Plan would freeze neighborhood groups' funds

Article by: STEVE BRANDT , Star Tribune
Updated: December 8, 2010 - 12:06 AM

As part of budget-balancing cuts in "extraordinary times," Minneapolis wants the groups to live off about $47 million in unspent funds. The full council will vote Monday.

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A property tax-lowering proposal to make Minneapolis neighborhood programs live off of what they have now has set off alarm bells among the city's 71 neighborhood organizations.

The proposal dominated a budget session Tuesday morning as City Council members gathered for a briefing on the neighborhood proposal and other budget-balancing cuts. Neighborhood groups fund programs as varied as housing fix-up loans, park and school improvements, and murals in a city-financed program that has won national recognition. The cuts would make it tougher for them to finance such projects.

"Extraordinary times demand extraordinary responses," council budget chair Betsy Hodges said of the proposed cut to neighborhood groups. It's part of a package of additional proposed cuts that she, Mayor R.T. Rybak and Council President Barbara Johnson agreed on in the face of taxpayer unrest. A budget committee vote on it is expected Wednesday.

The cuts would lower the city's overall property levy increase for 2011 from 7.5 percent to 4.7 percent. All council members attended the budget committee's budget-shaping session, a sign that they were still attempting to master a proposal whose details shifted overnight. A 4.7 percent tax hike would boost the tax by $212 a year on house with a market value of almost $197,000. That's $42 less than a 7.5 percent property tax would add. The plan goes to the full council and a public hearing on Monday.

The proposal offers $6.2 million in 2011 cuts to reduce the tax increase, plus $22 million more in standby cuts that are likely to be needed next year even if state aid continues at current levels.

The proposal would force neighborhood groups to live off about $47 million in unspent neighborhood money. That's what remains of $231 million set aside from development-derived taxes between 1989 and 2009 to finance revitalization programs outside of downtown. Some neighborhoods have been slow to spend their shares and the pot of money has become increasingly attractive to city policymakers trying to balance the budget. The change would require legislative approval.

But the proposed change would undo an arrangement the council agreed to just 12 months ago to lock up a portion of the city's tax base to fund Target Center's debt and future neighborhood programs. That was expected to generate about $5 million annually for future neighborhood spending.

The proposal also would freeze further spending from the previously stockpiled neighborhood money in an attempt to equalize conditions among neighborhoods that have spent most of their city allocation and those that have spent far less. But Hodges said she plans to modify that language so neighborhood groups can keep some staff after Dec. 31.

About $16 million of the $47 million on hand already has been put under contract, which would make stopping its use problematic. Some of the funding balance has been lent once by neighborhoods for housing repairs, repaid by homeowners, and was intended to be lent again.

Staffers from neighborhood groups were scrambling to understand the proposal. Council Member Sandra Colvin Roy said she was hearing Tuesday from neighborhood activists. She and other council members asked if only a portion of future neighborhood money could be diverted to keep more for their priorities.

Peter Wagenius, the mayor's budget point person, warned council members that if the city doesn't modify its set-aside of money for neighborhood programs, a Republican-controlled Legislature considered less friendly to city interests might make changes the city finds less palatable.

One Southeast Como neighborhood worker, Justin Eibenholzl, derided the proposed deal as "straight out of the [Gov. Tim] Pawlenty playbook."

The proposed shift in neighborhood funding and a proposed two-year wage freeze at City Hall arise because Rybak said he doesn't want to make one-time 2011 cuts that leave the budget unbalanced in 2012 and beyond.

The 4.7 percent tax hike envisioned under the proposal compares to a 6.5 percent increase in Rybak's original August budget, later modified to allow up to a 7.5 percent hike.

Steve Brandt • 612-673-4438

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