City looks to reduce property tax spike

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December 6, 2010 // UPDATED 11:05 am - December 7, 2010
By: Jake Weyer
Jake Weyer

The plan would reduce the property tax levy from 7.5 percent to 4.7 percent, but it would temporarily freeze funding for neighborhood groups. 

In response to an outcry from Minneapolis taxpayers about skyrocketing property taxes, city leaders Dec. 7 introduced a plan to bring the hike down.

Mayor R.T. Rybak, City Council President Barbara Johnson (4th Ward) and Council Member Betsy Hodges (13th Ward), who chairs the budget committee, developed the proposal. Through a series of cuts totaling $6.2 million, it would reduce the property tax levy increase from 7.5 percent to 4.7 percent, which should offer a little relief for homeowners who saw bumps as high as 20 percent. For the owner of a $197,000 home, the bill would drop about $42.

“This itself is a bad year,” Hodges said. “And we heard from a lot of people that we need to make changes.”

But a key part of the plan involves freezing unallocated funds from the Neighborhood Revitalization Program (NRP) as the city seeks legislation to end that program and merge it into its Neighborhood and Community Relations (NCR) department. The city would decertify half the Tax Increment Financing (TIF) districts it recertified last year to fund neighborhoods and Target Center debt. All of the money from the certified TIF districts would then go to the Target Center and neighborhood funding would temporarily come from about $47 million in NRP funds.

By doing this, the city would be able to return the decertified TIF districts back to the tax rolls.

“NRP would shut down quickly and we would ramp up pretty quickly and collapse the programs together legislatively during this upcoming session,” said NCR director David Rubedor. “In the short run for neighborhoods, contracts would continue, but unallocated funds would be locked into this proposal.”

The plan could create a problem for neighborhoods that have not received allocations for neighborhood projects. NRP dollars are used for community initiatives, such as enhancements of public space, crime prevention programs and improvements to housing stock. 

Rubedor said distributing funds equitably would be a challenge because neighborhoods are in different phases of project planning. Some have already been fully funded, others are still depending on those dollars for future plans. 

Peter Wagenius, a policy aide for Rybak, said equity would be a top priority. Each neighborhood would receive a “proportional slice of a smaller pie,” he said. 

The plan emerged quickly with few details, catching both city staff and neighborhood representatives off guard. But at least one neighborhood leader, the Lyndale Neighborhood Association's Mark Hinds, was swift with a response. In a letter to the mayor and council on the day of the proposal, Hinds warned that the consequences of freezing neighborhood funds would be "catastrophic."

"This action alone could destroy the civic infrastructure these organizations have worked so hard to build by forcing them into a position where they cannot pay any of their bills, where they would have to stop all of their programming, layoff their staff, and potentially lose their office space or have their buildings enter foreclosure as the city tries to get legislation passed through a Republican House and Senate that are dealing with a $6 billion budget shortfall," Hinds wrote. 

Wagenius said during the council hearing Dec. 7 that there was no telling how the plan would go over at the Minnesota Legislature. 

Other proposed cuts include a proportional reduction to the Park Board’s tax levy (roughly $2 million), a $1 million reduction in debt payments to internal service funds, a $1.4 million reduction in funding for the Municipal Housing Authority, a $1.1 million reduction for Target Center capital projects and funding reductions to the Municipal Building Commission and pension obligations.

The council planned to vote on it Dec. 13, the same day of a scheduled public hearing on the budget and tax levy.

Park Board President John Erwin said he was notified of the proposal Dec. 7, days after the board approved its budget, which also goes to the council for a vote Dec. 13.

“The Park Board is completely on board with taking a proportional cut,” he said. “We will all share in the pain that we have to go through to try to get our budgets in line with the tax base.”

A group of Minneapolis residents concerned about years of property tax increases planned to protest the recent hike at City Hall an hour before the meeting Dec. 13.
Mark Johnson, of Linden Hills, a leader of that group, said the new proposal wouldn’t change their plans. 

“Even a symbolic gesture like this is going give them credibility and it shows that they are at least listening to the residents of Minneapolis, but it’s still an increase,” he said.”

The public hearing, which will involve discussions of the city budget, park board budget and tax levies for each, will start at 6:05 p.m. Dec. 13 in room 317 of City Hall, 350 S. 5th St.

Reach Jake Weyer at 436-4367 or jweyer@mnpubs.com.