In Part 1 we reviewed why cuts alone will not free up enough tax dollars to provide relief in our budget. Now we get to the even more painful subject: raising more in tax funds through a higher levy — and the math behind the “it grows the tax base” argument you hear at every development hearing.
How the levy is actually set
The city plans out its budget for the following year. It decides what to spend from savings to fund that budget, predicts the revenue it expects from sources other than property tax, and then sets the tax levy for the difference. For 2026 the budget is $3,109,821 across all categories. The amount covered by non-property-tax revenue and spending from savings is $777,032. The difference between those two numbers — about $2,332,789, essentially the $2,332,787 certified levy — is the amount the city has to raise through property taxes. The city does not set a percentage rate and work backwards from it. It sets the budget, deducts other funding sources, and then charges all property owners in the city the total amount. What that works out to as a percentage for each taxpayer depends on how much 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 100% objective. 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.
Where the rate comes from
There is one subtlety here that trips almost everyone up. 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 pulls out of the metro commercial tax pool each year. That money is already paid for by commercial property across the metro, so it does not get 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 easy to land on a higher number by dividing the full certified levy by the tax base, but that double-counts the part of the levy the metro pool already covers; the rate is always figured on the local 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, with little commercial property of its own, is a net winner: we receive about $153,744 more than we put in. 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
Aside from those, 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 public works budget is $484,725, almost all of it for roads — equipment, salary, and maintenance. 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 public works budget and the city spends about $698,519.55 directly on roads. Broken down per mile: $698,519.55 ÷ 59 miles = $11,839.31 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 $238 goes toward roads. To cover the $11,839.31 a mile of road costs, you would need about 50 homes on that one mile. With 5-acre minimums, that density is impossible. Packing ~50 houses onto both sides of a one-mile road would mean about 213 feet of road frontage each, and to stay at 5 acres the lots would have to be about 1024 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.
＋－Doesn't the city study this for real proposals?click to expand
It does. The city's own planner ran the lot-versus-road-length math for this very corner, and the road-funding article walks through it alongside the peer-city numbers: Why Nowthen's roads are a tax-base problem. 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 2021 proposal would have converted 10 acres to commercial — one concept by Grant Rademacher placed a Bill's Superette and a liquor store, plus a corporate headquarters, warehouse, commissary, and an employee daycare — and developed another 100 acres as residential with parks and trails. 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. Split off just the 10 acres for comparison and that corner of farm field contributes about $135.04 a year — that is its $570 of tax capacity times the 23.69% rate, not $570 of tax dollars (a common place to slip).
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 is a net winner 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. The honest complication — and I want to be straight about this — is that 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. So treat the residential side as, at best, a wash; the real, 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% — a saving for the average Nowthen home of about $6 per year. That is the honest floor.
If you also count the residential 80 acres at its full $18,160 gross — treating its new road and service costs as a wash, which is the optimistic end of what I showed above — 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.
And that is the entire purpose of this article: to show you the cost. Saying no to this development and keeping the 110 acres as farm field costs the average Nowthen home somewhere between about $6 a year — the commercial piece that plainly pays for itself — and at most $14 a year if the residential side is a wash. Either way, it is a small number. That is the honest takeaway, and it cuts against the wishful thinking on both sides: development is not the tax windfall its boosters imply, and saying no to it is not the budget catastrophe its opponents fear.
I am not making a judgment here or advocating for any particular outcome. This is real math and 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 and not one based on wishful thinking about budget cuts. 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