Mayor Rybak's 2013 Budget Address to the City Council
As a kid growing up in Minneapolis — a place filled with parks and lakes and bike trails — I knew I was living in the greatest summer city anywhere. But there was one thing I hated about vacation: I knew that when I got back to school, my teacher would make me write the dreaded essay, How I Spent My Summer Vacation. It meant that instead of relaxing and having fun all summer, I had to waste brain space worrying about creative ways to describe what I was doing:
"Jumped off diving dock at Lake Harriet. Went camping with Cub Scout troop. Tried to throw a knuckleball. Rode bike to Porky's and Putt Putt."
I was thinking about this recently: what if I had to write one of those essays on how I spent the last 11 summers since I became Mayor?
"Did budget. Sat in rooms with spreadsheets and whiteboards. Listened to people a lot smarter than I am. Realized $1 billion is a lot of money — until you realize how much you actually have to get done with it."
If some had told me before I started that I would spend a decade of beautiful Minnesota summer days locked in back-to-back budget meetings, I wouldn't have been very happy. But looking back on what we have done in a decade, it's been worth it. We should all be proud that we have put this city back on strong fiscal ground. We have been willing to take political heat, break conventional wisdom and take risks.
Tackling the toughest issues
A decade ago, we faced a set of problems that seemed insurmountable: but one by one, we have tackled them, despite two recessions and a never-ending fiscal crisis at the State.
Think about our progress:
Paying down debt. A city that 10 years ago was in a fiscal crisis, whose bond rating had been devalued because the City had piled too much on the credit card, once again has a perfect credit rating. This is because we have paid down or avoided $241 million in debt.
Paying down debt means that we can borrow for more productive priorities at lower rates of interest, which is important for the aggressive road improvements roads this budget makes.
Reforming closed pensions: Ten years ago, we were staring a long-term fiscal disaster in the face, in the form of taxpayers’ exploding obligations to several closed pension funds. In the case of two of those pension funds, the deck was severely stacked against us.
It took years of heavy lifting to get this monkey off taxpayers’ backs, but we succeeded: in 2011, the last of these pensions were finally merged with the State’s PERA system. While the merger was a compromise and did not give taxpayers everything we wanted, it has provided much-needed stability and predictability.
And this year, we are finally retiring all of our pension debt.
Partnering with employees: While too many politicians are quick to criticize hard-working public servants, in Minneapolis, we have taken a different tack: we have partnered with our workforce. We are not Wisconsin. Through a decade of tough fiscal choices, we have worked together to make cost-saving reforms to employee health care without sacrificing quality, and we have agreed to hold all of our salaries in check, which has allowed us to save jobs and hold down the growth of property taxes.
Target Center: People who object to paying "stadium taxes" often forget that Minneapolis property taxpayers have been paying them for many years, because of the 1994 deal for Target Center. Since that time, Minneapolis property taxpayers have paid $110 million for Target Center.
For most of the last 10 years, there seemed to be no end in sight to these annual stadium taxes. But now, because of the new stadium legislation, the burden of Target Center on our property taxes will be less, to the tune of $5 million a year. Thank you, Council President Johnson and the six other Council members who partnered with us: you delivered $5 million in property-tax relief and kept Minneapolis residents from paying millions more in future stadium taxes for Target Center.
Tackling these big issues has saved taxpayers money. Had we not:
- paid down our debt,
- merged the closed police and fire pensions
- and partnered with our employees to hold the line on wages,
property taxes in 2012 would be 35 percent higher than they are now.
- The owner of a $138,000 home would be paying $303 more.
- The owner of a $216,000 home would be paying $527 more.
- And the owner of a $536,000 home would be paying $1,143 more.
Watching our spending
We’ve also saved taxpayers money by watching our own spending, year after year. Compared to 10 years ago and not including transfers, the City of Minneapolis is spendingonly 4 percentmore — while the State of Minnesota is spending 30 percent more. And in 2013, our spending decreases by $35 million, or more than 3 percent.
But there is no free lunch and there are real-life impacts to the decade of sustained cuts that we have made. We have 12 percent fewer full-time positions than we had 10 years ago. This means some very good public servants no longer work for the City of Minneapolis, and other very good public servants are doing a lot more.
Reforming service delivery
Watching our spending is essential, but too much of public debate is about whether to invest or cut. The truth is that we have to do both — and we have to reform the way we deliver services.
