Hennepin County will tighten its belt in 2009

Federal and state budget cuts are hitting the state's most populous and wealthiest county, with Hennepin County commissioners looking at cutting $29 million to balance the budget for 2009.

Property taxes levied by the county will go up. But homeowners hit hard by eroding home values will see some tax relief.

Though foreclosures and declining home values have pushed down the overall market value of property in the county for the first time in decades, a bump in commercial and industrial values means businesses will take on a bigger share of the property tax burden. That's a reversal of recent trends, which since 2000 have shifted more of the tax burden to homeowners.

The county board will set its maximum levy Sept. 9, framing discussions of county priorities and cuts that will continue until December, when members vote on a final budget.

County Administrator Richard Johnson told board members Thursday that he will propose a levy increase capped at 8 percent, with a goal of keeping it at 7.5 percent. That means 2009 county property taxes would bring in $657.1 million, compared with $640.4 million this year.

Big choices lie ahead, Johnson said.

"One of the dilemmas you get caught in here is that in these economic times, demand for services is going up," he said. "We have pretty substantial changes to make here. But we're a big county, we have a big budget, and we're financially stable. ... It's about how do we change what we do now to make it better, or how do we decide not to do some things in the future that we do now."

Several areas have been targeted for job cuts:

• Human Services would lose 120 full-time positions, 80 to 90 of which are filled now.

• The Metropolitan Health Plan, the county's insurance plan for the needy, lost 58 positions this month. Thirty of those positions were vacant; 28 people were laid off.

• Information technology would lose 24 positions, many of which are vacant now.

• Libraries have 17 vacant positions that will not be filled.

Commissioners were alarmed by the prospect of Human Services cuts.

"I don't want [budget cuts] put on the backs of child-protection workers," said Penny Steele. "In child protection, we better know what we need to do because children will pay."

She said she worried that the county had no will to target, "for the lack of a better word, waste around here ... people who are just staying and staying and staying" and not producing.

Gail Dorfman challenged Steele for specifics. "We can't just say we have a lot of dead wood out there. I don't think we know that," she said. "It's a complicated system, and I'd like us to assess that so we can say with some confidence whether that is true."

After the meeting, Johnson said he wouldn't claim there "isn't any fat in this organization; in any organization this size there clearly is some." But he said the county has been downsizing for seven or eight years. "A lot of that has kind of gone away," he said. "I don't think it's a big piece of this budget."

While property tax numbers won't be firm until a budget is set, numbers presented to the board estimate that with a 7.5 percent levy increase, county property taxes would go down on homes valued up to about $900,000 in Minneapolis and up to at least $400,000 in the suburbs.

The owner of a Minneapolis home at the median market value of $192,000 would see county property taxes drop $100. A suburban homeowner with a residence at the median value of $265,000 would see a decline of $11.

Tax capacity -- a measure of property worth that is calculated with a formula that includes market value -- declined almost 2 percent between 2008 and 2009 among homes in Minneapolis and 0.05 percent in the suburbs.

But tax capacity for commercial and industrial properties in the county increased more than 6 percent, which is why the property tax burden will shift slightly to businesses.