Chastened by last year's noisy pushback from Minneapolis property taxpayers, Mayor R.T. Rybak responded Thursday with a 2 percent tax hike proposal for 2012 -- the smallest he's urged in his 10 budgets.
The tax increase is less than a third of what was anticipated in the city's five-year budget, and Rybak credits the state's recent bailout of city pensions for making it possible. But it's also a reaction to last year's taxpayer backlash.
In December, homeowners demanding further cuts stormed City Hall before council members adopted a 2011 budget, saying they couldn't weather property tax hikes during a prolonged recession. The council responded by trimming Rybak's proposed 7.5 percent hike to 4.7 percent.
"Minneapolis residents have told us loud and clear that property taxes are too high, and they want us to do everything we can to hold them down," Rybak said Thursday.
But his tax critics said the mayor hasn't gone far enough.
"I don't think an increase translates into property tax relief to individuals," said Scot Pekarek, who protested last year's hike at a City Hall rally.
How much more homeowners will pay was left unanswered in Rybak's proposal. The mayor said delays caused by the May 22 tornado and the special legislative session mean he won't provide a full budget until Sept. 12, almost a month after the normal schedule.
The mayor's tax hike adds $5.6 million for a $285.2 million total city levy. But the proposal is built on the gamble that the city's retired police and firefighters will approve a pension merger that finance officials say will save the city $17.1 million in spending next year alone. Although firefighters appear ready to do so, the proposal faced tough questioning last week from police retirees.
The results of those votes will be announced by Sept. 15, which is the deadline for the Board of Estimate and Taxation, on which Rybak sits, to set a maximum levy for 2012.
If merger is rejected, Rybak said he won't amend his budget. Rather, he'd force the police and fire pension funds to tell Hennepin County to impose the higher pension levy, something state law gives them the power to do. In doing so, he would put the political onus on the pension funds to justify a larger tax hike.
Rybak said that city spending for basic services is nearly flat in his pending budget but didn't release any figures supporting that.
In past years, Rybak has proposed tax hikes ranging from 6.5 percent to 11.3 percent. He didn't release any figures on the impact of his current property tax proposal, and household calculations are complicated by a recent change in how the state calculates aid to homesteads. That change is expected to shift tax burden to higher-value homes, such as those in areas that generated much of the tax protest, as well as businesses, according to city finance experts.
"It isn't enough to say 2 percent without saying what 2 percent means for the community," said Carol Becker, a member of the Board of Estimate and Taxation.
Last year's 4.7 percent increase in the overall levy translated to tax hikes of triple that amount on many individual homes. That's because businesses lost property value faster than homes did, throwing more of the burden to residential property. Taxes also rose in 2011 because part of the city's tax base was locked up in special districts used to pay off debt for Target Center.
One of City Hall's most knowledgeable tax critics, David Sadler of southwest Minneapolis, said he'd been hoping for no tax hike.
"We realize the Minneapolis ship of state is large and has been moving at high speed for some time and can't stop on a dime," he said. "But we still need a rollback in taxes."
While the pension merger approved by the Legislature in its special session eased the strain on city finances, lawmakers also froze local government aid at last year's level, triggering $23.4 million in cuts. As a result, 10 firefighters got layoff notices this week, Rybak was forced to cancel a planned street-paving expansion, and some money budgeted for future pension costs vanished.
Steve Brandt • 612-673-4438