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LEGISLATIVE COMMITTEE , REPORT COMMERCIAL/INDUSTRIAL PROPERTY TAXES -- IS THERE A SOLUTION? A great deal of effort has taken place over the past several years to educate members of the Minnesota Legislature on the issue of commercial/industrial pro- perty taxes. Today, based upon a National Property Tax Survey undertaken by this Chapter of NAIOP, the property taxes on a typical office/warehouse building in Minnesota averages 162% higher than for 22 other cities included in that survey. Commercial/industrial properties pay a disproportionate share of the property tax burden. Throughout the State these taxes as a per- cent of market value range from 5-9% for commer- cial/industrial properties, as Iow as Vz of 1% for farm properties and approximately 1% for single family homes. The ability of both local and State legislators to fund their spending increases from business property owners is a reflection of the overly complicated and unfair classification system that we have and the extensive use of credits to reduce taxes, sometimes for political reasons. In the State of Minnesota commercial/in- dustrial properties are assessed at 43°'/o of their market value and it is to this number that the mill rate is ap- plied to determine the exact taxes that a particular pro- perty will pay. For other properties this same figure ranges from 14% to 34%. None of the credits ap- plicable to single family homes, farms and other select properties apply to commercial/industrial properties. Several members of the Chapter recently had the op- portunity to meet with the Commissioner of Revenue, Tom Triplett, and Assistant Commissioner of Tax Policy, John Haynes. We met with these two in- dividuals to determine and understand the proposal that Governor Perpich is planning to put forth on pro- perty tax reform. The Governor has, in the past, given his very specific commitment to a significant reduction in commercial/industrial property taxes. In fact, recently and in his State of the State address the Gover- nor committed to take Minnesota out of the top ten in every specific tax category. We hope that this also ap- plies to commercial/industrial property taxes. Com- missioner Triplett and Assistant Commissioner Haynes indicated to us that the Governor's program was, in- deed, an extensive simplification of the classification system, with a reduction in the number of classes from over 60 to between five and seven individual categories. This is fine but by itself will not solve our problem. As a part of the simplification process we are looking for a significant reduction in the 43% figure that applies to commercial/industrial properties and possibly a restructuring of the credit system. We plan on meeting again shortly with Commissioner Triplett and Assistant Commissioner Haynes to determine if, indeed, the Governor's program meets with our goals. NAIOP would like to see an overall reduction, over a five year period, from the current level of approx- imately 5% of market value to 2V,% of market value with a significant downpayment on this during the 1987 Legislative Session. Equally important we would like to see the necessary restructuring in the system to protect commercial/industrial property owners from future increases above justifiable levels. As a part of our continued efforts, we will continue with the process of meeting with small groups of Legislators to educate them on this cause. To this date we have met with 23 members of both the Senate and the House Tax Committees and wii continue this pro- cess. We plan on putting in place an advertising pro- gram to inform the general public at large of this issue and will back up any approach we take with sound financial analysis. We plan on continuing our discus- sion with other business groups for the purpose of maintaining pressure on our Legislature from all possi- ble sources. We are currently putting together a series of case studies of companies who have left, in part, because of the high level of these taxes. In the end, if necessary, we will have a bill written and our Legislative lobbyists, the O'Connor & Hannah law firm, will be directed to take this bill through the political process. LONG RANGE PLANNING COMMITTEE NAIOP has discussed for years the concept of establishing a Long Range Planning Committee for the purpose of staying on top of issues are not solely Legislative in nature, they are principally in this area and for this reason it has been decided to establish such a Committee as a subcommittee to the Legislative Committee and headed up by Al Beisner. This group will not only be meeting to brainstorm ideas on their own but will also be looking for significant feedback from and communication with our members at large. If any of you have any thoughts on this or would be in- terested in serving on this Committee please call Al Beisner at 560-6829 or call me at 835-5932. Richard V. Martens Legislative Committee Chairman NAIOP NATIONAL CONFERENCE · FEBRUARY 10 - 15, 1987 Marriott's Harbor Beach Resort, Fort Lauderdale, Florida