[Mpls] Mpls Property Values....what a relief!

[David Brauer]

On Feb 10, 2005, at 8:55 AM, Victoria Heller wrote:

> So the claims that "it's the Governor's fault" and "it's the=20
> Legislature's
> fault" turn out to be false.  The erosion of the commercial market in
> Minneapolis seems to be the real problem.  Office vacancies are 4 =
times
> higher than required for a "stable market".  Where have all of the
> businesses gone?

This misses the point.

While government policies are important, business/market forces are=20
arguably moreso. So you have to factor those in first. The factor: the=20=

commercial sector has been sluggish since 2000. Again, the metro=20
vacancy rate in the United Properties survey is 18.6 percent - so=20
EVERYHERE is "higher than required for a 'stable market.' Since Mpls is=20=

a titch above that, perhaps there's some local blame, but it pales in=20
comparison to the larger market forces.

Then you get to government policies. The biggest government policy=20
change has been the state's drop in commercial property tax rates.=20
Multiply a flat overall economy by declining tax rates and you get less=20=

money for the city. That's why the Gov and Legislature get most of the=20=

blame for Mpls's budget mess, and deserve it, IMHO.

> Unlike the Strib's property, my commercial property which is next to=20=

> an LRT
> station, had its tax valuation go UP.

If Vicky's property is apartments, I'd say there's potentially quite a=20=

bit of difference between Cedar-Riverside housing and a Downtown=20
commercial building. The Strib =97 which, as Steve noted, already had=20
excellent access for its employees =97 will benefit less than a building=20=

aimed at renters who are likely to be more transit-dependent.

Another reason apartment values ticked up is =97 ta da! =97 the Guv and =
the=20
legislature. They have "stepped down" apartment property-tax rates from=20=

the mid-2 percent range to 1.25 percent over the past three years.=20
Halved property taxes means a bigger cash flow for property owners and=20=

thus a more valuable property. (True, higher vacancies and lower rents=20=

might reduce fee-simple market-value evaluations, but I don't know how=20=

Vicky's property, if it is rental, has trended vacancy- and rent-wise.)

The paradoxical effect of the apartment tax cut is that the property=20
owners have more valuable buildings but government sees less revenue=20
from them.

Of course, there are a million other potential reasons why the two=20
properties would have different valuations. Without more evidence than=20=

one factor (LRT), it's difficult to draw a strong conclusion.

David Brauer
Kingfield
Editor, SW Journal and Skyway News=