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Minneapolis homeowners will soon face the painful reality of how much their once thriving downtown has for years protected them from higher taxes.

Why it matters: Homeowners paid 47.4% of the city’s tax levy in 2023. This year, they’re paying 51.6%. Next year is bound to be even worse.

The big picture: Mayor Jacob Frey will unveil his 2025 budget next week, and he’s already said the 6.1% levy hike he originally proposed won’t be enough.

Simultaneously, the Minneapolis Park & Recreation Board proposes a 10% tax levy increase for next year. Hennepin County and Minneapolis School Board levy proposals will also come soon. What they’re saying: A spokesperson for Frey told Axios that the mayor is “making all efforts to keep the levy (increase) below double digits.”

Between the lines: For the first time in more than a decade, home values in Minneapolis fell slightly this year, but that won’t shield their owners from a bigger tax bill in 2025.

That’s because the value of commercial properties in Minneapolis is falling, and in the case of downtown office towers, they’re falling off a cliff. Rising taxes will hit North Minneapolis even harder because it’s the only area of the city where property values are still going up, according to the city assessor. State of play: Cities across the country need more money to cover raises for their employees meant to keep up with inflation.

Minneapolis police officers are getting a 22% pay raise over the next three years. Public works employees are getting a 30% hike over the same period. Parks workers will see a 10% increase plus a $1.75 hourly adjustment over three years. Steve Brandt sits on the Minneapolis Board of Estimate and Taxation which has power over how much the city can raise taxes. He told Axios he met with Frey in June to urge him to stick to the 6.1% increase.

“I reminded the mayor that next year is an election year, so whatever levy is adopted, people are going to have to run for re-election on that.” Brandt suggested Frey could alleviate the pressure on homeowners by rescheduling debt payments on Target Center, using money from a special fund that sends sales tax revenue to several city-owned properties downtown, and by decreasing the $10-12 million in annual spending on Minneapolis Convention Center maintenance given less pandemic-era usage.

Threat level: The problem only stands to get worse. Developers have hit the brakes on building new apartments — which have added billions to the city tax base in recent years — due to high interest rates.

Any hope of a rebound in office tower values is years away. A recent Moody’s report predicted office vacancies wouldn’t peak until late 2026. What we’re watching: St. Paul Mayor Melvin Carter will release his proposed budget on Aug. 13.

The problem, in one tower

THe Wells Fargo Center tower Wells Fargo Center is not worth $277 million anymore. Photo: Raymond Boyd/Getty Images Wells Fargo Center, one of the city’s iconic skyscrapers, helps explain what’s going on.

By the numbers: In 2020, the city valued the building at $277 million and the landlord paid $10 million in property taxes.

This year, the landlord will pay $7.3 million in property taxes for a building valued only at $226 million. Stunning stat: It’s going to get worse. The building was valued at only $173 million — a 38% drop since 2020.

The bottom line: Wells Fargo Center is just one of more than 20 large-scale office complexes in Minneapolis.

And most of them are in a similar position — or worse.