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Editorial: Tough choices for city budgets

Whether tax hikes are best choice will shape debate.

Last update: August 14, 2009 - 6:20 PM

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• In Minneapolis, Mayor R.T. Rybak's budget plan raises property taxes by 6. 6 percent in 2010, or about $80 per year on a $216,000 home.

• In St. Paul, Mayor Chris Coleman's budget proposal would increase taxes on a $183,000 home by about $107, including increases on various fees such as sewer, maintenance and recycling.

For information about the budget plans and the mayors' speeches, go to ci.minneapolis.mn.us or ci.stpaul.mn.us.

In budget addresses this week, the mayors of Minneapolis and St. Paul struck similar, solid themes for core cities struggling with declining revenue. They rightly emphasized job creation and housing stability to rebuild city tax bases. R.T. Rybak and Chris Coleman also focused on improved government efficiency and continued investment in basic city services. And like many companies and households in today's recession, the mayors correctly acknowledged that reduced staff and spending and paying down debt are also needed to manage the budget pinch.

The mayors called for property tax increases of 6 to 6.5 percent, even though in St. Paul Coleman would cut actual spending for the first time in four years. The 2010 budget plans they outlined reflect continuing multimillion-dollar cuts in state aid to cities (LGA) and revenue losses caused by foreclosures and declining property values. Both said they will reduce the number of city positions, mostly through attrition and restructuring, though some layoffs are likely.

It remains to be seen whether the mayors can make the case to their city councils and voters that those tax hikes are the best response to their cities' budget challenges.

Yet despite this recessionary economy, the city CEOs made strong, practical cases for investments in their cities' futures. Though Rybak proposes some cuts in all departments, he would maintain or expand spending on business growth, job training and infrastructure improvements. In St. Paul, Coleman recommends closing or restructuring eight recreation centers, but calls for keeping city libraries open and for new spending for a rec center, library and mixed-use development on the city's East Side.

In addition, both mayors are adding to sworn police officer and firefighter ranks, with the help of federal stimulus funds. At the same time they are reorganizing those departments to create savings in areas such as overtime pay and administration. To their credit, both mayors have exercised fiscal discipline in previous budgets to, as Coleman said, "put the credit card in the drawer.'' In Minneapolis, city leaders have reduced debt by $116 million since 2002.

As he did last year, Rybak's reiterated the city's need to rein in its health care and pension expenses. If the current rate of health care increases continue, he said, by 2026 Minneapolis will spend as much on health care as it spends on salaries.

Also driving up costs is the city's skyrocketing pension obligation; in 2010, those obligations in total cost $25 million and at present rates the figure will more than double by 2014. The system is broken because it requires the city to make up pension funds' investment losses during economic bad times, producing unsustainably costly benefits; the city needs legislative help to reform the system.

To address the combination of recession, state cuts, health and pension costs, Rybak is proposing raising levies for two purposes in 2010. First, a 4.1 regular property tax levy to partially replace the LGA cuts. Second, a 7.2 percent special pension levy solely to pay pension bills.

Some of that 11 percent total increase will be bought down by capturing funds that were previously used for neighborhood revitalization. But it's not certain that same subsidy would occur next year, meaning that a substantial tax increase could loom in 2011.

In general, the mayors' proposals offer a sensible foundation upon which to begin budget talks with council members.

Voters beyond the mayors' city limits should pay attention to their budgets, as both are possible candidates for governor in 2010. The fiscal decisions they make as municipal CEOs can offer insight into how they might manage the state.

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