Tower’s new construction will offer tax advantages

TOWER— It’s been a remarkable, even unprecedented, year for new construction here, with two major developments along the city’s harbor and East Two riverfront.
Once completed over the next year or two, the projects are expected to generate millions of dollars in new tax base for the city. With 14 planned twin homes and at least ten new apartments and several hundred square feet of commercial space at the harbor, and six single family residences under construction behind the Marjo Motel, the two projects can be expected to add at least ten million dollars in total market valuation in the city.
That would amount to a 20 percent increase on the city’s current estimated market value of $50.06 million, enough to make a noticeable difference to the city’s finances.
That new valuation would provide a substantial boost in the city’s tax capacity, the final amount dependent on how the new development is ultimately classified. The tax capacity of residential properties is calculated at one percent of total valuation, although that jumps to 1.25 percent for values over $500,000. The tax capacity of commercial properties is calculated at 1.5 percent up to $500,000, and two percent for values above that level.
That’s according to Brandon Larson, tax division manager at the St. Louis County auditor’s office.
But even considered conservatively, the new developments are likely to add at least $100,000 to the city’s tax capacity. That would be a 21-percent increase over the city’s calculated tax capacity of $464,982.
So, what would that mean for city taxpayers? All things being equal, the taxes on a $100,000 home in the city would see its annual property tax decline by about $160, according to Larson.
Of course, Larson notes, things rarely stay equal. Valuations change periodically on properties, which can affect the taxes the owners pay. Taxpayers in our region pay into a fiscal disparities pool that can raise or lower taxes based on a complicated formula. Other tax programs, like tax increment financing, can impact taxes as well. And local governments can raise their levy, which could reduce or even eliminate any tax savings.
But there’s an upside even if the city were to increase the levy, since the higher tax capacity means the pain is more widely shared. With a higher tax capacity, the city could increase its levy by $100,000 and city property taxpayers might well avoid a tax increase. Under the city’s current tax capacity, taxpayers could anticipate a levy increase north of 20 percent to raise that same $100,000.
A more moderate scenario, in which the city raised its levy by $50,000, most taxpayers in the city could still expect a modest tax reduction, at least on the city portion of their tax bills. That’s where expanding a city’s tax base can yield a real win-win for a small community.
“You’re making the pie bigger,” said Larson. And that generally makes the load carried by any one taxpayer, just a little bit easier.
The larger tax base probably won’t be in place immediately. According to Larson, the valuations are calculated in early January, for the following year. Residential properties still under construction as of January 2027 may not become part of the city’s tax base until the following January, in 2028. And those valuations would be calculated for determining the city’s tax capacity for the 2029 levy.