In Part 1 we reviewed why cuts alone will not free up enough tax dollars to provide relief. The next, even more painful subject is raising more tax dollars through a higher levy, and the math behind increasing the tax base.
How the levy is actually set
The city does not start with a tax rate and work backward. It builds a budget for the coming year, adds up every dollar it expects from sources other than property taxes, and sets the levy to cover whatever is left. For 2026 the city budgeted $3,109,821 in revenue across all funds. Of that, $777,032 comes from things other than property taxes: state aid, licenses and permits, charges for services, interest, and special assessments. The rest, about $2,332,787, is the levy Nowthen certified to the county to raise from property owners. The city plans to spend more than that revenue, about $3,984,005 in 2026, and it covers the roughly $874,184 difference by drawing down savings, most of which is set aside for capital projects like roads rather than everyday operations. That savings does not feed into the levy, though. The levy is simply the property-tax share of the budget: a fixed number of dollars the city spreads across every property in town. What that comes to as a percentage for any one owner depends on how large a tax base it is spread over.
The rest of this article explores how the tax base affects your personal tax rate. You have likely heard that one of the benefits of development is increasing the tax base. Most mentions of tax base leave it at that, usually as a justification for whatever development project the council is focused on for the moment. Unless you have had reason to, you probably have never delved deeper into the math. I know I had not until my work on the council last year. I am going to do my best to lay out the math without too much jargon. I have tried to make this as objective as I can. I am not advocating for any particular plan or future for Nowthen; I am trying to let residents see the math behind the options and decide for themselves. If you think I have made an error in my math or my assumptions, it is entirely possible, so please point it out and I will correct it as warranted.
What the tax base is
Every property in Nowthen has a taxable value assigned to it by Anoka County. For all property in Nowthen in 2026, the county tabulated a total value of $803,924,273. Depending on the property type, only a certain percentage of any individual property's value becomes part of the actual tax base, or tax capacity. For a commercial property, the first $150,000 of value contributes 1.5%, and 2% of any value above that. For agricultural land, such as farm fields, it is 1%. For a normal family home occupied as a homestead (not a second home), it is 1% of the first $500,000 of value and 1.25% above that. This math is applied to each individual property. Add it all back up and you get the city's net tax capacity, or tax base. For 2026 that local tax base is $9,197,371.
There is one more thing worth saying about that $9,197,371, because it is where most people get the wrong idea about who taxes them. The city is only one line on your property-tax bill. The same tax capacity the city taxes is also taxed by Anoka County, by your school district, and by a couple of small special districts. The county is the largest piece by far, and the city is one of the two smaller ones. So when someone is upset about their total property-tax bill, most of that bill is county and school, not the city.
Here is how it lands on the average Nowthen home. The county estimated the average homestead at about $480,372 of market value. After the homestead exclusion and the 1% residential class rate, that home's own tax capacity is about $4,789, its small slice of the $9,197,371 town-wide base. Every taxing authority then charges its own rate against that same $4,789:
| Taxing authority | Rate | On the average home |
|---|---|---|
| City of Nowthen | 23.69% | $1,135 |
| Anoka County | 31.85% | $1,525 |
| School: St. Francis (ISD 15) | 21.65% | $1,037 |
| School: Elk River (ISD 728) | 24.50% | $1,173 |
| Special districts | 2.55% | $122 |
| Total, one school district applies | $3,819 to $3,955 |
Your home sits in one school district or the other, so the total is $3,819 a year if you are in St. Francis schools, or $3,955 if you are in Elk River. The county is the biggest piece in both districts. The city is the smallest piece in Elk River; in St. Francis the school levy is actually lower than the city's, so there the city is the middle piece. Either way the city is far from the largest line on your bill. These are all the payable-2026 rates Anoka County published for Nowthen's taxing areas. School districts also add voter-approved levies charged on market value, so a real bill will differ a little.
Where the rate comes from
The rate is not simply the full certified levy divided by the tax base. Before the rate is figured, the certified levy is reduced by the city's fiscal-disparities distribution, the $153,744 Nowthen draws out of the metro commercial tax pool each year. The whole difference between the certified levy and the local levy is that fiscal-disparities amount (more on fiscal disparities in the commercial development section below). That money is already paid for by commercial property across the metro, so it is not charged to Nowthen property owners again. What is left after removing it is the local levy, and that is what actually gets spread over our tax base:
$2,332,787 certified levy − $153,744 metro fiscal-disparities distribution = $2,179,043 local levy.
