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Continued: Minneapolis budget compromise carries 8% tax hike

  • Article by: STEVE BRANDT , Star Tribune
  • Last update: December 5, 2008 - 10:09 PM

A budget compromise that divvies money among fixing potholed streets, funding a new pension deficit and renewing community development spending emerged Friday at Minneapolis City Hall.

But the cost of satisfying everyone means property taxpayers will have to dig deeper than Mayor R.T. Rybak initially recommended last summer.

The City Council's budget committee approved an 8 percent property levy increase. That's what the council has adopted for each of the past several years, but it's up from the 6.8 percent Rybak recommended. Paul Ostrow, chairman of the budget committee, said the $19 million that will compound from the extra taxation over a six-year period will go halfway toward meeting a new pension deficit of at least $38 million caused by the sagging stock market. Rybak said he reluctantly agreed.

The committee expects to finish marking up Rybak's $1.4 billion budget proposal on Monday. The spending plan is due for a full council vote on Thursday; the council is expected to act the following day on a hiring freeze urged by Rybak and Council President Barbara Johnson. The committee so far has left intact Rybak's proposal to spend an extra $5.5 million next year on transportation projects, something he wants to extend for four more years to catch up on infrastructure investment. The money comes from a fund from the sale of the downtown Hilton hotel.

That fund has been the city's primary source of no-strings community development money, causing some opposition from development advocates. But the committee instead approved an Ostrow outline for potentially diverting $3.5 million annually for development-priming purposes along neighborhood commercial streets.

That money would be part of an estimated $24 million that is projected to flow annually from resurrected development districts starting in 2010. The city has a year to plan for using that $24 million. But the panel approved an outline for spending it that will guide finance staff in developing a proposal for public comment by mid-2009.

That outline calls for $10 million to $12 million be spent annually to pay off Target Center debt, which the city plans to restructure to end in 2020. Another $8.5 million annually would go to supporting neighborhood organizations.

The $24 million proposal introduced by Ostrow would use up all of the tax yield from the revived districts, up from Rybak's proposal to use 75 percent of it for city spending. That affects other taxpayers because none of the incremental property wealth created by development in those districts would help defray the tax burden.

Still pending is a proposal by Rybak to spend $3 million from a one-time tax windfall created by the temporary end of the districts on Twins ballpark area pedestrian and transportation improvements. Ostrow proposes withholding $1 million of that for a later vote, while Johnson proposed borrowing to pay for the improvements.

Steve Brandt • 612-673-4438

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