That's the difference between governments that react to a crisis by simply cutting services and those, like ours, which have maintained or even improved services. For example:
- Merging our libraries with the County system allowed us to keep them open for significantly more hours than we could have if we hadn’t made that reform.
- Reforming staffing for snowplowing in partnership with our employees allowed us to significantly cut costs without cutting service.
- Instituting 311,which an independent expert just called "the best-run call center of its kind,” has allowed us to improve service dramatically, and our new smartphone app expands service even more. This budget keeps staffing at current levels but I hope to open negotiations to provide service to other governments and institutions, which may bring in revenue to support longer 311 hours for our residents.
Reform is not just an option, it's a necessity. We simply don't have the luxury of doing things the same old way.
So this budget proposes a major reorganization of our Regulatory Services Department that will cut administrative costs and provide better service to our growing businesses. The proposal is to move the parts of Regulatory Services that now work with business — business licensing and our one-stop Development Review — to the Department of Community Planning and Economic Development. The intent is to streamline the way businesses interact with the City and send a clear message that Minneapolis government is here to grow your business, not slow your business.
As part of this plan, the Environmental Management division would move to the Department of Health and Family Support. The remaining functions would form a smaller, more targeted
Inspections Department focused on enforcement.
This move, if approved, will be the most significant internal restructuring of City services since 2002, when we formed CPED. By eliminating a top tier of management we will save $300,000–400,000 in the first year alone and provide better service.
This proposal grows out of many years of input from our residents, businesses and staff. We need much more. I have asked City Council leaders to work on an internal team with City Coordinator Paul Aasen to improve this plan and put it into action by the first of the year.
Let me turn to Investing in the future.
It’s our job to control spending, deliver reforms and tackle the toughest fiscal issues. But it’s also our job to invest. We stand on the shoulders of those bold and visionary enough to build a Minneapolis of great roads, bridges, schools, parks and one of our country's best water systems. We, too, need to invest to pass on an even greater Minneapolis to our children and grandchildren.
In this budget, we invest in two areas that are the bedrock of healthy neighborhoods: strong infrastructure and safe streets.
Investing in infrastructure
We’ve closed a lot of different deficits in Minneapolis in the last 10 years: a financial deficit, a safety deficit, an unemployment deficit — and in recent years, a pothole deficit. Because make no mistake about it: a pothole, as a symbol of roads and streets that need repair, is an infrastructure deficit. And like any other deficit, we will not pass it off to future generations.
In 2008, this is what our capital-improvement plans for our streets looked like. We realized we needed to do more, so five years ago, after a massive investment in public safety that made Minneapolis dramatically safer, we started the Infrastructure Acceleration Program to start catching up.
With one year left of that program, we have improved 104 additional miles of streets. Put that on top of what we had already planned and the map of improved streets looks like this.
Last year at this time, I said we had to go further. I proposed, and am grateful you passed, a five-year capital-improvement budget that is 60 percent larger than we had previously planned. As a result:
- This year, we will resurface or sealcoat 70 miles of streets.
- Next year, we will invest 300% more in improving our roads in 2013 than we planned for just two years ago.
With all this investment, now look at what the map of streets improved through 2016 will look like.
Two of the streets being completely redone this year are ones everyone notices:
- Nicollet Avenue, which we are rebuilding from Lake Street to 36th Street this year and 36th to 40th Streets next year. I drive Nicollet a lot of mornings and have to say that both my alignment and I are very happy.
- Riverside Avenue. Coupled with the renovation of Riverside Plaza and the completion of the Central Corridor light rail line, the West Bank will be one of the country's most physically well-connected and economically vibrant neighborhoods.
A lot of us have been thinking about infrastructure lately, because we just marked the fifth anniversary of the 35W bridge collapse. We said at that time we would never again take our infrastructure — the common ground we all share — for granted. The progress we are making on bridges as well as streets shows we are delivering on our promise.
- The Plymouth Avenue Bridge will be open once again to traffic in October while we continue work on it for another year.
- We have broken ground on the Van White Bridge that will directly connect North Minneapolis to South Minneapolis.
- We will begin structural repairs on the 10th Avenue Bridge in 2014, creating exciting bike and pedestrian links between the West Bank, the University, Downtown, Marcy Holmes and Northeast.
