Mayor Rybak Outlines 2012 Budget that Controls Property Taxes and Spending

Proposed levy increase of 2 percent is significantly smaller than 6.7 percent increase previously projected; Mayor holds 2012 spending nearly flat as spending drops over 10 years

August 11, 2011 (MINNEAPOLIS) — In a message to the City Council today, Minneapolis Mayor R.T. Rybak today outlined a City budget for 2012 that cuts the growth of property taxes and holds City spending nearly constant.

Mayor Rybak proposed a property-tax levy increase of only 2 percent, the smallest levy increase in the 10 budgets that he has delivered as mayor and significantly smaller than the 6.7 percent levy increase that was projected for 2012 less than a year ago. The Mayor’s proposed levy is $13 million smaller than it would have been under the previously-projected 6.7 percent levy increase.

In addition, spending for basic City services in 2012 is nearly flat relative to 2011 actual spending.

The City of Minneapolis currently spends 8 percent less than it did 10 years ago and has 10 percent fewer full-time positions than 10 years ago. In the same time period, the City has also paid down $130 million in debt and last year regained its AAA credit rating.

"Minneapolis residents have told us loud and clear that property taxes are too high and they want us to do everything we can to hold them down. After much hard work to hold the line on property taxes and spending, I am proud to propose a budget that cuts the previously-projected increase of 6.7 percent down to just 2 percent and holds spending for basic services nearly flat. This is a balanced, responsible solution," said Mayor Rybak.

In a budget message to the City Council (available here ), Mayor Rybak cited three specific strategies that his administration has pursued to minimize property-tax increases: holding the line on spending, holding the Legislature to its promise of Local Government Aid, and reforming the closed-pension system.

• Spending. Mayor Rybak’s 2012 proposed budget holds the line on spending: it will nearly equal expenditures on basic City services in the 2011 adopted budget, once the waterfall of cuts to the 2011 budget that are currently being implemented are factored in.

• LGA. Despite City efforts to maintain Minneapolis’ Local Government Aid at promised levels, the Legislature cut Minneapolis’ certified LGA of $87.5 million by $23.4 million, leaving the City with the same level of certified LGA in 2011 and 2012 that it received in 2010. The City was nonetheless successful in fighting the tax bill that the Legislature passed in May that singled out Minneapolis, along with Saint Paul and Duluth, for elimination of all Local Government Aid by 2014, which would have begun with a cut of $40 million to Minneapolis in 2011.

• Closed-pension reform. Taxpayers’ obligations to two closed pension funds — the Minneapolis Police Relief Association and the Minneapolis Fire Relief Association — have skyrocketed in recent years. (In the 2011 budget, the entire increase in the property-tax levy was due to the increase in our obligations to pensions.) In addition to successfully defending taxpayers’ interests in court, the City also sought a merger at the Legislature of the MPRA and the MFRA with the State’s PERA system.

The merger bill that passed was a compromise that prevents huge future increases in our obligations and provides for large benefit increases to pensioners, but does not pay back taxpayers who have been overcharged.

Nevertheless, the proposed merger of the MPRA and the MFRA with PERA will reduce taxpayers’ obligations to those two funds by $17.15 million in 2012. At the same time, however, taxpayers’ obligations to the Minneapolis Employees Retirement Association, another closed pension that was merged with PERA in 2010, will increase by $14.9 million in 2012.

Mayor Rybak’s proposed budget assumes that all parties to the closed-pension merger will approve the agreement.

Mayor Rybak cited several other budget challenges that the City still faces, including future cuts to Local Government Aid, funding of pension liabilities, funding of physical infrastructure, funding for internal services and negotiating no salary growth.

Mayor Rybak will deliver the full 2012 budget to the Council, along with a budget address, on September 12.

Published Aug. 11, 2011