$2,179,043 ÷ $9,197,371 = 23.69%, the city's 2026 tax rate.
That 23.69% is the rate Anoka County publishes for Nowthen. It is always figured on the local levy, not the full certified levy.
＋－Local levy vs. total levy: what is “fiscal disparities”?click to expand
The seven-county metro shares a slice of its commercial and industrial tax base in a pool called fiscal disparities. Every city contributes 40% of the growth in its commercial/industrial tax base to the pool, and then every city draws an amount back out based on its population and property wealth. Nowthen's distribution from the pool is about $153,744 for 2026. That $153,744 covers part of our certified levy, so only the remaining $2,179,043 has to be raised from Nowthen property, which is why the rate is 23.69% and not higher.
Obviously, if the levy increases and the tax base stays the same, the rate goes up. Do the math for a $1,000,000 levy increase with the same base: the local levy becomes $3,179,043, and $3,179,043 ÷ $9,197,371 = 34.56%.
If the levy stays exactly the same but the tax base shrinks because property values fall, the rate goes up too. Suppose every Nowthen property value dropped by 20%. The tax base would shrink by the same 20%, to about $7,357,897, and the same local levy over that smaller base gives $2,179,043 ÷ $7,357,897 = 29.62%. This is exactly what happened in the years after the housing crash around 2008: the tax rate went way up, not from a skyrocketing levy, but from falling property values shrinking the tax base.
The only two ways to lower the rate
The only two ways to actually lower the tax rate are to decrease the levy or to increase the tax base. Growing the tax base happens through property values rising with inflation and normal market cycles, or by converting lower-valued property into higher-valued property, in other words, development. Not all development is the same, though. Different types come with different pros and cons.
Residential development
Residential development certainly increases the value of land compared to the farm field or undeveloped land it replaced. The problem, especially with Nowthen's minimum 5-acre lots, is that it also adds costs the city must cover forever. It adds miles of road the city must maintain, plow, and replace. It adds population, not a bad thing in itself, but more houses and more people increase demands on the fire department, emergency services, and general city services, which means more staff, more hours, more pay, more equipment. Setting aside the hard-to-pin-down increase in service demand, let's look at just the added roads.
Nowthen currently has 59 miles of city-owned road. The 2026 roads budget is $537,725: the public works department (equipment, salary, and maintenance) plus the engineering line. The city also spends on capital road projects each year: the bigger overlays, patching, and full replacements done on a rotating basis. For the 2026 work, the accepted bid was $427,589.10. The city directly pays roughly half of that, and residents of the road being worked on are assessed the other half. These numbers are not final or exact, but half of that bid is $213,794.55. Add it to the roads budget and the city spends about $751,519.55 directly on roads. Broken down per mile: $751,519.55 ÷ 59 miles = $12,737.62 per mile.
For a new residential development, assume it adds a mile of road. Each residential property in Nowthen adds about $1,135 in city tax for 2026. But not all of that goes to roads; it covers every other city service too. Roads are only about 21% of the city budget, so of that $1,135, roughly $244 goes toward roads. To cover the $12,737.62 a mile of road costs, you would need about 52 homes on that one mile. With 5-acre minimums, that density is impossible. Packing ~52 houses onto both sides of a one-mile road would mean about 202 feet of road frontage each, and to stay at 5 acres the lots would have to be about 1079 feet deep. Technically possible, but unlike any other neighborhood in Nowthen. With the cost of maintaining the new road, at current 2026 rates, residential development does not actually produce more money for the city to reduce taxes or spend on roads.
＋－Wouldn't that per-mile cost drop as the city adds road?click to expand
It probably would, a little, and it is a fair point. The $12,737.62 a mile is an average across all 59 miles, not the price of the next one. A lot of the roads budget is fixed: the grader, the plow trucks, the crew, the engineering line. Those costs do not rise much when you add a mile, so spread over more miles the average maintenance cost per mile would fall. That is a real economy of scale, and it is mostly the capital projects, the big rotating overlays and rebuilds, that drive the number up.
But it does not rescue the math, for two reasons. First, that lumpy capital cost is not optional. Every mile of road, old or new, eventually comes due for its own overlay and rebuild, so a new mile does not escape that expense. It just defers it ten or twenty years.