- And let’s remember that we rebuilt the Camden Bridge just two years ago with federal economic-recovery dollars.
We are continuing to fund bicycle infrastructure: by the end of his year, Minneapolis will have 182 miles of bikeways that serve nearly 32,000 people every day. A real gem that this budget funds is the Bluff Street bike trail, which will finally connect the University of Minnesota trail on Bridge No. 9 to the downtown riverfront along South Second Street.
Some may ask why we don't spend some of the money that goes to roads and infrastructure on other needs, like hiring police or firefighters. Remember that spending for infrastructure does not come from our property-tax-supported General Fund that pays for police and fire: it comes from selling bonds that can only be used on capital improvements and cannot be used on personnel.
And as I explained last year, we can only make this major ongoing investment in infrastructure because of years of a smart financial strategy that paid down debt and let us restore our AAA bond rating. Paying off the financial debt has allowed us to fix the infrastructure debt.
We aren't just spending more on infrastructure; we are also reforming how we deliver services.
- We are partnering with our Public Works employees and their unions to create new job classifications that will make our workforce more versatile and flexible.
- We are budgeting $100,000 less this year for road salt for snow and ice control. That's because the “Smart Spreaders” that we funded a few budgets ago apply salt more efficiently. As a result, we expect to spread 5,000 fewer tons of salt this winter. That’s great for the bottom line, and great for our lakes, rivers and creeks.
Investing in public safety
We are investing more in our streets — and more in making them safer. Making Minneapolis a safe place to call home has been the top priority of City leadership for the last decade.
Broken down by City goal, in 2012 we are spending fully 56 percent of property-tax-supported General Fund dollars to make Minneapolis “A Safe Place to Call Home.” And we have gotten results:
- In 2011, violent crime was down 42 percent compared to 2005, for a 28-year low.
We still have challenges to meet that will take investment, but before I talk about how we will spend more money on police, I want to highlight how we are doing a more effective job with the dollars already in the budget.
- Using smart technology and cutting-edge analytics, our department has become a national leader in predictive policing. Our police don't just react to where crime has occurred: we are increasingly able to predict where it will occur and prevent it before it happens.
- Our Downtown 100 initiative, which just won another national award for our police and city attorneys, has led to a 74 percent decrease in violent crimes committed by chronic offenders.
- This budget invests another $165,000 in the Youth Violence Prevention initiative that has led to a 59 percent drop in youth involved in violent crime since 2006. As we reach the five-year anniversary of this initiative, the Police Executive Research Foundation and attorney Andy Luger are launching an independent review of our successes and challenges, and will propose best practices from around the country for us to integrate.
- Our partnerships with community-based partners have taken tremendous pressure off our police and their budget. None has been more critical to our efforts, and given so much hope at times of great despair, as V.J. Smith and MadDads. This budget provides a $50,000 grant to Mad Dads and I will join V.J. in his upcoming fundraising campaign. So should all of you.
All of that work makes our police more effective, but we need to put our money where our mouth is, so this budget increases the Police Department budget by $2.5 million next year for three things:
- Continued funding for the community service officers that we will promote to sworn officers in September.
- A new class of non-sworn community service officers to be hired in January.
- A new recruit class to be hired as sworn officers next March.
Together these three actions should allow us, if attrition occurs as projected, to have 10 additional officers on the force by next summer when we need them most.
We are also investing in the Fire Department, which an outside report recently praised as efficient and well operated, with excellent response times. This budget invests $1.1 million more for personnel in this budget, and in each of the next five years. I also propose starting a new recruit class this year, using one-time 2012 dollars.
We are putting more General Fund money into hiring in Fire, and we are also getting more because we won a SAFER grant of just over $1 million from the Obama Administration. We were only able to accept this grant after we worked with a coalition of other cities and mayors to make the terms of this federal program more flexible. We have also applied for another SAFER grant that helps hire military veterans as firefighters.
Putting more in the Fire Department equals planning for the future. Our Fire Department is rapidly aging, in part because we have had historically low attrition in recent years. As a result, the average age of a firefighter is now 46. At some point, we could see a surge of retirements, so we need to be building homegrown staff for the future.
This potential “Silver Tsunami” is not unique to Fire and Police. Over the coming year we will be working with other departments to identify how we get the next generation of city employees in place so we don't face a worker shortage in a few years.
