This piece appeared as a Guest Column in today’s (December 29) Northfield News.
For pretty much most of this century, owners of commercial property in downtown Northfield have been complaining about steadily and substantially rising property taxes. Since 2000, these building owners have experienced annual average tax increases of 30%. Think about it, their property taxes have risen 30% each year for the past seven years.
Almost all of these building owners live in Northfield. Comparing their residential property taxes to their commercial property taxes effectively illustrates the issue. During these same seven years, their residential property taxes gone up about 10% per year. For example, on a residential property for which they were taxed $1,200 in 2001, they were taxed $2,100 in 2007. On a commercial property for which they were taxed $3,000 in 2001, they were taxed $14,500 in 2007. That’s a $900 increase in residential taxes and an $11,500 in commercial taxes over the same number of years.
Both residential and commercial property owners pay property taxes from the same source: their income. Typically, the residential taxpayer’s income comes from their employment. The commercial income source is rent paid by business or residential tenants, at least in theory. Unfortunately for building owners, in recent years market rents have not kept up with the increases in property taxes.
Most of the buildings in downtown Northfield are old, many are historic. If rental income is relatively flat and the property tax costs are steadily and substantially rising, there is less and less cash flow for maintaining these older buildings. In fact, in recent years, some building owners have had to dip into their savings to make needed repairs. Even more discouraging, some are being forced to tap savings just to pay their property tax bills. Essentially, they are personally subsidizing the preservation and operation of these historic structures. Increasingly, owning a building is less a profitable business venture and more a labor of love.
There are as many theories about how this situation developed as there are theorists. Different downtown building owners probably have different ideas about the causes of their plight. However, at the end of the day they all agree, something has got to be done about it, and now.
Some of us who don’t even own downtown commercial property also think something needs to be done about it. We believe that trends that threaten the economic vitality of our downtown present an economic risk to the broader community.
That sense of place, and community pride that it fosters, inspires citizens to leadership and promotes civic involvement. Many of us believe that having our downtown buildings owned by people who live here helps assure that they will be preserved and enhanced. It also gives us hope that the necessary financial investments and essential volunteer efforts in the community will be made.
Downtown building owners are not asking for a reduction in their property taxes. They are not expecting future increases in their property tax bills to be zero. All they are requesting is that future tax burdens be more equitably distributed and that their property tax costs rise at a rate that is in line with their other costs.
With a more equitable distribution of the tax burden and tax increases that are in line with other expenses, building owners have a chance to make their economics work. If they can make their building economics work, our downtown has a better chance of remaining economically viable. If the downtown remains economically viable, Northfield will continue to attract good families, creative individuals, inspired entrepreneurs, and innovative businesses.