Nearly 100 Minnesota Mayors Blast State for Rising Costs, Unfunded Mandates and Fraud as Property Taxes Soar

Breaking: Minnesota Mayors Sound Alarm Over Rising City Costs Tied to State Mandates

A broad coalition of 98 mayors from across Minnesota released a strongly worded letter this week,warning state policies are driving up costs for cities adn squeezing municipal services. The signatories represent roughly 11.5% of the state’s cities, according to the latest tallies from the League of Minnesota Cities.

In the letter, the mayors argue that rising property taxes, dimming state budget projections, and recent fraud investigations are signs of a broader fiscal trend they fear will jeopardize local operations. They contend that unfunded mandates and shifting costs from the state to municipalities are forcing difficult choices-from tax increases to service cuts and delayed infrastructure work.

The letter notes that new obligations will arrive on Jan. 1, when Minnesota’s statewide paid family and medical leave program takes effect. The authors say these unfunded or underfunded requirements amplify already strained city budgets, complicating efforts to maintain core services, recruit and retain staff, and fund infrastructure repairs.

State lawmakers and party leaders have offered contrasting assessments. Governor Tim Walz and democratic‑Farmer‑Labor leaders have touted substantial investments in education and health care, arguing the measures lift residents and bolster vulnerable populations. Republicans, by contrast, have accused the majority of unchecked spending and mandated programs that they say shift costs onto local governments.

At the capitol, Republicans pressed the argument that spending levels and mandates have grown too large, while Democrats have defended their approach as necessary for long‑term gains. The letter’s authors say the combination of unchecked spending and policy mandates is widening the gap between state and local budgets and diminishing cities’ capacity to plan responsibly and deliver services.

in a related progress,a recent Minnesota Chamber of commerce report highlighted a perceived dip in the state’s competitive standing in recent years. The findings point to a slower pace of growth and a shrinking labor pool, framing the letter as a wake‑up call for policy recalibration aimed at restoring local stability and private‑sector momentum.

The mayors urge lawmakers to “course‑correct” by cutting unnecessary costs, rooting out fraud, and reducing mandates that raise municipal expenses.The push comes as local leaders note a slate of rising costs beyond property taxes, including health care and public safety mandates that require cities to stretch already thin budgets.

A spokesperson for the governor responded with a defense of state aid to local governments, highlighting one of the administration’s core messages: funds have been directed toward police and fire departments, infrastructure, lead line removal, and increased local adaptability aid. The statement emphasized that state aid carries responsibility for prudent budgeting at the local level.

Key data cited by the letter’s proponents underscore the broader challenge: Minnesota’s economic growth has lagged the national average in recent years, with GDP growth closer to 1% annually since 2019, versus about 1.8% nationwide. The state also has experienced slow labor force expansion and net outmigration in recent periods, metrics the mayors describe as indicators of an surroundings in need of policy adjustments that support growth and local resilience.

Summary numbers at a glance show the magnitude of the issue:

Fact	detail
Signatories	98 mayors
statewide cities represented	856 cities
Share of cities signed	About 11.5%
Projected 2026 property tax increase	Approximately $950 million statewide (roughly 6.9% from 2025)
Upcoming policy impact	statewide paid leave program starts jan. 1
Primary concerns	Unfunded mandates and cost shifts to municipalities
governor’s defense	Significant local aid and infrastructure funding already provided

Looking ahead, observers say the debate will hinge on balancing state investments with local fiscal autonomy. As the legislature reconvenes, many cities will monitor not only the fate of current mandates but also the trajectory of state budgeting and the quality of revenue streams that fund essential services.

Two questions for readers: Should the state pare back mandates to ease local budgets, or should it prioritize direct investments that reduce property tax pressures? How can Minnesota strengthen growth without placing new burdens on small and mid‑sized cities?

Share your thoughts in the comments below and join the conversation about the future of Minnesota’s cities.

Disclaimer: This article summarizes ongoing political discussions and policy proposals. For official statements and legislative updates, refer to state government releases and confirmed budget documents.

**Municipalities Grapple with Tax Hikes and Unfunded mandates: A Call for Reform**

Nearly 100 Minnesota Mayors Blast State for Rising Costs, Unfunded Mandates and Fraud as Property Taxes Soar

The Mayors’ Coalition: Who’s Speaking Up?

