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Austin Pushes Businesses to the Brink with Potential 15 Percent Levy Hike

Minnesota’s high income and business taxes put our state near the top of the least taxpayer friendly states in the union. But some local tax levy rates can be just as onerous, even in Greater Minnesota.

Tonight, for example, the Austin City Council will consider approving a nearly 16 percent hike in the local levy. Much of the burden falls on small business owners, who told the Austin Daily Herald they’re already stretched to the breaking point.

Randall Fett currently owns 12 commercial properties in Downtown Austin. Some of his tenants include George’s Pizza, Rydjor Bike Shop and Heartman Insurance.

And like some commercial property and business owners in Austin, he has concerns about the proposed 15.7 percent tax levy increase.

“Taxes can make or break a small business,” he said. “Small businesses pay so much in taxes, it’s crazy.”

Wants, not needs, appear to account for much of the $932,000 proposed levy increase from $500,000 for a study of the city’s wage and job classification system to a new community rec center.

Property taxes are based on valuation and classification of the property, with commercial/industrial properties paying 3 ½ to 4 times what residential property owners pay. An increase of 15.7 percent in 2019 would equal a $396 increase for a commercial property valued at $281,500, a $503 increase for a commercial property valued at $347,300, and a $1,558 increase for a commercial property valued at $997,900.

Austin Area Chamber of Commerce Director Sandy Forstner has expressed concern about the consistency with which the tax levy has been increased, pointing out it will be a 60 percent increase in the span of four years.

“People think it’s not a big increase, but this is on top of all of the other taxes,” Fett said. “I used to run Ooh-La-La for four years and the taxes were crazy. That’s one of the reasons I closed that business. It got to a point I wasn’t making a profit. It seemed like everything went to taxes. I finally called it quits. It wasn’t worth the hassle.”

Other business owners in town may not be far behind.

Fett said that he pays more in taxes than most people make in a year. Any increases in taxes are passed on to the businesses that lease his property. The increases, he said, do not come without complaint.

“Businesses are trying to survive and make a profit and everything cuts into them,” he said. “I don’t know if any of them will leave based on that, but I know they won’t like it.”

One of Fett’s tenants is Lisa Deyo, who owns Sweet Reads Books and Candy on Main Street.

“Speaking as a small Main Street business in its first years of operation, I am overwhelmed by the constant cost of maintenance, taxation, and general expenses of running a business in an aging building,” she said. “We (small businesses) are continually reviewing our budget lines and adjusting, which I do believe and have faith that our city council members are doing. Sandy (Forstner) certainly brings to light many concerns about this levy. Where is that double-digit levy going to come from? My bottom line.”

Regardless of how the city council votes, the Austin’s tax levy will have risen more than 50 percent in the last four years. The city’s motto of “growing together” seems to apply more to the city budget and tax levy and the key city bureaucrats’ salaries: City Administrator ($138,507),
Public Works Director, ($118,643) and Director of Administrative Services ($114,275).

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