Commercial owners upset with tax increases

Some commercial property owners in Rochester aren't happy with the size of their tax increases this year.

At Monday's annual Truth in Taxation hearing during the Rochester City Council meeting, City Administrator Stevan Kvenvold laid out the reasons for tax increases. The council set a maximum levy increase for 2015 of 6.9 percent higher than this year, at $53.5 million . Council members are reviewing budget items this week and will decide on a final budget on Dec. 15.

The main factor for an increase? Employee services. All city employees will receive a 2.25 percent raise based on their collective bargaining agreement, Kvenvold said.

Those employee services and the other costs associated with their jobs, like office supplies and fuel, make up about 60 percent of the levy increase, he said.

The city will get a slight increase in Local Government Aid for 2015, though historically, that percentage of the total budget has decreased from about 20 percent of total funds in 1990 to about 7 percent now, Kvenvold said. The hotel/motel tax is expected to bring in about $250,000 more in 2015, and the increase in sewer utility charges should bring about $1.5 million more into city coffers, he said.

Commercial properties tend to carry a bit more of the tax burden than residential – residential owners don't pay as many taxes as the value they hold, according to Kvenvold.

Combined with increases in valuation, that tax burden is weighing on Gary Mattison, who owns several properties. Mattison said he owns a strip center property that went up 22 percent for 2015.

There's a "downtown gold rush, but the small strip centers are having a few vacancies and our rents have actually gone down," Mattison said.

The valuations aren't done at the city level, but rather by the Olmsted County assessor's office, and the city doesn't have any control over that process, said Assistant City Administrator Gary Neumann.

"It's a regulated process. … It has to be uniform on a city basis, so it doesn't pick out one property and do something different on that property," Neumann said.

Olmsted County set its levy increase at 3.25 percent over last year , with a total county budget of approximately $185 million, about $85 million of which comes from the property tax levy. Local school boards have increased taxes across the region as well, with the Rochester School Board setting its levy at 9.88 percent over 2014, up to $40.8 million.

The county's Truth in Taxation hearing will be Thursday at 7 p.m., and property owners are encouraged to express concerns with taxes to board members at that time.

For Mattison, high taxes make the business environment a bit difficult for developers in Rochester.

"My income, I can truly tell you, did not go up 22 percent. … We're taxing ourselves right out of business in this town," he said.

Mattison said he knows of at least two developers who have left town because of taxes. "And I may have to be one of them," he said.

Rochester School Board: Up 9.88 percent to $40.8 million

City of Rochester: Up 6.9 percent to $53.5 million

Olmsted County: Up 3.25 percent to $85 million