Council votes to pursue half-cent city sales-tax hike

Share this:
February 14, 2005 // UPDATED 1:52 pm - April 26, 2007
By: Scott Russell
Scott Russell

The City of Minneapolis is going to ask the legislature for permission to increase the local sales tax by a half-percent to pay for more police and fire services.

If the state agrees, sales tax in Minneapolis would be 1 percent higher than in surrounding communities, or $1 more on a $100 purchase. The half-cent hike would pour $27 million into city coffers.

A divided Council approved the resolution seeking the new tax amid worries that the state will cut city aid by an offsetting amount and whether Minneapolis's own legislative delegation would back it.

The Council voted 7-4 Feb. 11. Downtown Councilmembers Lisa Goodman (7th Ward) and Paul Zerby (2nd Ward) voted no, along with Scott Benson (11th Ward) and Sandy Colvin Roy (12th Ward). Downtown's Natalie Johnson Lee (5th Ward) and Barret Lane (13th Ward) were absent.

Council President Paul Ostrow (1st Ward) pushed the measure as a "last resort" to restore public safety cuts. The city has 150 fewer officers than at the 1990s peak. Supporters reiterated frustration that the state is balancing its budget by pushing spending onto local property taxes.

Sales tax opponents said the city's move would let the state off the hook for cuts to Local Government Aid (LGA). Ostrow said the city would still seek more LGA, but the state has a $1.4 billion deficit. Even if those dollars materialize, schools, transit and health care would also have a claim.

"We cannot put all of our chips in that basket," he said.

Benson, who chairs the Council's Intergovernmental Relations Committee and lobbies at the Capitol, said the state could approve the sales tax, then take LGA away from the city, leaving it worse off because the sales tax would make Minneapolis less competitive.

Further, Benson said the proposal could affect key legislative partnerships. The city has built a coalition with other cities to support adequate LGA funding. "Now we are saying we are willing to break that link" by relying on a "go-it-alone" strategy.

Benson wasn't even sure Minneapolis legislators would carry the bill. He characterized their response as "lukewarm or tepid. They are not running to support it," he said.

Even if the legislature said OK, the city would not get an immediate cash infusion, Benson said. The new sales tax would require a second Council action and a city referendum. The money wouldn't begin flowing until next fiscal year at the earliest.

Zerby argued that the sales tax fell heaviest on people who had less money.

Supporters spoke of needing more police and fire funding. Councilmember Dan Niziolek (10th Ward), chair of the Public Safety and Regulatory Services Committee, said the city's 911 response times have slipped since 2000 and all violent crime categories increased in 2004.

Last year's budget cuts included disbanding the department's gang unit - while 35 percent of homicides are gang related, he said. The city's five-year financial plan projects multi-million-dollar cuts in status quo police services.

"We are moving in the wrong direction," Niziolek said.

Ostrow said property taxes were already higher than anyone wanted them to be. Councilmember Barb Johnson (4th Ward), chair of the Ways and Means Committee, said it would require an "astounding" property tax increase - 24 percent - to raise as much money as a half-cent sales tax.

She said it was "scary" that the legislature could cut the city's LGA if it increased the sales tax - but even if the city kept half of LGA, it would still be ahead. "I will sleep better at night knowing I have done something."

The city already has a number of local-option sales taxes.

A 3 percent entertainment tax on admission fees, cover charges, amusement devices on jukeboxes, pinball machines and food and beverages sold during live performances generally goes into the city's General Fund for police, fire and basic city services.

Other city sales taxes support the Convention Center. They are the 0.5 percent citywide sales tax; the 3 percent Downtown restaurant tax; the 3 percent Downtown liquor taxes ($2.9 million in 2003); and the 3 percent lodging tax.