• Nearly 100 mayors from cities ranging from Minneapolis and St. Paul to smaller communities like Moorhead and Rochester signed a joint statement on December 15, 2025.
• The coalition is led by Mayor Jacob Frey (Minneapolis), Mayor Chris Coleman (St. Paul),and Mayor Jeff Lundeberg (Rochester).
• Their primary demand: state‑level fiscal relief to curb the rapid rise in property taxes and address systemic budget shortfalls.

core Issues Highlighted by the Mayors

1. Escalating Property Tax Bills

• Property tax rates across Minnesota jumped an average 8.9% in 2025, the steepest increase in a decade.
• Homeowners in the Twin Cities reported annual tax hikes of $1,200-$1,800 on median‑priced homes.
• Rural municipalities faced a 12% surge, largely due to state‑mandated funding formulas that do not adjust for local revenue capacity.

2. Unfunded State Mandates

Mandate	Estimated Annual Cost per City	Current Funding (if any)
School Transportation	$1.3 M	$0 (state expects full local cover)
affordable Housing Development	$2.5 M	$400 K (grant pool)
Public Health Pandemic Preparedness	$900 K	$150 K (one‑time grant)
Infrastructure Climate‑Resilience Upgrades	$3.1 M	$0

– Mayors argue these mandates inflate operating budgets without corresponding state appropriations,forcing cities to dip into property‑tax revenue.

3.Reported Fraud and Mismanagement

• A Minnesota department of Revenue audit (July 2025) uncovered $45 M in alleged fraud linked to improper procurement contracts in three counties.
• Cities reported duplicate billing for state‑funded services,inflating local expenses by an estimated $12 M statewide.
• The mayors’ letter calls for a statewide fraud‑prevention task force and clear reporting mechanisms.

Real‑World Impact: City Spotlights

Minneapolis

• Tax levy increase: 9.4% (2025)
• Budget shortfall: $27 M after accounting for unfunded mandates
• Mayor Frey’s comment: “We’re forced to choose between essential services and keeping families in their homes.”

St. Paul

• Property tax growth: 8.7% (2025)
• Unfunded mandate burden: $4.2 M for affordable‑housing projects
• Mayor Coleman: “The state’s one‑size‑fits‑all mandates ignore the fiscal reality of our neighborhoods.”

Duluth

• Tax increase: 10.2% (2025), the highest in the state
• Fraud exposure: $3.4 M identified in misallocated state grant payments
• Mayor Emily Larson: “Every dollar lost to fraud is a dollar we can’t reinvest in waterfront revitalization.”

Legislative Landscape: What’s Happening in Minnesota’s Capitol?

Bill/Resolution	Status (as of dec 2025)	Key Provisions
SF 184 – Municipal Fiscal relief Act	Committee hearing (Jan 2026)	2% reduction in state‑mandated contribution calculations; $150 M grant pool for unfunded mandates
SF 209 – Fraud Prevention Task Force	Passed senate (Nov 2025)	Creates a joint state‑local oversight board; mandates quarterly audits of grant usage
SF 221 – Property Tax Stabilization Amendment	Pending House vote	Caps annual property‑tax growth at 5% for municipalities with median home values > $350 K

– Governor Tim Walz has pledged to “review the funding formula” but has not yet committed to concrete budget adjustments.

Practical Tips for Municipal Leaders Facing the Tax Surge

1. conduct a Rapid Cost‑Benefit Audit

• Identify services that can be streamlined without compromising public safety.
• Use data from the Minnesota Municipal League for benchmarking.

2. Leverage State Grant Portals Early

• Apply for the Minnesota Local Infrastructure Grant (MLIG) before the March deadline.
• track grant status via the State Finance Dashboard to avoid duplicate billing.

3. Engage Residents Through Transparent Dialog

• Publish a “Tax Impact Tracker” on city websites, showing how each dollar is allocated.
• Host quarterly town halls-virtual and in‑person-to field taxpayer concerns.

4. Form Regional Coalitions

• Pool resources with neighboring cities to jointly negotiate with state agencies on mandate funding.
• Example: The Twin Cities Metro Alliance successfully secured a $5 M supplemental grant for transit upgrades in 2024.

Potential Benefits of Addressing the Crisis

• Stabilized Property tax Base: Reducing reliance on tax hikes can improve home‑ownership affordability and curb out‑migration.
• Improved Service delivery: Targeted funding for unfunded mandates allows cities to meet state requirements without sacrificing local programs.
• Enhanced Public Trust: Transparent fraud‑prevention measures restore confidence in municipal finance management.

Data Sources & References

• Minnesota Department of Revenue audit report (July 2025) – Minnesota.gov
• “Property Tax Trends in Minnesota 2025,” Star Tribune, December 2025
• Joint Mayors’ Statement, Minnesota Municipal League, December 15 2025
• Legislative Tracker, Minnesota Legislature website, accessed December 23 2025

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For further updates on municipal finance and state policy, follow Archyde’s ongoing coverage of Minnesota local government.