Investing in housing
Infrastructure and safety are the twin pillars of strong cities. But in these tough economic times we have to do more, especially to build and preserve housing and spur economic growth.
This budget continues our long-term investment in affordable housing over the past 11 budgets, with strong support from leaders like Council Members Goodman and Quincy.
From 2003 to 2012, the Affordable Housing Trust Fund invested $82 million to create 6,500 units of affordable housing for low-income residents. That investment also added $600 million to the tax rolls. This budget continues our investment in the Affordable Housing Trust Fund and Heading Home Hennepin, our 10-year homelessness collaboration with the county.
In its first five years, Heading Home Hennepin moved more than 350 people off the street and into housing, and created more than 2,400 housing opportunities for low-income households. This work is even more impressive when you consider it was done in the middle of an economic calamity that put many, many more people on the street.
This budget also puts renewed focus on middle-class homeownership.
In last year’s budget speech, I said that while Paris has the Eiffel Tower and San Francisco the Golden Gate Bridge, Minneapolis is defined by strong middle-class neighborhoods: miles and miles of houses not too big and not too small. These neighborhoods are the bedrock of one of the strongest middle classes of any big city in the America.
But that bedrock is weaker than it was. For many years, 93 percent of single-family homes in Minneapolis were homesteaded. Last year that fell to 80 percent, and in some neighborhoods it was much lower. The median sales price of single-family homes fell 16 percent from 2007 to 2011.
This budget invests in stabilizing neighborhoods and helping people stay in their homes.
First, we continue to fund a suite of successful programs that grow a new generation of single-family homeowners: that includes Minneapolis Advantage, City Living, Bridge to Success and Home Ownership Works. HUD Secretary Shawn Donovan praised this work as a national model, and helped us expand the work with $34 million through the Neighborhood Stabilization Program. Take a look at what we’ve done with it.
Now we have another tool. Wells Fargo just announced it will make $7.2 million available in downpayment assistance through a program called Neighborhood Lift, which will fund more than 400 forgivable grants of $15,000 apiece to spur home ownership in Minneapolis. It is available to all buyers using any lender for any home in Minneapolis. Anyone looking to buy in Minneapolis is invited to an event at the Convention Center on September 7 and 8 to see if they qualify. We thank Wells Fargo for this investment.
This budget also continues to fund our foreclosure-prevention efforts. The foreclosure crisis hit Minneapolis hard: from 2007 to 2011, more than 12,000 properties were foreclosed on. The rate has slowed dramatically: in 2012, we are on track for less than half the foreclosures of 2009. Unlike then, many of our foreclosures today are investors, instead of homesteaders. But this number is still too high, so we need to step up our efforts.
In the last five years, we have funded a partnership with the Homeownership Center, which worked with homeowners and lenders to help prevent 1,473 foreclosures. Their success rate is high: counselors are typically able to help two-thirds of homeowners who seek their help to avoid foreclosure.
I am also announcing a new effort called Project Homeowner Connect. Modeled after the very successful Project Homeless Connect, the Homeownership Center will pull together under one roof a wide variety of service providers, including lenders, who will on helping homeowners stay in their homes, including those who have fallen behind. We aim to hold Project Homeowner Connect at least three times a year, because it doesn’t take long for a homeowner with the best of intentions to start falling behind on a mortgage.
In addition, the Homeownership Center will begin holding regular hours in City Hall, to make their services even more accessible.
Another new homeowner-retention effort in the last year is a deferred-loan program called the Rehab Support Program. This City program targets middle- and lower-middle-income homeowners who find that unexpected home repairs put them in danger of foreclosure or walking away. It is currently funded by the State of Minnesota, and we have applied for more State funding to double the program.
Foreclosures obviously hurt the homeowner but they also can destabilize a neighborhood and hurt the values of everyone who leaves nearby. We have seen this have dramatic consequences in some neighborhoods, especially North Minneapolis.
We realized we needed a "big bang" to restore confidence and excitement to the Northside housing market, so at my State of the City speech in April we announced a bold new effort.
Green Homes North will build 100 green homes on City-owned vacant lots in North Minneapolis over the next five years. We just sent out the RFP to build the first 20 homes this year. Green Homes North will:
- provide sustainable, affordable housing;
- create good, green construction jobs for local residents;
- support local green businesses by sourcing materials through them;
- set new standards for innovative green planning.
