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To the Media: You're Forgetting Just One Thing

   

An article topping the Star Tribune’s Metro Section on May 2, 2005, announced “GOP pushing cut in renter’s credit.” The hard news was that the Pawlenty administration proposed to save $113 million over three years by cutting the percentage of rent paid represented by taxes from 19 per cent to 16 per cent in 2007 and then to 15 per cent in 2008. The article by Patricia Lopez cited “a Revenue Department study that found that, on average, 15 percent, not 19 percent, cover landlords’ property tax bills” due to a 2001 cut in the tax rate.

I recognized that political reality that Gov. Tim Pawlenty was burnishing his reputation among political conservatives by holding to his “no new taxes” pledge; taxes raised by local governments due to cuts in state aid don’t count. Whatever holes might be found in the state budget can be plugged by cuts in spending, even ones like this which hit poor people the hardest.

My eyebrows were raised, however, by the Department of Revenue “study” showing that local property taxes account for a reduced percentage of the rent paid in Minnesota. What study? I emailed Patricia Lopez who suggested that I contact the Revenue department. I spoke with someone in the commissioner’s office who referred me to someone else who has not yet returned my phone call. I wanted to know if authors of this study realized that property taxes paid represent a combination of the tax rate and the assessed value of a property, not just the rate. Did they have data showing that assessed values had risen more slowly than the one-time cut in the tax rate?

Evidently, reporter Lopez did not consider the matter of assessed values important since she did not mention this anywhere in her article. What she did mention caught my attention. She wrote: “Renters’ advocates have argued that landlords were under no obligation to pass the 2001 property tax on to their renters and that many did not. To penalize renters by cutting their rebates now, said Nan Madden, budget director for the Minnesota Budget Project, would amount to a double-whammy. Most renters didn’t get any kind of rent cut when the property taxes were cut,’ she said.”

In the following paragraph, Ms. Lopez quoted David Strom, president of the Minnesota Taxpayers League, to the effect that the rent transfer is an “income transfer” - i.e., a relic of class warfare. Farther down, Lopez wrote: “That renters did not benefit from the 2001 property tax ‘is not government’s issue,’ Strom said. “That’s a market function. People can complain to their landlords. They can negotiate with them.’”

Here was a clear statement that the Republican-controlled state legislature would not be responsible if the cut in the rent credit hurt poor people. Government had done its part with the 2001 tax cut. It was the evil, greedy landlords who were responsible by refusing to pass along the savings from the cut in tax rates on apartment buildings that state government had so generously provided four years ago.

I did a quick study on the property taxes that I have paid during the past five years on my nine-unit apartment building in Minneapolis. I found that my taxes increased from $3,132 in 2000 to $5,051 in 2005. Sure, the tax declined by 11% between 2001 and 2002 when the rate reduction first went into effect; but in dollar amounts, the tax increased by 61% over the five-year period even taking into account the effect of the 2001 rate reduction. That is because the assessed value of the property was increased by 168% during the five year period.

I had, in other words, no tax savings to pass along to my tenants. Sharply increased taxes and business insurance are responsible for most of my cost increase but there are also other culprits such as city water and sewage, waste disposal, and gas to heat the building.

I wanted to learn if my experience was typical of the experience of other landlords in my situation. So I drove around my neighborhood jotting down addresses of other apartment buildings. The city’s web site gives the history of assessed values for each property over a number of years along with the current year’s and the previous year’s taxes. The seven properties which I researched had a combined assessed value of $1,166,000 in 2000 and $2,738,800 in 2005, representing an increase in assessed value of 135% during the five-year period.

I did not know what was the increase in taxes. But comparing my 168% increase in assessed value with the combined total of 135%, I would estimate that the seven properties together paid 40% to 50% more in property taxes in 2005 than in 2000 - even after the 2001 cut in rates. Other landlords I know have told me that these figures are in line with their own experience.

So the Minnesota Department of Revenue “study” has produced an improbable conclusion; no wonder the person involved with it will not return my call. Two days later, the Star Tribune decided to revisit the topic in an editorial. While the editorial writers had the good sense to oppose the cut in the percentage for the renter’s rebate, they also repeated the erroneous argument which the reporter had made: that the pain to tenants was caused by the failure of landlords to pass along the savings from the cut in tax rate.

The Star Tribune editorial said: “Fairness might justify such a change if rents had dropped after landlords’ property taxes were cut in 2001. But no cut materialized for most tenants.” And, again: “It strains logic to cut tenants’ disposable now because their landlords got a tax break four years ago that most did not pass along to their tenants.”

Ms. Lopez, Mme. editorial writer, there was no tax break for landlords. Whatever cut was made in the rate in 2001 has more than been offset by the huge increase in the asessed value of our properties. Therefore, we had no savings to pass along to tenants. Don’t you realize this? Didn’t you know that real estate taxes reflect a combination of rates and assessed values? Any normally intelligent homeowner would.

I thought the factual error material enough to write letters of complaint both to Scott Gillespie, the Star Tribune’s managing editor, and to Susan Albright, editor of the Editorial Page. Sharing my data with them, I proposed that the newspaper do its own study to see if taxes on apartment buildings in the Twin Cities have, in fact, declined in the period that would be affected by the 2001 cut in the tax rate. To date, neither has responded.

I was, however, interested to read in the paper on Sunday, May 15, 2005, an article by Gillespie’s and Albright’s boss, Anders Gyllenhaal, the paper’s executive editor, claiming that the Star Tribune was “work(ing) hard to retain your trust.” His column claimed that the Star Tribune was “among the first in the nation to hire a reader’s representative. It takes an aggressive approach to errors, places enormous emphasis on accuracy, and lists staff contacts throughout the paper.” It does list staff contacts; I doubt if the other two statements are true.

With respect to the reader’s representative, she was busy that day writing about news coverage of women’s sports though it was unclear that anyone had complained. She obviously felt that there should be more coverage. That’s the sort of topic that interests the feminists down at the Star Tribune, not grubby little things like the amount of the renter rebate check for people who rent apartments.

All I can say is that if General Motors put out a product as shoddy as the Star Tribune, you would hear about it from Ralph Nader, assorted newspapers and television stations, and Attorneys General. The Star Tribune, which enjoys a near monopoly in Minneapolis among daily newspapers, evidently does not feel it has to do much about this problem except to have top editors periodically boast of the paper’s concern for quality.

The Star Tribune got the facts wrong for the main point of its lead article in the Metro Section. It then repeated the error in an editorial. Finally, the paper has apparently decided not to correct the error after it has been pointed out to top editors. Whatever Mr. Gyllenhaal says, this newspaper appears not to give a hoot about fairness or quality. I could be wrong - maybe a legitimate study will indeed show that my own experience has been atypical. But this has not yet happened.

Finally, let me say that David Strom, president of the Minnesota Taxpayers League, ought also to know that property taxes, which are a form of taxation, reflect a combination of assessed value and the tax rate. If he doesn’t know this, he should not be in the business of tax policy. But I doubt if he cares about what happens to people who rent apartments in poorer sections of the city. The ballgame for him and Pawlenty is protecting income-tax cuts for the movers and shakers who fund their respective enterprises and, of course, advancing their own careers.

Bogus or not, a study is a study - Who the heck cares?

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