Even with no increase in St. Paul’s tax levy this year, Frogtown homeowners will pay at least roughly $300 more next year.
It’s because properties gain value at different rates, and the neighborhood is seeing rapid increases in those values. Increases in values are varying across St. Paul.
If the city tax levy stayed flat next year, a homeowner on Summit Hill might save $72 or more.
Residents of the North End, Payne-Phalen and West Seventh Street wouldn’t be so lucky. They’d pay about $140 to $200 more in 2020 than this year, after accounting for the proposed Ramsey County tax levy increase.
But in the Thomas-Dale neighborhood — or Frogtown — estimated home values have finally broken the $150,000 mark after years of stagnation.
EIGHTEEN PERCENT INCREASE IN ESTIMATED MARKET VALUES
Following an 18 percent increase in estimated market values, owners of a median-value Frogtown home can expect to pay $283 more next year.
That’s assuming the city keeps overall tax collections flat and only the county levy rises. The final city and county levies will be officially set in December.
A 4 percent increase in the city tax lexy would cost Frogtown homeowners $314.
A 7 percent increase would raise their taxes by $337.
And an 11.5 percent tax levy increase would boost their taxes by more than 20 percent to $371.
Those scenarios were compiled by Ramsey County Auditor-Treasurer Chris Samuel, who presented his findings to the St. Paul City Council earlier this week as a preview of tax trends for city property owners in 2020.
St. Paul Mayor Melvin Carter will deliver his own budget presentation on Aug. 15, which will include an initial tax levy proposal, though even that’s not the final word.
Both the city council and county board have until December to negotiate changes to the budget and levy.
“Ultimately, the city council will determine what they want to have as a proposed levy,” Samuel said.
Council Member Dai Thao, who represents Frogtown, said he’s keenly aware that when property taxes go up, rents often follow.
“Just knowing that so many folks have to pay over half their income to rent, and the folks who are being displaced are also the folks who are going to be hit hardest with taxes,” Thao said. “The levy will hit low-income, fixed-income and working families.”
He sees new affordable housing production — such as a planned 41-unit building at Rice and Atwater streets — as one strategy for countering rising tax burdens.
Council members also have weighed mandating that developers incorporate affordable units into new market-rate developments, a controversial strategy called inclusionary zoning.
As for tax trends, “it’s market-driven … but if we can’t control the market, what are we doing to balance it, so people don’t get displaced?” Thao said.
The median value St. Paul home is $199,800 as of 2019, which is what taxes payable in 2020 will be based on.
Assuming no change in the city levy, that homeowner would pay $2,865 next year, a $52 increase over the current year. Of that increase, the county tax levy hike accounts for $47.
HOMEOWNERS SEEING STEEP INCREASES CAN GET CASH BACK
Whatever happens with the tax levies, Samuel is urging residents not to let cash slip through their fingers.
The state offers a “targeted” tax refund for homeowners experiencing property tax increases greater than 12 percent in a single year.
What’s the catch? Homeowners have to apply for it on the M1PR Form when they file income taxes.
The owner of a median-value home in Frogtown might save at least $40 that way, or even twice as much if the levy numbers come in high. There are no income restrictions.
Why would a zero percent increase in citywide property taxes still boost tax collections in Frogtown by more than 15 percent? For one thing, the city isn’t the only taxing jurisdiction. Ramsey County also taxes properties, and the county manager’s initial budget proposal calls for a 4.75 percent increase to the county tax levy in 2020.
HOME VALUES IN LOW-INCOME AREAS SHOOTING UP
But the most dramatic impact on tax trends this year won’t come from any particular tax levy.
Property buyers are snatching up the cheapest housing stock, fixing it up and either moving in or reselling it, and many of those properties are found in some of St. Paul’s poorest neighborhoods.
As a result, estimated home values in low-income areas are experiencing double-digit increases, the most dramatic increases in the city.
Wealthier neighborhoods are still experiencing value growth that exceeds inflation, but not nine times over.
“It’s also a supply and demand issue. Those are the areas with the most affordable homes, and the ones suited to first-time homebuyers,” Samuel said. “It’s not just the levy. And it’s not just the individual market value, but it’s ‘How is your market value changing relative to other properties?'”
THE POST-RECESSION SNAP BACK
Frogtown, the North End, Dayton’s Bluff and Payne-Phalen have yet to regain the full home values they enjoyed before the recession and housing crisis of 2007 to 2009.
Home values in both Frogtown and Hamline-Midway are about 5 1/2 percent below where they were in 2007. Home values in the North End are rising, but they’re still 14 percent below where they were before the housing collapse.
Other St. Paul neighborhoods have already experienced the “snap back,” and neighborhoods such as Mac-Groveland and Highland Park have regained all of their value and then some.
In Frogtown, median estimated home market values rose from $129,000 to $154,000 this year — an increase of 18.6 percent. Pricier neighborhoods such as Highland, Summit Hill and downtown St. Paul are experiencing healthy market value increases, as well.
But those value increases are much shallower at 6.8 percent, 5.5 percent and 5.9 percent, respectively.
In Highland Park, taxes for a median-value home would go up $17 if the city tax levy stayed flat and only the county tax levy increased as planned. A median value Summit Hill home would save $72. Downtown, the savings would add up to $4.
BIG HOUSE, BIG SAVINGS
Some of the priciest housing stock may see the greatest tax savings.
A homeowner on the 700 block of Summit Avenue experienced a value increase this year of less than 3 percent, with estimated market value climbing from $899,000 to $923,000.
Assuming no change in the city levy and a 4.75 percent increase in the county levy, their taxes would drop more than $600 next year, for a total property tax bill of about $16,000, according to Samuel’s figures.
The fiscal disparities program, a metro-wide effort that redistributes commercial-industrial tax dollars throughout the seven counties, will pay off handsomely for St. Paul and the St. Paul School District in 2020.
The program dates to the early 1970s. “It’s one of the biggest increases we’ve seen in fiscal disparities money in recent years,” Samuel said.
St. Paul, which received $30.7 million this year, stands to receive $33.2 million from the fiscal disparities program, an 8 percent increase. St. Paul Public Schools, which received $32.5 million this year, will receive $38.6 million next year, an 18.9 percent increase.
Looking beyond homeowner occupied residences, steady market values in other areas could spell some property tax stability, or even relief.
Commercial values are fairly flat, and apartments aren’t gaining value quite as quickly as they have, though “it’s still strong growth,” Samuel said.
“When you’re looking at apartments, it’s not that values aren’t going up, but they’re not going up as fast as they have been the last few years,” Samuel said. “There are certainly going to be properties that will experience tax decreases.”