We believe that these homes will also restore value and vitality to the blocks where they are built and to the entire neighborhood.
The City of Minneapolis has acted and will continue to act. Banks, lenders and financial institutions also need to do everything they can to prevent foreclosure, by negotiating with homeowners to reduce interest rates, clear the way for more refinancing and short sales, and reduce principal. Far too often, however, homeowners in trouble can't master the complex home-mortgage system. Banks and lenders need to step up voluntarily and do more to help them.
The City needs to work with lenders — and if necessary, put pressure on them to do more to attack this crisis. I'm interested in working with Council Member Glidden on considering if we should require the City’s depository institutions to report more data about what they are doing to work with homeowners to prevent foreclosure. I thank the advocates from Jewish Community Action and other groups who have brought this idea forward.
The foreclosure crisis, however, is national in scale. We will get some additional help in addressing it from a recent national settlement that will provide much-needed refinancing and principal reduction for homeowners whose mortgages are underwater. But there's a catch: the settlement exempts Fannie Mae and Freddie Mac, who own or insure up to 60% of all home mortgages in the country.
The Federal Housing Finance Agency, which oversees Freddie and Fannie, steadfastly refuses to write down any principal on underwater mortgages. The effects of this intransigence in Minneapolis, where Fannie and Freddie own or insure half the mortgages of properties facing foreclosure, are devastating. That's why last month, the City Council and I added to the City’s federal legislative agenda the demand that the FHFA establish a principal-reduction program.
Investing in growing the economy
Investing in the common ground that helps everyone succeed, and making sure it’s safe. Investing in stabilizing middle-class neighborhoods and helping people find and stay in their homes. These are the right investments for this city to make, but we must invest in growing our economy, too.
During the toughest years of the great recession, our investments in helping people find jobs have made a difference. Some results:
- In 2011, 4,843 Minneapolis residents received employment and training services through Minneapolis Employment and Training Programs.
- Of them, 572 low-income adults were placed in jobs earning an average of $12 an hour, and 339 dislocated workers were placed in jobs earning an average of $19 an hour.
- One person we helped in is Muna, an East African immigrant who received tuition assistance from METP to get an associate’s degree in nursing. Within weeks of graduating, she accepted an RN position at Fairview-University Hospital, where she is now making $30/hour with benefits.
Because of efforts like these, Minneapolis’ most recent unemployment rate fell to 5.5 percent, the lowest since the recession began in late 2008.
Minneapolis has fared far better through the recession than other large cities — but it’s still true, as I said in last year’s budget address, that Minneapolis has the largest gap between white and African American employment of nearly all other large cities. For this reason, this budget continues to invest in the One Minneapolis initiative, a partnership of CPED and Civil Rights, which aims to reduce and ultimately eliminate this disparity.
One of the most successful aspects of One Minneapolis is the RENEW initiative. Initially funded by economic-recovery dollars from the Obama Administration, RENEW trains and places people who have faced challenges finding employment in green-economy jobs. We’ve gotten strong results here as well:
- We have trained close to 500 people through RENEW, and placed two-thirds of them in good, green jobs in the 21st-century economy.
- One is Gwen. She completed a 5-month training program at Summit Academy in North Minneapolis, where she studied green roofing and weatherization. Two months after graduation, Gwen got a job with Mortenson Construction and is currently working on the Union Depot project in Saint Paul, earning $26 per hour.
We are also training the workforce of tomorrow. Since we started STEP-UP in 2004, we have placed almost 16,000 Minneapolis young people in good-paying summer jobs with most of the city's best companies and nonprofits. More than 85% of them are kids of color.
This summer there were 1,850 young people working in STEP-UP, including two in my office: Miriam Demello and Eduardo Sanchez Beltran.
- Miriam graduated from Southwest High School and is starting at the Hamline University this fall, majoring in philosophy and legal studies.
- Eduardo graduated from Roosevelt High School and is starting at North Central College in Naperville, Illinois this fall, majoring in broadcast communications and Spanish.
No one needs to ask: this budget continues funding for STEP-UP. It also doubles our investment in Urban Scholars, a new effort we started this year to open the doors of City Hall to a new generation. In the front row is our first class of college students of color who worked here all summer and we hope will someday work in city government.
