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Local elected officials talk taxes with lawmakers in Winona

The Minnesota House Committee on Taxes listened to some Southeast Minnesota problems Thursday during a House Mini Session hearing.

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Rep. Marquart
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WINONA — The Minnesota House Committee on Taxes listened to some Southeast Minnesota problems Thursday during a House Mini Session hearing.

A Public information hearing on property taxes was held at Winona City Hall to discuss increasing costs and other issues facing local communities when it comes to taxation.

"You're sitting in my chair," Winona Mayor Mark Peterson joked to committee chairman Rep. Paul Marquart, DFL-Glyndon, who sat where Peterson normally sits during Winona City Council meetings.

After a short opening presentation where a House staff member pointed to some of the property tax changes from the last legislative session – changes to the agricultural homestead regulations, and increases to both local government aid and county program aid were touted – the committee heard local elected officials about property tax issues.

Winona City Council Member Michelle Alexander told the committee that one of the problems in Winona faces is that about 30 percent of its land is tax-exempt thanks in part to land owned by Winona State University, St. Mary's University and Minnesota State College Southeast. Consequently, a large chunk of the city is land that does not provide property tax income to the city. 

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Because of that, a lot of projects on the city's capital spending list "get pushed to the side." That means holding off until a problem becomes truly dire or pushing maintenance down the road, both of which can drive up costs.

"What could have been repaired for a reasonable amount becomes an unbearable cost," Alexander said. 

Another problem cities face, she said, is when property taxes start rising, it can reduce home ownership.

Goodview City Administrator Dan Matejka followed the Winona contingent saying his city council has managed to keep property taxes down to a 2.9 percent increase over the last five years, but it's come at the cost of spending down the city's fund balance, something that's not sustainable. 

Matejka put in a plug for the Small Cities Assistance fund which paid out $8 million in aid across Minnesota for 2019 but is not funded for 2020 and beyond. 

"Unfortunately, we don't get a lot of local government aid," Matejka said. "We're funded mainly through property taxes."

Marquart agreed that, with about 100 cities not qualifying for LGA because of the program's intricate formula, changes needed to be made. "It's time to fix the formula again," he said.

Xcel's Long Shadow

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Representatives from Red Wing – Mayor Sean Dowse and Administrative Business Director Marshall Hallock – discussed several property tax issues, but focused mainly on how Xcel Energy and the Prairie Island Nuclear Plant impact local taxes. 

"Red Wing ... is home to a Target store," Hallock said. "Without Prairie Island, that would be one of the largest taxpayers in our community. But it would take 131 Targets to equal the Prairie Island plant."

However, he added, the state's process for valuing the Xcel Energy plant for tax purposes invariably leads Xcel to appeal its tax valuation, and that can lead to dangerous uncertainties for the city when it comes to budget planning. 

Because Xcel's final valuation numbers can come late in the budgeting cycle, the city occasionally faces a large uncertainty to its revenue as it prepares to set its levy on local property taxes.

This past year, Hallock said, the city had already passed its preliminary levy when the separate Prairie Island valuation was determined. That left the city with the choice of cutting staff, delaying projects or spending down its fund balance, which it eventually chose to do to make up the difference. 

"The process needs to be more transparent," Hallock said. 

Counties Counted On

Scott Arneson the Goodhue County administrator, said he'd shared with Rep. Steve Drazkowski, R-Mazeppa, that 100 percent of the county's cost increases last year were due to state mandates not funded by the Legislature. 

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The problem of unfunded mandates from the state was a common theme for Winona County Commissioner Marcia Ward. 

Ward said human services costs – most of which come from mandates from St. Paul – make up about a third of the county's $50 million budget, and are handled by about a third of the county's staff. 

"One of the issues with human services is we can't control it," Ward said. "We don't set the rules and regulations."

One human services cost, she said, is out-of-home placements for minors who need foster care. That is one of the fastest growing costs the Winona County faces, and it's directly related to state mandates where the Legislature has shifted costs from the state to the county level.

"Be careful when you say something is a cost savings," Ward warned the lawmakers. "Is it really a cost savings or is it a cost shift."

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Ward

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