On Dec. 14, the City Council adopted the 2011 Budget, reducing the property tax levy increase from 7.5 to 4.7 percent. I want to explain why I voted for this budget and what I did to lower the tax levy and to provide property tax relief for 2012 and 2013.
The budget we passed cut $6.1 million from the Mayor’s recommended budget. That budget already cut 80 positions, bringing the total number of positions in the city to close to 1,000 fewer than existed in 2001. In addition to the additional cuts we made to the 2011 budget, I supported measures to provide tax relief in 2012, 2013, and beyond by consolidating neighborhood funding in order to shrink the TIF district that pays for it at the expense of our tax capacity.
To lower the levy to a level that would show up on your tax bill as a decrease, the Council would have needed to make an additional $27 million in cuts to property tax supported services. Property tax supported services are only 25 percent of the city’s overall budget, and consist primarily of police, fire, road-related services, and the internal functioning of the city enterprise.
Here are examples of the magnitude of cut that would be required to bring a consistent $27 million worth of savings to our budget: the city could eliminate all street maintenance – pothole filling, seal-coating, snow plowing, etc. – and still need to make another $3 million in cuts. Half the total budget of the Fire Department is $27 million. It’s a quarter of the budget of the Police Department. The LGA and property tax revenue of all the other property tax supported services combined only amount to $70 million.
Of course we would not make cuts to only one of those services – it would be a combination of cuts to those services – but the magnitude of even those cuts would increase public safety response times to unacceptable levels, put our road repair and plowing services so far behind that our streets would be in greater disrepair, and cripple the city’s internal capacity to do its mandated work.
I want to be clear about the two main reasons we face such a horrendous set of choices, both of which have been my main priorities on the City Council and both of which are out of the city’s direct control: cuts to the revenue sharing program known as Local Government Aid (LGA) and the cost of three closed pension funds unique to Minneapolis.
For the last ten years the state has consistently broken its promises to return to us – to you – a fair portion of the income, sales, and property tax dollars we send to them every year. LGA was intended to even out the property tax base statewide so all communities could have excellent services without any one community having to bear too high a property tax burden. That foundational principle remains in name only. The LGA program is broken and needs to be fixed, or discarded for another that is more effective for residents. I ring that bell in every setting I can, and am working with allies across the state to forge a new state-city fiscal relationship.
Some have suggested the solution to our problem is to simply not pay our closed pension fund obligations. Bankruptcy, many say, would be preferable. One problem with this suggestion is that under current state law it is not possible. Because we have a tax levy authority, Minnesota cities are not allowed to go bankrupt. It would not help your property tax bill at all to refuse to pay because it is written in the state statutes that formed these closed funds that if we as a city do not levy the dollars from Minneapolis citizens, the county is required to do so. This obligation you have as a Minneapolis taxpayer to pay the closed funds exists in statute in spite of your lack of meaningful input into how they are managed or administered. Our only choice is to carry on with our work to merge these closed funds with the state funds, and to continue to prevail in the lawsuit we have brought against the funds for overpayment of benefits.
In other words, these two problems have solutions. Both solutions must be found at the state level. The city-state fiscal relationship must be repaired, and our remaining closed pension funds must be merged with the state’s pension. I have been working hard since I voted on my first budget in 2005 to achieve those goals and I will continue to do so on your behalf.
At the end of the day, that is why I voted to support the budget that passed. It was the best option available in a time of only bad options. I will continue to work to be a steward of your property tax dollars and I will continue to fight for both LGA and pension reform.
Betsy Hodges
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