We have invested in people, and we have also invested in helping businesses succeed. Some success stories:
- Open Access Technologies moved into their new corporate headquarters in Northeast Minneapolis with $25 million in City-issued industrial revenue bonds and has added nearly 100 more professional jobs in the past year.
- We have also invested in a wide variety of food-related businesses, a very fast-growing sector of our economy.
- Two leading commercial kitchens — Kindred Kitchen in North Minneapolis and Kitchen in the Market at the Midtown Global Market — are thriving as a result of Great Streets and 2% loans.
- And we have provided a variety of tools to ten different breweries and brewpubs, six of which have already opened their doors — including Indeed Brewing in Northeast Minneapolis, whose grand opening I attended last week with Council Member Kevin Reich. Indeed Brewing is adding 100 jobs to that neighborhood.
But often, we can lay the ground for growth without spending a dollar. Take the Grain Exchange, where I delivered the budget address last year. I talked then about how CPED staff helped connect CoCo with Project Skyway to locate their innovative co-work space for tech and marketing entrepreneurs in the former Grain Exchange. Since then, more technology-related businesses and organizations have moved into the Grain Exchange building, including the Minnesota High Tech Association.
Last week, I cut the ribbon at Outsell, a fast-growing digital marketing firm that moved 100 employees into Capella Tower. This rapid expansion of high-tech across downtown started with very low-tech means: CPED staff simply picked up the phone and pounded the pavement.
Now, as our economy begins to show signs of growth, is not the time to reduce our support for the infrastructure of CPED-led business support, housing development and workforce asset-building that brought us through the recession. Now is not the time to roll back the planning and development review pipeline that facilitates the growth projects we need.
As the city's economy shows strong signs of recovery, as the construction cranes once again rise above our streets, as our unemployment falls and our population rises, this is the time to seize the opportunities of growth and guide it. Growing the city's economy grows our tax base, the same tax base that funds this city government and the vital services our residents expect.
Although Minneapolis’ commercial tax base lost $1.5 billion in value from 2008–2011, commercial properties with CPED investment grew in value by $300 million.
Another way we are growing the tax base is through the new development infrastructure fund in the capital budget, a partnership between CPED and Public Works that we passed last year to invest in public infrastructure that spur more development. This year, we have leveraged County infrastructure funds for a new project in Prospect Park, and we have started to pay for additional infrastructure at the Franklin station along Hiawatha.
I am proposing to expand this program in 2013 in order to:
- allocate resources for our work to reopen Nicollet Avenue at Lake Street,
- partner with Hennepin County along Penn Avenue in North Minneapolis,
- and fund needed street work in the West Bank, where several new development projects are in the works.
All of these investments will help us to grow the tax base and add density near our transit investments.
CPED is a proven revenue-generating arm of the city and investing resources in CPED today means we will have the resources, through a stronger tax base, to fund the police officers, firefighters, and street repair in years to come. This is why the budget I'm proposing continues to invest in CPED’s growth infrastructure.
But investing in CPED now is only part of the solution. In 2014, we will have exhausted the short-term funds that carried CPED's budget in recent years, and without new revenue and dramatic reorganization, we will not be able to provide the services we do today into future years. As a result, fewer homes will be built, fewer jobs will be created and our tax base will suffer.
Addressing this longer-term challenge head-on with innovative ideas and tough decisions is a top priority on which I know our new CPED director is focused.
I spoke just now about how we’ve used our business tools to help the hospitality sector grow. That sector is poised to grow even faster with the upcoming investment of $1 billion in the new Vikings stadium and the renovation of Target Center, anchored by a Convention Center with a stable, guaranteed funding source through 2046.
It’s important to remember that the reason that Council President Barb Johnson and I joined the discussion over a new Vikings stadium was to lessen the burden of the Target Center stadium taxes that Minneapolis property taxpayers alone were paying, and to jolt our economy, particularly in the construction sector.
With the help of a majority of the Council and the Legislature, not to mention Governor Mark Dayton, we succeeded. Starting in 2013, Minneapolis property taxpayers will be paying $5 million less per year for the Target Center, a facility used by more than one million people a year. We transferred the burden of that cost off of the backs of Minneapolis property taxpayers and onto everyone who pays sales or hospitality taxes in Minneapolis every year, which includes many people from outside Minneapolis.