Second, even if you set the capital project aside entirely and charge a new mile only the operating budget, that is still $537,725 ÷ 59 miles = $9,114 a mile, which would still need about 37 homes on that mile to cover. Five-acre zoning tops out far below that. So the exact break-even moves with scale, but not nearly enough to change the answer at rural density.
＋－Doesn't the city study this for real proposals?click to expand
It does. The city's own planner runs the lot-versus-road-length math on real proposed developments, and the road-funding article puts Nowthen's road costs next to peer cities: What Nowthen's roads cost, and why. The takeaway there is the same as here: at the densities our zoning allows, new homes do not generate enough to cover the roads they require.
Commercial development
The other type of development is commercial. Its benefit is density, and typically no new roads to maintain. Rather than invent a project, I will use a real one from recent Nowthen history, not to second-guess prior council decisions, but to put real numbers to the cost of decisions like it.
In 2017 and 2021, efforts were made to convert part of the property at 181st and Baugh to commercial. The 2017 effort was a smaller, roughly 41-acre commercial rezone; this piece follows the larger 2021 proposal, which would have converted 10 acres to commercial and developed another 100 acres as residential with parks and trails (about 110 acres in all). Grant Rademacher proposed building on that 10 acres of commercial land: a Bill's Superette and a liquor store, a corporate headquarters, warehouse, commissary, and an employee daycare. The council ultimately voted against it. The acreage remains farm fields and agricultural land today. Even generously assuming this ag land is worth $5,700 per acre, the 110 acres add $6,270 to Nowthen's tax base, and at the current city rate of 23.69% contribute $1,485.49 to the city in 2026. Apply that same math to just the 10 acres proposed for commercial, and that corner of ag land contributes about $135.04 to the city each year.
We can look at Bill's other locations for the value and footprint of a Bill's Superette and G-Will Liquors. The Oak Grove location has an Anoka County assessed value of $3,287,000 on 8.18 acres, a per-acre value of $401,833.74. Assuming each of the 10 acres carried that value, the commercial development would have a total value of $4,018,337.41. Run it through the commercial class rates and it adds $79,616.75 of tax capacity with just 10 acres. At the 23.69% city rate, the property itself would pay about $18,863 a year in city taxes.
But there is a catch, and it cuts the city's benefit. For commercial property, Nowthen only keeps about 60% of the new tax capacity locally; the other 40% is contributed to the metro fiscal-disparities pool (the same pool Nowthen draws its distribution from). So the city retains about $47,770.05 of new local tax capacity, and the city's own net new tax dollars from this 10-acre project come to about $11,318 a year, and importantly, with no new road for the city to own and maintain forever.
Putting the whole corner together
The 100-acre residential half is more complicated, because it would almost certainly add road and service costs. Assume 80 acres developed in 5-acre lots (leaving 20 for parks, trails, and road): that is 16 new homes. At about $1,135 each, they add about $18,160 a year to the city in tax dollars. But those 16 homes also add new road and services the city pays for forever, which I showed above tends to eat up most or all of that residential gain. The durable tax-base win in this example is the commercial 10 acres.
Start with the part that clearly pays for itself: the commercial 10 acres, with no new road for the city to own. Counting only its retained 60%, it nets the city about $11,318 a year and adds about $47,200 to the tax base. Holding the levy flat, that nudges the rate from 23.69% down to 23.57%, which saves the average Nowthen home about $6 per year.
If you also count the residential 80 acres at its full $18,160 gross, then minus what the 110 acres pay as farm field today (~$1,485.49), the city would take in about $27,992 more a year, adding about $118,124 to the tax base, dropping the rate to 23.39% and saving the average home about $14 per year. Call that the ceiling, before the residential road and services are paid for.
The entire purpose of this article is to show you the cost. Saying no to this development and keeping the 110 acres as farm field costs the average Nowthen home about $6 to $14 a year through higher taxes. Either way, it is a small number. Clearly even the bigger number is not enough to either reduce the rate much or to spend meaningfully more on roads. The tax-base problem is bigger than any one corner in Nowthen.
This is the real cost of keeping Nowthen rural versus developing agricultural land. When you make your opinions known to the council and to other residents, please keep this math in mind, so we can have an apples-to-apples conversation. Do the work. Test different scenarios yourself. Decide what kind of city you want and what you are willing to pay for it.
Try the numbers in the Tax Lab →← Back to Part 1: pick two of three