[Mpls] Death by arithmetic

[Greg Abbott]

On Jun 11, 2004, at 7:16 AM, Victoria Heller wrote:

> Am I the only person who wonders why Omaha (population of
> 395,000) operates with $80 million of property taxes, while Minneapolis
> can't make ends meet with $220 million?

I'm not going to debate the larger point, but I think using Omaha as a 
"comparable" doesn't make a lot of sense for Minneapolis.

I thought I'd compare taxes and property values for the house I grew up 
in (north 75th St. in Omaha) and the house I now live in (in Linden 
Hills), and see if Ms. Heller's comparison makes sense.

What I discovered is that Omaha has to tax its property at a rate which 
is 1.7 times higher than Minneapolis in order to generate its $80 
million in property taxes (versus Minneapolis, with $220 million at a 
lower rate).

In 1974, my mom bought a house on north 75th street in Omaha for 
$26,000.  In 1988, she sold that house for $43,000.  Today, the county 
assessor values the house at $82,400 (from the Douglas County, NE, 
website).  That's less than double the value in 16 years -- far less 
than the appreciation we've experienced in the Twin Cities.

Annual taxes on the Omaha house, a 1060 square foot, 3 bedroom, one 
bath, built in 1960, are $1768 (based on a valuation of $82,400).  By 
comparison, the house I currently live in, in Linden Hills, was 
assessed on Jan 1, 2003, at $250,000 (this has since gone up 
substantially), and we paid $3,104 in property taxes last year.

If I paid taxes on the Linden Hills house at the same rate as the house 
in Omaha, the 2003 tax bill would have been $5364, or 1.7 times the 
rate I'm paying in Minneapolis.

This comparison includes all taxes, city, county, and school district.

Why the difference?  I suspect Omaha has only a fraction of the "tax 
capacity" that Minneapolis does.  There's a great deal of unused or 
even distressed commercial real property in and surrounding downtown 
Omaha.  I was in Omaha two weeks ago, and driving along Harney or 
Farnam streets, between 20th and 27th, was shocking.  There are also 
miles and miles of small, post-war houses that do not look as if they 
are enjoying the run-up in property values  we've experienced here in 
Minneapolis.  Take Brooklyn Center or Richfield, multiply it by 2-3 
times, and put it inside the city limits (while cutting the value in 
half), and you get the idea.

The reason for this is, while Minneapolis is land-locked by its 
suburbs, Omaha is not.  There has been rapid growth towards the 
southwest, along the I-80 corridor between Omaha and Lincoln -- the 
"McMansions" everyone complains about have all been built inside the 
city limits because Omaha has been able to extend its boundaries to the 
previously empty land surrounding it.

Because of the ease at which new growth can occur outside Omaha, there 
is no shortage of land to drive up prices for the 50's and 60's tract 
homes now located in the middle of the city.  Also, unlike Minneapolis, 
where proximity to downtown and the promise of a short commute to work 
has pushed up property values in the city, downtown Omaha is not an 
economic center driving up residential property values based on 
proximity or short commute times (jobs in Omaha are more widely spread 
out than in the Twin Cities).

And, the fact that Minneapolis is at the center of a vibrant region 
where nearly 3 million people live, gives it both more tax capacity as 
well as expenses and obligations that Omaha does not face.  Minneapolis 
has far more amenities, be it parks, culture, or otherwise than Omaha 
(amenities that a metro area of 3 million demands, but which a small 
city of 400,000 can ignore).

Statistics can be twisted one way or another -- but to find a valid 
comparison to Minneapolis you'd have to find a relatively small, 
land-locked central city in the heart of a large metro area.  Seattle, 
perhaps.  Or San Francisco.

After all these years, it's time to put the "cold Omaha" comparisons to 
bed.

Greg Abbott
Linden Hills
13th Ward