Minneapolis Mayor R.T. Rybak announced Tuesday that he wants to spend $8 million collected annually in taxes from the city's redevelopment district on neighborhood revitalization, plus another $10 million annually to retire Target Center debt.

Those are the two purposes allowed by the 2008 Legislature, which passed a special law that effectively allows the city to keep capturing taxes from some of its oldest development districts.

Rybak said he would allocate $500,000 annually in the next two years to pave the transition from the city's pioneering Neighborhood Revitalization Program (NRP) to a revamped program.

The $8 million in funding would begin in 2011 and would be part of a 10-year, $80 million commitment. Up to $3 million annually would help keep alive the city's dozens of neighborhood organizations, some of which predate NRP and some of which were spawned by it. Of the remaining $5 million, 90 percent would go to neighborhood-planned projects and 10 percent for city-set priorities where City Hall invites competitive proposals from neighborhoods.

Early city estimates are that new development districts -- which capture the increased taxes from development that otherwise would lower the general tax burden -- could potentially generate $24 million per year initially.

Rybak said that amounts generated beyond the $18 million for Target Center and neighborhoods could go for property tax relief. But the deal that allowed the city an extra 10 years to capture the yield from its oldest districts also will cost the city $9 million annually in state aid.

Paul Ostrow, who chairs the City Council's money committee, called the $8 million in annual neighborhood spending "aggressive but doable."

NRP started as a program intended to devote $20 million annually for 20 years to neighborhood-set priorities, but it fell short of that goal -- largely because of state property tax cuts for businesses.

One big potential issue for the Rybak proposal is a city attorney's memo delivered last week to the council, which would have to approve Rybak's plan. The city attorney found that the special law that was hastily drafted in a conference committee doesn't authorize some of the neighborhood spending it was intended to cover. Specifically, there's no express authority to pay the administrative expenses of neighborhoods, and spending by neighborhoods is limited to the traditional bricks and mortar of development districts rather than the broad array of NRP activities such as youth, arts and crime-fighting programs.

There has been push back from some neighborhoods over the direction set by a lengthy city process to revamp how it interacts with neighborhoods. In general, NRP has been run by a multi-agency board and independent staff. The proposal developed by Rybak and council members figures brings the city's interactions with the community to a new city department.

"This is not going to be a top-down program," Rybak said.

He said his proposal is shaped by a desire to see neighborhoods and the city respond better to each other's priorities, with more direct links, accountability and transparency, and fuller participation by people who can't attend an evening meeting.

The $10 million set aside for Target Center debt would be enough to pay off the debt in 10 years. But the city is obligated to maintain the arena as a state-of-the-art facility, which city officials say is likely to requirement future investments. However, using the tax-district proceeds for arena debt could free up other money such as entertainment taxes and parking fees for those improvements or for other city purposes.

Steve Brandt • 612-673-4438