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| Learn how NAIOP Minnesota members contribute to communities with its Catalyst Community Partners community enhancement initiative. Catalyst revitalizes urban corridors through real estate and business development. |
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Breakfast Program: Treasure Hunting for Secret Sources of Money
The Feb 14 NAIOP Minnesota program examines the most widely used economic incentives by real estate developers, investors and practitioners. Often overlooked or under-used, these mechanisms commonly have untapped potential for developers, owners, brokers and property managers and even heirs to real estate. With real-world examples of these programs working for property owners and properties, get the insight that could be instrumental to that next deal.
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Help Minnesota residents see what drives public cost increases
The St. Paul Pioneer Press editorial board supports NAIOP Minnesota’s transparency initiative.
“A bill in the Minnesota House ... helps understand better what’s driving costs higher and could change taxpayers’ ‘why bother’ attitudes.”
This supportive editorial is based on interviews with Paul Reinke, Senior Director – Development at Haugland Company, Oakdale City Council Member and NAIOP member; Rep. Keith Downey of Edina, chief author in the House; and Kaye Rakow, Director of Public Policy – NAIOP Minnesota.
Some highlights from the editorial:
- Rep. Downey: "We need to understand the spending behind tax increases to understand what can be done."
- Paul Reinke: “With good information, ‘citizens can plug in constructively and help us’ serve the needs of the community.”
- “Property taxes are an issue of deep concern for local businesses, and we appreciate the work done by the Minnesota chapter of the commercial real estate organization NAIOP and the Minnesota Taxpayers Association.”
Read the editorial.
NAIOP Minnesota announces its Awards of Excellence building winners for the 2011 Year
The NAIOP Minnesota Awards of Excellence competition recognizes exceptional developments by NAIOP members, with winners selected by a panel of independent judges. Criteria included site development, architectural integrity, interior design, integration into the community, market feasibility, unique challenges and LEED certification.
- Office Build-to-Suit, Less Than 100,000 sf:
Allina Medical Clinic - Ramsey
Entered by bdh + young interiors | architecture
- Office Build-to-Suit, Greater Than 100,000 sf:
Open Systems International, Inc.
Entered by CresaPartners
- Repositioned/Renovated Building, Less Than 25,000 sf:
Emily Program
Entered by RJM Construction
- Repositioned/Renovated Building, 25,000-75,000 sf:
FROST
Entered by Hillcrest Development, LLLP
- Repositioned/Renovated Building, Greater Than 75,000 sf:
Best Western Plus at Mall of America
Entered by Welsh Construction
- Special Purpose
Two Twelve Medical Center
Entered by M.A. Mortenson Company
- Mixed Use:
5 Points Building
Entered by The Ackerberg Group
The GOP and the DFL have declared job creation as their number one priority of the 2012 session. While they share that goal, they differ in their approaches.
- DFL Leaders: Our Minnesota Agenda
By Sen. Tom Bakk & Rep. Paul Thissen
Star Tribune, January 22, 2012
- GOP leaders: Our Minnesota Agenda
By Rep. Kurt Zellers & Rep. Matt Dean
Star Tribune, January 22, 2012
Senate Tax committee chair Julianne Ortman and House Tax committee chair Greg Davids are united behind a push to phase out the State general property tax in the 2012 session.
Read the Finance & Commerce article, “GOP seeks phase-out of business property tax”
Finance & Commerce, January 18, 2012
Bills to phase out the state general property tax were introduced last week. NAIOP will be offering testimony in favor of the bill in front of the Senate Jobs and Economic Growth Committee.
- House File (HF) 1914
- Senate File (SF) 1624
 NAIOP Minnesota's 2012 Property Tax Talking Points
For Minnesota’s thousands of job-creating small businesses, our dozens of Fortune 500 employers, and our tens of thousands of entrepreneurs innovating and working to build a brighter economic future...
--COSTS MATTER--
...and the costs that matter most are the fixed costs they cannot control, such as the property taxes they must pay on the buildings they own or in which they lease space to office or operate. Read more.
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NAIOP Minnesota’s transparency initiative
Developed by the Nexus Task Force, NAIOP Minnesota’s transparency initiative requires local units of government to report certain cost drivers in their budgets, and has been adopted and made a part of the House majority Reform 2.0 initiative.