But the impact of the stadium legislation goes beyond just reducing the Target Center stadium taxes, because for the first time ever, we won direct control of the revenues of four sales and hospitality taxes collected in Minneapolis — as well as some flexibility in how to spend them.
At a historically modest growth rate of 2 percent a year, these hospitality taxes will generate enough for us to pay for all of our obligations at the Convention Center and Target Center, renovate the Target Center and finance the local share of the Vikings stadium.
However, the average annual growth rate of these taxes over the past 15 years has been 2.7 percent, so over time, we can reasonably expect that there will be excess revenue. Indeed, in 2012, the revenue generated from those taxes is coming in at 4 percent higher than last year.
Fortunately, the stadium legislation gave us control of these excess revenues to spend on infrastructure and economic development.
Which leads us to this year’s property taxes. If you add up everything in this budget — especially adding new spending for police and firefighters, investments in infrastructure and growing the tax base — it would lead to a property-tax increase of 3.4 percent. But because you passed the stadium package that reduced the property-tax impact of Target Center, we have $5 million this year in property tax relief. That's nearly a 2 percent property-tax decrease (1.786 percent to be exact.) That means that I am proposing a tax increase of 1.7 percent, or half what it would have been without the stadium legislation.
Moreover, because our increase is modest and because commercial properties are shouldering more over the overall property-tax burden this year, 70 percent of Minneapolis homeowners should feel no increase — or will even feel a decrease — in the City portion of their property taxes in 2013.
Any increase is a burden, but I want to thank Council President Johnson and Council Members Kevin Reich, Diane Hofstede, Don Samuels, Meg Tuthill, John Quincy and Sandy Colvin Roy for courageous leadership that made it possible to put more cops and firefighters on the street, make significant investments in paving, bridges and grow the tax base — while cutting a property-tax increase in half. And for making it possible to deliver that property-tax relief each year, for many years into the future.
Remaining challenge: Local Government Aid
We have made great progress in Minneapolis. If we had not taken on these big, tough issues — pension reform, paying down debt, partnering on wage policy with employees — the financial impact would have equaled either a 35% property increase in the property taxes paid by everyone in Minneapolis, or massive cuts to basic services like police, fire and public works.
One huge challenge of that scope remains: Local Government Aid. The revenue-sharing partnership with the state is broken, and our property taxpayers are footing the bill. Minneapolis sends $445 million more to the state than we get back, but the State's contribution to the City has been cut by a staggering $459 million dollars since 2003. This means we are using far more property-tax dollars to provide basic services:
- In2003, LGA supplied 40% of Minneapolis’ General Fund revenue, while property taxes supplied 29% of the revenue.
- But in 2012, LGA is supplying just 17% of General Fund revenue, while property taxes are supplying 47% of the revenue.
For the first time in years, there is a chance to change this dynamic and deliver relief to our property taxpayers. Governor Dayton is making good on his promise to reform this partnership, and his Revenue Commissioner Myron Frans has appointed me to co-chair a committee of Minnesota mayors charged with bringing a new plan to the upcoming Legislature. In the meantime,
- Council President Johnson sits on a Minnesota House panel looking at the formula,
- Council Members Hodges is moving this issue forward statewide in her role as president of the League of Minnesota Cities,
- and Council Member Glidden, who chairs our Intergovernmental Relations Committee, is leading an internal working group to help define City goals for the reform.
Local Government Aid is about as wonky an issue as you can get, but it has an impact on the daily life of everyone who lives and works in Minneapolis: the safety of your neighborhood, the condition of your streets, snowplowing, our public health, the vitality of our commercial corridors and so much more will get better or worse depending on our revenue sharing partnership with the State. We have to get this right.
I spent Friday in Granite Falls with the LGA committee that I co-chair. It was so powerful to be at the table with mayors from around Minnesota, most of whom I've gotten to know over the years fighting seemingly unwinnable LGA battles at the Capitol. Suddenly, there seems to be a way to take on this issue that seemed unsolvable.
Those of us in City Hall know that feeling, because we have been tackling seemingly unsolvable issues for a long time: pensions, Target Center, debt, infrastructure gaps, the list goes on. But one by one, we’ve solved them, and that has set up a budget that delivers a great value to a great city.
So it's been a great way to spend my summer vacations. And I look forward to spending the fall with you putting our ideas into action.
Published Aug. 15, 2012