“The Golden Goose”

 

Did you happen to catch the October 21, 2017 Star Tribune article, “In Minnesota lake country, cabin owners shoulder a big share of property tax burden,” written by John Reinan?

Reinan pretty much identified “the golden goose” when he divulged that Cook County ranks number one among Minnesota’s 87 counties when it comes to the percentage of property tax revenues generated by seasonal property owners – a significant 69 percent of the county’s property tax revenues! In comparison, Lake County generates 46 percent and St. Louis County 15 percent.

If you recall the “DO YOU KNOW?” February 4, 2017 column titled, “Comparing the Price of Local Government,” I addressed this issue of “tax exporting”– collecting tax revenues from nonresidents which, in effect, exports government costs to people who cannot vote for or against those imposing the taxes.

In the column I pointed out Cook County benefits, to a greater degree than any other county in the state of Minnesota, from tax revenues exported to those living outside the county.

Reinan further explains, “The state’s 124,000 cabin owners [3,137 in Cook County], many of whom live in the Twin Cities area, pay a hefty share of the property taxes in Minnesota’s picturesque lake country. In 10 of Minnesota’s 87 counties, they shoulder more than 40 percent of the residential property tax burden, according to data from the state Department of Revenue. And in several counties, they pay more than 50 percent.”

Cook County tops the list at 69 percent.

Mr. Reinan’s article quotes John Knoblauch, a homebuilder who lives in the Twin Cities suburb of Chanhassen and who owns lake property in Hubbard County. Knoblauch “and others say they often don’t feel like they have much voice in how that tax money is spent. That frustration has prompted many property owners in lake country to question the fairness of a system where counties rely so heavily on taxpayers who live there only a few months of the year.”

This sentiment rings loud and clear in Cook County. When I campaigned for commissioner–as you might imagine–there were a number of seasonal property owners who voiced their frustrations regarding the lack of fiscal responsibility on the part of local officials …and the fact that, as seasonal property owners, their opinions were not represented in the decisions affecting their property taxes.

Taxation without representation. Wasn’t there a well-publicized skirmish about that back in 1776?

This is precisely why the recent Cook County Taxpayer Survey included seasonal property owners in its sampling of opinions.

It is evident keeping and maintaining seasonal property is becoming a real challenge, given escalating costs associated with property taxes.

I’d venture to say every county in the state has budget problems. (Didn’t have to go too far out on the proverbial limb to make that assumption.) Solving these problems, on the other hand, has pushed some property owners too far out on that limb.

Budgeting requires reduced spending or increased taxes or both.

As we are witnessing, the arguments for each are emotionally charged and rarely supported by persuasive policy analysis. Cook County is no exception to the usual dogma accompanying taxing versus cutting arguments.

Cook County’s economy and geographic location make it a special tax case. As identified in Mr. Reinan’s timely article, Cook County depends on a disproportionate portion of its seasonal property owners for its revenues. These seasonal property owners could appropriately be labeled “The Golden Goose.”

But …only as long as these seasonal property taxpayers remain here. After all, seasonal property owners are not a static population. They are coming to and leaving Cook County …anyone notice the real estate “for sale” signs of late?

As long as the same number of buyers keeps up with the number of sellers, we will maintain a large enough number to help pay the bills. But if taxpayers stop coming or accelerate their departures, the total number here will decline and an essential component of our revenue base will be gone.

Priority number one for local tax policy should be making sure we don’t accelerate the departure – “kill the Golden Goose” – employing the English idiom.

There’s another reason not to take seasonal property owners for granted. A February 24, 2017 published study, “Busting the myth of the ‘rich’ cabin owner,” conducted by Minnesota Lakes and Rivers Advocates, an environmental- advocacy group that often focuses on issues relevant to lake property owners associations.

Jeff Forester, Minnesota Lakes and Rivers Advocates executive director, stated in the recent news release, “Minnesota is about to experience the largest intergenerational transfer of shoreline property in our history. Yet, the next generation will no doubt be stressed to pay for the medical bills and maintain the properties that will come into their ownership in the next decade.”

The group called the findings a “disturbing trend” because of the uncertainty it could create over the future of both seasonal property ownership and environmental stewardship.

Forester further clarifies, “By and large, lake home and cabin owners in Minnesota have average-to-low cash reserves, but probably higher than average net worth due to property they own. However, they are of an advanced age [55 percent of seasonal property owners are retired and over the age of 62 and 45 percent live on fixed incomes and are over the age of 65] and are about to face the highest health care costs of their lives.”

Key findings taken from the study:

Seasonal property owners do not have “higher incomes” and thus are not financially “more able to afford higher property taxes.” Average seasonal property owner household income in 2005 was $58,383. In 1999, the average seasonal property owner income was $58,504, and in 1995, $53,682.

Minnesota resident seasonal property owners occupy/utilize their properties, on average, only 55 days per year. They use far less of the tax funded services and facilities than year around residents.

75 percent of Minnesota seasonal property owners do not believe that there is a correlation between their tax bill and the services received.

Six percent of property owners said they might possibly sell their property in the next three years because it is no longer affordable for them to keep their property.

Given all the soaring goose down plumage, I suggest local leadership reacquaint themselves with Aesop’s Fable, number 87, whose instructive application teaches how to look after “The Golden Goose” and how to avoid shortsighted action that can destroy the value of an asset.

Former Cook County Commissioner Garry Gamble is writing this ongoing column about the various ways government works.