Hennepin County property tax collections are lowest in decades

Plummeting commercial real estate values prompted by the shift to remote work are causing a trickle-down financial crunch on cities, schools, park districts and other public operations that depend on tax collections.

The reason: more commercial property taxes are going unpaid than at any time since the Great Recession of 2008-09.

Minneapolis, for example, typically collects around 99% of taxes levied. But by the third quarter of 2023, just 97.5% of taxes levied had been collected — leaving $11 million in unpaid taxes.

Some public bodies, like the city, rely less heavily on property taxes to fund operations, so the immediate impact is less severe. But the tax-collection drop is a major hit for the Park Board, which ended the year with a $1.9 million difference between taxes levied and those actually collected. The board depends on property taxes to finance almost 80% of its general fund — and might be a harbinger of what can happen when collections fall short of expectations.

“This is a big reality check,” said Park Board President Meg Forney, who noted the revenue loss comes as the Park Board is working on major capital projects and in negotiations with union park workers looking for higher pay. “So heads up everybody, roll up your sleeves, because we have a big lift here.”

For Minneapolis Public Schools, which is already facing financial challenges as a result of declining enrollment, property taxes represent one-fifth of its operating budget. A 1% decline in its collection rate would be a loss of roughly $1.5 million, said Donnie Belcher, the district’s executive director of marketing and communications. At last year’s collection rate, then, MPS is down nearly $3.5 million in tax revenue.

Top delinquent taxpayers

While tax delinquencies are an immediate issue for local entities like the Park Board, the steep and steady decline in commercial property values is a longer-term problem because delinquent taxes are a first-priority lien — meaning they receive payment ahead of other debtors even in the case of a…