated Housing Values

  1. noodleman

    For many, many years, the assessed value of many homes trailed behind the actual market value. As market values climbed, local governments decided to play catch-up with the assessed tax values. That’s okay as long as the market value keeps climbing but when market values fall, it should be inconsciousable for any tax authority to continue raising any assessed value beyond the true market value.
     
    Sucks to be a tax collector when the housing market drops through the floor, as it has the past couple of years. My own house went from a market-value high of $195k to being, now, around $120k. Thankfully, while St. Paul lagged a bit behind in catching up with the home’s market value, once its market value did begin to slide in 2008 so did its assessed tax value.
     
    What I find to be troubling in all this is the growing practice of levying higher property taxes on personal property while lowering, or temporarily eliminating, property taxes on business property. Once upon a time, the IRS gained a greater percentage of its revenue from business. Ca. 1940 it was something like 70% of Federal taxes came from corporations while personal income taxes accounted for only 30% of the tax cash collected. That’s flip-flopped now, with corporate taxes now accounting for a significantly lower percentage of Federal tax revenue. Alas, the middle-class is making up the difference.
     
    In 2008, personal income tax intake amounted to ~$1.1 trillion; corporate taxes amounted to $250 billion, i.e. 25% of the total income tax revenues. When companies like Exxon announce profits in the billions of dollars but are able write-off or move funds off-shore or completely write-off foreign tax obligations 100% to the point where they pay no US income tax at all, something is grievously wrong with the system.
     
    American expats overseas owe the IRS a US income tax above a foreign-income threshold. But not Exxon?

  2. kc!

    When Pawlenty stated no new taxes, he clearly meant only no new income taxes.  As revenue fell, his refusal to raise taxes lead to cities not getting money they relied on. Now, they have to find a way to make up this money, even as their tax base falls. Who can blame them?
     
    Each year my assessed value grew, as did my taxes. This year they assessed my value for about $3k less than last year. Which is fair, but hopefully still below what it will be appraised at (I need to have it appraised next month for a refi.) But evne with the assessed value down, my taxes are still going up.
     
    I’m okay with paying taxes. But I’d rather pay higher income taxes than higher property taxes.  Income taxes are on something I’m getting and they reflect my situation. Property taxes, at least for homesteaded property, don’t refelct anything. If you lose your job, your income taxes go down, but your property taxes don’t. And unfortunately, selling your home if the taxes get too high isn’t an option for most people right now. Nothing is selling, regardless of price.

  3. mnblrmkr

    A lot of that lag was written into law. That law was phased out over a few yerars and assessed value and market vakue should  have been the same as of a year or two ago. 
     
    But even if your assessed value remained the same or dropped, your property tasxes could still rise. Once taxing body has set it’s budget, that money has to be raised somehow (barring successful pushback that forces them to re do their budget), so it’s still going to be proportioned out to the property owners.
     
    Nood, was it Minnpost that yesterday had a graph showing how property taxes have gone from being ~60% commercial property/40% residential in 1997 or so, to the exact flip side now? So yeah, in Minnesota, the property tax burden has been removed form commercial property to residential property.
     
     

  4. Juris Curiskis

    Please note the fact: All homeowners can afford our income taxes, but not all homeowners can afford our property taxes.
    Please note another fact: Our property tax concept is no different from the MAFIA protection money. In fact, it is worse. The MAFIA used to break your knee caps if you could not pay. But now our legalized MAFIA can take away our homes if we can’t pay the extortion tax.

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