Brooklyn Park's savings account is a novel way to plan

In 25 to 30 years, when the community center in Brooklyn Park needs a major repair, city officials won't have to borrow millions of dollars or beg residents to vote for more taxes. Instead, they will make a withdrawal from the city's savings account.

The idea is unique in the state -- creating an endowment that over 50 years will pay for $300 million of projects. While many cities do plan for the next 10 to 15 years, national experts are seeing local government officials pick up on the idea of planning city budgets like they manage their own retirement funds.

Over the past 10 years, Brooklyn Park has been socking away money a little at a time by making annual transfers from its general fund and making some tax increases permanent.

For example, in 1998 residents voted to raise taxes to pay for fire department improvements. When the tax increase expires in 2012, the city could lower taxes, but instead, will keep them at the same level and put the money in the savings account.

With this system, the city guarantees that taxes won't go up dramatically when another big project needs to be paid for, said Brooklyn Park Finance Director Cory Kampf.

In a recent national survey, hundreds of government financial managers ranked long-term financial planning as one of the top areas of interest, said Anne Kinney, the director of research and consulting for the Chicago-based Government Finance Officers Association, which surveyed a sample of its 17,500 members. The League of Minnesota Cities said it doesn't keep track of cities' financial plans, but financial experts say Brooklyn Park's approach is novel.

"Basically, [we're] saying the city has a city hall, public safety buildings, streets and parks that will need to be repaired or replaced over 50 years, just like your house, so how is the city planning to do that?" Kampf said.

The endowment currently has a balance of about $7.2 million, but over the next few decades the city, whose projected 2008 budget is $33.9 million, will increase the amount of money it saves.

While the plan will undergo revisions over the next 50 years and every new City Council could mean changes to the program, Kampf said he thinks most city officials will continue to save the money because it benefits the city financially.

"Over the long term, you're going to pay less doing it this way," Kampf said. "If you reduced taxes and [parks or roads] fell apart, the tax increase would be massive."

Brooklyn Park is being fiscally responsible by maintaining taxes and saving the proceeds, said Mark Ruff, a financial adviser with the Roseville office of the public finance advising company Ehlers & Associates.

"It's not easy to explain to a taxpayer at a public hearing, but I think Brooklyn Park is right," he said.

It's not for everyone

While financial experts say the idea works, most cities aren't jumping on board yet. They say they don't have any money left over at the end of the year to save for future projects. And others say even if they did have the extra money, they might not take the same approach because they want future residents to pay for those projects.

Andover City Manager Jim Dickinson said his city plans for major projects in the next five years, but also plans beyond that for specific buildings or projects, such as the city's YMCA. When the community center was built two years ago, the agreement with the YMCA said the city had to start setting aside money for long-term improvements after the building had been open for five years.

"But you don't necessarily have to set aside money for 100 percent of the expenses because you should also look into the future to who should be paying for it then," Dickinson said of the city's projects.

Shayne Kavanagh, who works for the Government Finance Officers Association, recently wrote a book on long-term financial planning for cities called "Financing the Future." He said cities don't need to create a savings fund like the one in Brooklyn Park, but they should at least begin thinking about their future.

"I think it's more important for cities that don't have a lot of money to do long-term financial planning," he said.

While Brooklyn Park's plan has only been in the works for about 10 years, Kampf said the city finally has enough money saved to pay for a $1 million rehab of the ice arena and a $2 million expansion of a maintenance facility in the next couple years.

"It's an ongoing process of tapping into [the fund] a little bit, but making sure we put something into it," Kampf said.

The alternative would be that when the city needs to do a project, they would take out a loan for it and then raise taxes to pay it off, Kampf said.

"The not-me-not-now is a short-term outlook from a city's point of view," Kampf said. "The infrastructure will crumble and suddenly your community becomes less livable."

Lora Pabst • 612-673-4628