Council passes reduced tax hike

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December 20, 2010
By: Jake Weyer
Jake Weyer
// It’s lower than initially proposed, but still too much for many Minneapolis property owners //

After four hours of fiery public testimony and two hours of intense discussion, the Minneapolis City Council just after midnight Dec. 14 voted 10-3 to approve a 2011 budget that includes a 4.7 percent increase in property tax collections.

Though lower than the 7.5 percent increase initially proposed and reflected on tax statements mailed to property owners in November, the hike will still stick many residents with double-digit bumps. Council Chambers was packed during the hearing with outraged residents, who took turns blasting the council and Mayor R.T. Rybak.

The tax increase is part of a budget that eliminates roughly 80 city positions, freezes pay for two years, trims spending in several areas including affordable housing and restructures funding for neighborhood groups, an issue that also drew many to the meeting. The budget plans for additional cuts if state aid is reduced as it has been during the past several years.

Rybak has said that the city’s rising taxes are the result of pension obligations it is fighting in court, the recertification of Tax Increment Financing (TIF) districts that fund neighborhoods and Target Center debt and declining state aid. And because the value of commercial and industrial properties is down further than that of residential properties, homeowners are carrying the greatest burden.

But that reasoning was not enough for the mass of people at the public hearing, which started after 6 p.m. and ended
75 speakers later.   

In danger of a death spiral

Residents called the increase unsustainable, insulting and said the city needed to stop careless spending. They called for further trimming of the budget and several claimed tax increases have driven them out of their homes, or would soon. Some, such as Bryn Mawr resident David Wahlstedt, warned the city was moving toward economic ruin.

“My property taxes have tripled and in the last eight years, doubled,” he said. “It’s unsustainable. Unsustainable doesn’t say it. It’s a death spiral.”

Bill Himmelwright, who owns a home in Linden Hills, used a business analogy to make his point.

“I would look around the room and think of everyone as a customer of yours and there’s just a lot of angry customers,” he said. “If you drive your customers out of the place of business, who is going to pay for anything in the end?”

Applause and cheers followed just about everyone who stepped to the microphone. While some speakers pointed fingers and raised their voices, others were on the verge of tears.

Robert Tish, a longtime Northeast resident, said his fixed income could no longer cover the cost of rising property taxes. He said he couldn’t sell, but he couldn’t afford to stay in Minneapolis either.   

“I’m retired and I’m speaking for all the elderly people here who can’t afford to have their homes no more,” he said. “I got so much [invested] in my house that I have to give it away and I’m stuck here in the city. It’s just too much and I need some kind of relief.”

Rybak said after the meeting that he expected the big turnout and felt citizens had a right to be upset.

“If we’re going to ask for pain we need to feel it,” he said.

Council Member Betsy Hodges (13th Ward), who chairs the budget committee and came up with the plan to reduce the tax levy, along with Rybak and Council President Barbara Johnson (4th Ward), said she had never seen so many people at a public hearing. She said she had to balance many factors when developing the budget revision, weighing services with the need for tax relief.

“What I heard tonight from a lot of people is what we came up with doesn’t go far enough,” Hodges said. “On the other hand, it goes pretty far. Just ask the folks who came to testify about NRP (Neighborhood Revitalization Program). It goes pretty far.”

Freezing neighborhood funds

Those who didn’t talk about property taxes showed up to express concerns about the future of neighborhood funding, an issue that became intertwined with the property tax debate during the week prior to the hearing.

It happened after the introduction of the plan, now approved, to bring the tax levy down to 4.7 percent.

The plan involves freezing unallocated funds from NRP as the city seeks legislation to end that program and merge it into its Neighborhood and Community Relations (NCR) department. Half the Tax Increment Financing (TIF) districts that fund NRP and pay Target Center debt will be decertified, with NRP’s portion returned to the tax rolls. The remaining NRP dollars are expected to make up the difference.

But there’s no guarantee the legislature will approve decertifying NRP before all of its dollars have been allocated to neighborhoods, even though the program is set to end soon. NRP, launched two decades ago and split into two funding phases, has funneled millions into neighborhoods for community initiatives such as enhancing public space, fighting crime and improving housing. But some neighborhoods have not received their phase-two dollars and an early end to NRP could put that money in jeopardy.     

Some speakers at the hearing accused the council and mayor of using the property tax problem as an excuse to get rid of NRP.

“It is a cheap and dirty trick to use our concerns for unsustainable rising property taxes to go after the NRP funds,” said Whittier resident Laura Jean. “This proposal is a death sentence for neighborhood organizations.”

Council Member Cam Gordon (2nd Ward), who voted against the budget along with council members Robert Lilligren (6th Ward) and Meg Tuthill (10th Ward), agreed that the NRP change was a bad move.

“I am disappointed in my colleagues decision that will, in my strongly-held opinion, fundamentally damage both the capacity of neighborhoods to serve Minneapolis residents and their capacity to collaborate with the city,” Gordon said in an e-mail to constituents after the meeting.

He also argued that the change wouldn’t have an impact on the budget until 2012. Hodges said at the meeting that the city is looking to reduce the property tax burden beyond next year.  

“This proposal does not kill neighborhood funding, it asks us to restrain neighborhood funding, not end neighborhood funding,” she said. “And let’s be clear that this is about property tax relief in 2011, 2012 and 2013.”

Rybak said making everyone happy is impossible in tough economic times.  

“After you’ve made a lot of the easier cuts, you’re only going to cut things that are going to make people unhappy,” he said. “My job is to balance those needs and this is the best we can do.”

Reach Jake Weyer at 436-4367 or