Andy Babula, director of the real estate program at the University of St. Thomas Opus College of Business, recently spoke with the Minneapolis St. Paul Business Journal about how appeals on commercial property values in Minneapolis have reduced tax revenues.
From the story:
Some of the largest commercial properties in Minneapolis have filed appeals on their assessed property values. While some appeals are still pending, those resolved so far resulted in hundreds of millions of dollars in reduced property values.
Of the 25 highest-valued commercial properties in the city as of last year, all but two petitioned their property values, according to data provided to the Business Journal by the Hennepin County Assessor’s Office...
Ultimately, the significant drop in the values of big office buildings isn't as impactful to overall property tax revenues as some may think. If assessed values of Class A downtown office properties declined by 50%, the reduction would represent only about 1% of the total property tax revenue in the city, according to a study called Falling Valuations and the Impact on Tax Revenue done by Andrew Babula, director of the real estate program at the University of St. Thomas, and a couple of his students.
"It wasn't as significant as it may be, but it still has an impact," Babula said. "You have that combined with increasing costs, etc., collectively, that can be painful to bear for other property owners in the city of Minneapolis."...
Looking ahead, Babula anticipates challenges to continue in the office market, especially as tenants keep downsizing and loans on properties become due. "We'll likely see more distressed sales, potentially foreclosures, not across the board, but we'll see enough that [that will] continue to put downward pressure on property values."
