Each year the City Council sets a preliminary property tax levy dollar amount and budget that must be submitted to Hennepin County at the end of September. The final property tax levy and budget must be approved by the end of December. The final tax levy can be lower than the preliminary tax levy that is submitted in September, but it cannot be higher.
The 2021 property tax amount levied by the City was $66,468,834. About $57.5 million of that amount was levied to fund the City’s General Fund operations. The majority of General Fund expenses are comprised of services such as Police, Fire, and maintenance to roads, infrastructure, and parks throughout the City. Other General Fund expenses include Environmental Health, Planning, Building and Inspections, Assessing, Public Health, Community Outreach and Engagement, Parks and Recreation, Engineering, City Clerk, Human Resources, Legal, Finance and the City Manager’s Office. The General Fund is the largest fund in the City, but it is just one of 30 Funds with a budget approved by the Council by resolution each year. A majority of the other budgeted funds receive revenues other than property taxes such as user fees or grants.
In addition to revenue from property taxes, the General Fund also receives revenue from local lodging and admission taxes. The pandemic greatly reduced this revenue source. In 2019, local lodging and admission taxes received into the General Fund were $10.4 million. In 2020, that amount was only $3.2 million and was budgeted at only $4.8 million in 2021. City staff are projecting it may take five years before lodging and admission taxes are back to pre-pandemic levels. This strain on City revenues brings challenges to the budget. Last year, the Council appointed a nine-person resident Community Budget Advisory Committee to address the multimillion dollar revenue loss and help prioritize budget reductions. At the end of December 2020, the 2021 budget was approved along with a forecast for a 2022 conceptual budget. The 2022 conceptual budget was presented with a 0% increase to the 2021 $66.5 million tax levy. The conceptual 2022 budget allowed projected increases in expenses offset with forecasted increases in lodging and admission taxes as well as tax stabilization reserves transferred to the General Fund.
However, even if the overall tax levy for 2022 is not increased from 2021, residential properties may see an increase on their 2022 property tax statements. The City’s portion of annual residential property tax comprises about one third of the overall property tax bill. The other two thirds go mostly to the Bloomington School District and Hennepin County. An increase in the School District or County tax levy could increase overall property taxes, but the biggest impact to property tax statements will be the shift of tax burden from commercial to residential. The City’s total property tax amount is allocated among property owners based on the value and type of their property. The residential housing market has continued to skyrocket with the median value home increasing from $286,400 to $307,200 while commercial values have decreased by more than 9%. Even if the overall property tax amount levied by the City is not increased in 2022, more of the share of property taxes will be paid by residential properties due to this shift.
The City Council plans to set the 2022 preliminary tax levy and budget at the September 13 Council meeting. The truth-in-taxation public hearing is scheduled for December 6 before the final property tax levy and budget is approved.
To see additional information about the City’s budget along with information on public budget information and engagement sessions, visit blm.mn/budget.