Read the Reform 2.0 highlights.
A separate bill, HF 1954, has been introduced on NAIOP’s transparency initiative. This bill requires counties and certain cities to report additional budgetary information.
Read the bill.
| With all of the energy and information available, shouldn’t it be easier to understand the who, what and why of property taxes?
According to Jim Mulder, retired executive director of the Association of Minnesota Counties, and the Independence Party’s candidate for lieutenant governor in 2010, the entire tax system needs to be redesigned.
Your property-tax calculation is here
Star Tribune, January 14, 2012
Mr. Mulder will lead a provocative conversation on this and other general government redesign ideas at the next public policy committee:
- Thursday, February 2, 2012, 7:45-9:00 a.m.
- Want to join the meeting? RSVP to Kaye Rakow at kayerakow@harringtoncompany.com or (952) 928-7461.
“A Worse-Case Scenario”
If Minnesota’s pension plans assumed an 8% return instead of an 8.5% return over the “forever” timeline, the biggest three statewide pension plans would immediately report an additional $2.9 billion in unfunded pension liabilities.
Read more about the status of Minnesota’s public pension fund obligation and the necessary elements for reform.
By Mark Haveman, Minnesota Taxpayers Association (MTA)
MTA is NAIOP Minnesota’s research partner for the Nexus Project.
Star Tribune, January 22, 2012
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 A Message to Governor Dayton and Minnesota's Legislators
“As we listen to our tenants every day, one message remains constant: costs really matter to them…and new, friendlier policies regarding business property taxes and regulation would go far in assuring their success and speeding Minnesota’s economic recovery, especially with regard to employment.”
Pat Mascia, Senior Vice President–Minneapolis/St. Paul Operations, Duke Realty, 2012 President, NAIOP Minnesota
NAIOP Minnesota introduces its 2012 president and public policy team, along with its legislative priorities. Read more.
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Metropolitan Council offers grants for Transit-Oriented Development (TOD)
The purpose of this new program is to assist Livable Communities participants to implement transit-oriented development that demonstrates how increasing density around transit stations can reduce dependence on automobile ownership, vehicular traffic, and associated parking requirements that would otherwise be necessary to support a similar level of more traditional development, and encourage more transit ridership. Building on prior regional public investment in its transit infrastructure, the Metropolitan Council is requesting proposals for development sites that are located in the following areas:
- Within a DEED designated Transit Improvement Area (TIA) or area eligible for TIA designation.
- Within a one-quarter mile radius along designated high frequency local bus lines.
- Within a one-half mile radius of a bus stop or station on designated high-frequency express routes.
Maps of eligible areas
More information about TOD grants
Applications for this first funding round are due February 15, 2012.
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Impact of Market Value Exclusion on C/I Property Tax Burdens in the Metro Area
The average change in C/I property taxes payable is 1.71% or $1,842 for the hypothetical $3,000,000 C/I property. Increases range from a low of $930 to a high of $4,900. On a percentage basis, increases range from 0.88% to 4.51%.
These numbers are based on the following assumptions:
- No levy increases over payable 2011.
- No changes to distribution of tax burden due to market-based valuation changes across property types.
Gary Carlson, director of intergovernmental relations for the League of Minnesota Cities, said the effects of the switch to the market value exclusion system will vary from city to city. But in general, he said, communities with many lower-value homes and small commercial-industrial bases will see the biggest tax shifts to commercial properties.
See the chart prepared by the Minnesota Taxpayers Association showing the impact based on a $3million C/I property for selected metro area cities.
| More on the Impact of the New Market Value Exclusion Law
“As a result of this exclusion, a bigger share of the property tax burden in many cities is falling on owners of office and retail buildings who in turn pass along the tax increases to their tenants.”
Pat Mascia, Senior Vice President–Minneapolis/St. Paul Operations, Duke Realty, 2012 President, NAIOP Minnesota
Read the full article from the Star Tribune, January 6, 2012.
| “What NAIOP is proposing in terms of legislation requiring cities of a certain minimum size to apply object code breakouts to their spending reports is really key.”
Representative Keith Downey, House District 41A, Edina.
