Tuesday, March 27, 2012

Property Tax Trouble in Duluth

Duluth is a city of 86,265 people, an incredibly important port city for the region and a hotbed for tourism. It also has a growing property tax problem. The City of Duluth, like many cities across the U.S., relies heavily on property taxes for its revenue. In the past five years and with a damaging recession impacting the city, it has increasingly done so.

In the past 5 years, Duluth's property tax levy has increased from approximately $10 million to $16.5 million, or 65%. In 2006, property taxes accounted for 8% of the City's revenue. By 2011, that percentage reached 15%.

               












In the past 5 years, Duluth's property tax levy has increased from approximately $10 million to $16.5 million, or 65%. In 2006, property taxes accounted for 8% of the City's revenue. By 2011, that percentage nearly doubled to 15%. 

Meanwhile, the population only grew from 85,170 people to 86,2015, an increase of only 1,035 people. During the same time frame, property taxes went from $118 to $191 per person, or a 63% gain.


The increasing property tax burden on its citizens isn't the only problem. Property tax levy outpaced the tax capacity in the last five years. The levy by the City increased by 50% from 2006 to 2011, while the capacity only rose 31%. During that time, the increase in levy was larger than that of the capacity for four of the last five years, with a 10 percent difference in 2009.



These dramatic increases would trouble residents residents of any city, but the citizens of Duluth in particular are feeling the pinch by these taxes. Duluth's per capita income of $23,845 is good for 256th out of the 867 places in Minnesota, and it has a lower median household income than the state at large. The case can be made that relying on property taxes for a greater portion of the city budget is more harmful to Duluth residents than it would be in a wealthier city.


Additionally, Duluth is facing an aging infrastructure that has seen a 9.7% increase in maintenance costs in the past 10 years, and has had to reduce overall expenditures 6% in the last few years. In order to decrease the property tax burden, we recommend eliminating operations that require heavy subsidy and deliver few results, such as the Great Lakes AquariumDuluth should advocate for a return to previous levels of Local Government Aid (LGA), which was cut $1.2 million in the 2011-2013 State Budget. 


Duluth should look toward developing its regional presence music, theater and other forms of arts culture, which will result in an increase in tourism dollars, sales taxes and motel taxes. Revenue from these gains can be used to help relieve the strain of property taxes.








1 comment:

  1. Justin-

    Are you from Duluth by chance? I grew up in Duluth, so I found this post incredibly interesting.

    First off, interesting analysis and good topic. LGA is key for Duluth. We obviously heard that from the audio link in class.

    Those interested might also want to look at the effect that the "red plan" or long-range facilities plan passed by the Duluth School Board has on property taxes. This was a controversial school board decision a few years ago that was done without a referendum.

    See the link below for more information from MPR.

    http://minnesota.publicradio.org/display/web/2008/04/03/duluth/

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