Read about Representative Downey’s conversation with NAIOP Minnesota’s public policy committee at a recent meeting.
| Have you found yourself complaining about the quality of candidates running for office?
Have you found yourself complaining about the direction your political party is taking?
Attend your precinct caucus on February 7, 2012.
Precinct caucuses are meetings organized by Minnesota’s political parties to begin the process of selecting candidates for the 2012 election and policy positions to shape the party platform.
Who can attend a precinct caucus and what do attendees do at these caucus meetings?
Find your precinct caucus location.
| Will Pension Plans Run Out of Money?
A new research report using GASB proposed metrics reveals risks of “depletion”
“…The burden of proof now empirically resides with the elected officials and these plans’ officials to show that they have a strategy in place (or at least underway) to put their house in order.” The Minnesota Teachers fund is included in the list.
This demonstrates the need for greater transparency in local budget reporting in Minnesota.
Read Girard Miller’s article from Governing.com, December 8, 2011.
| A report released in November suggested that Hennepin County fix a “piecemeal” system of watershed management in order to simplify the current water governance structure.
The Minnesota Center for Science, Technology and Public Policy (CSTPP) made the following recommendations to the Hennepin County Board of Commissioners on November 3, 2011:
- Consolidate the 11 existing watershed districts and water management organizations into 4 divisions based on hydrological boundaries.
- Grant taxing authority to all water organizations in Hennepin County.
- Improve coordination of water management planning between watershed districts/water management organizations and cities.
- Implement coordination, oversight or enforcement between watershed organizations and the state.
Read the full report.
For NAIOP Members who have asked for clarification on the new Medicare tax on “unearned” net investment income
Beginning January 1, 2013, a new 3.8 percent tax on some investment income will take effect. Since this new tax will affect some real estate transactions, the National Association of Realtors (NAR) has prepared materials to clarify the new tax.
Understand that this tax WILL NOT be imposed on all real estate transactions, a common misconception. Rather, when the legislation becomes effective in 2013, it may impose a 3.8% tax on some (but not all) income from interest, dividends, rents (less expenses) and capital gains (less capital losses). The tax will fall only on individuals with an adjusted gross income (AGI) above $200,000 and couples filing a joint return with more than $250,000.
NAR frequently asked questions
Examples of different scenarios in which this new tax applies
| The 8.5% dilemma
Minnesota’s current 8.5% annual assumed rate of return on pension fund investments in the highest in the nation, according to a public fund survey conducted by the National Association of State Retirement Administrators. Last fall the Minnesota Pension Commission heard extensive testimony on whether the current 8.5% is too optimistic and what the implications would be if this assumption was lowered.
How big of a deal would this be?
MSRS: Minnesota State Retirement System
PERA: Public Employees' Retirement Association
TRA: Teachers’ Retirement Association
“It is only in pension finance that the discount rate for a liability is based on the expected return. Not in banking, not in investment banking, not in project finance, not in home mortgages of consumer finance—and not in government finance. No one else; nowhere else; nothing else.”
--M Barton Waring, Pension Finance: Putting the Risks and Costs of Defined Benefit Plans Back Under Your Control
Read more from the Minnesota Taxpayers Association on page three of their Fiscal Focus, November-December 2011, Volume XXXVII No. 6
| New Laws Effective January 1, 2012
Source: Minnesota House of Representatives, Public Information Services
| Q: What does greater transparency in government spending have to do with property taxes?
A: Everything!
It's time to unveil the drivers behind the rising cost of public services and the demand for increasing local tax revenues.
Read more.
Transparency Proposal Talking Points for NAIOP members
Transparency Proposal FAQ
Transparency Proposal Press Release, Initiative to Spur Greater Transparency in Local Government Spending Launched by NAIOP Minnesota
Ultimately local government spending drives property tax levies and, in turn, property taxpayers’ bills. This is the most influential piece of the property tax system. It is also the most important and—in many ways—the most challenging element for taxpayers to understand.
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NAIOP introduces OpenGovernmentMN.com
OpenGovernmentMN.com has been established as an online resource and central repository of research, news and other information useful in informing Minnesota taxpayers and encouraging public debate and involvement.
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