Fighting to keep property taxes down

Taxpayers are upset about property taxes, and they should be. They rightly want to know, why are my property taxes going up? There’s no one easy answer to that question, but I want to tell you what we at the City of Minneapolis are doing to slow the growth of property taxes, give you some background about the outside budgetary pressures we’re facing that have contributed to big increases for many residents, and suggest what you can do to help.

What we’re doing to slow the growth of property taxes

1) Shrinking government. Above all, we’re shrunk the size of City government. Over the last 10 years, City spending has declined in constant dollars: after adjusting for inflation, my proposed budget for 2011 is 7 percent smaller than the City’s budget in 2001. The City will have fewer full-time employees in 2011 than at any point in the last 10 years.

2) Paying down debt. Nine years ago, Minneapolis was deeply indebted, but since then, we’ve paid down $139 million in debt. Just like when you pay down your credit card, this means that we have more money every year to fund core services like police, fire and roads, and more money to help hold down property taxes. And as a result of paying down that debt, we’ve restored the City’s triple-A credit rating. Just like when you have a good credit rating, this also means that when the City borrows money, it costs taxpayers less.

Outside budgetary pressures

1) Overcharges from closed pension funds. Every penny of the 6.5% tax increase that I proposed — a total of $17.4 million — goes solely to pay for the skyrocketing costs of three closed pension funds. If not for these charges to the taxpayers, we could have actually cuts property taxes slightly next year.   

We don’t manage these closed pension funds. Rather, under State law, the pension funds are managed by their own boards, and those fund managers have been overcharging the City taxpayers. We had to take the funds to court to defend taxpayers from being overcharged — and we won: a judge sided with taxpayers and that’s how we were able to decrease taxes by $10 million last year alone. But the Court has also ruled that taxpayers were overcharged over many years to the tune of tens of millions of dollars. 

If the State had by now reformed the closed pensions as we have asked them to do, years’ worth of tax increases could have been avoided and we would never have had to go to court. I encourage you to urge your state legislators to enact pension reform that balances the needs of both retirees and taxpayers. 

2) Cuts to Local Government Aid. In the past three years alone, the State of Minnesota has cut $54 million in Local Government Aid to the City of Minneapolis. To put it in perspective, that amount could pay for the entire Fire Department for one year.

Let me be clear about one thing right off the bat: Local Government Aid (LGA) is not a handout. Because Minneapolis is the economic engine of the state of Minnesota, we contribute far more to the State in sales, property and income taxes than we get back from the State. But as the State has lurched from one budget deficit to the next, it has chosen to pass down its problems onto property-tax payers in the form of LGA cuts — meaning that at the City of Minneapolis, we’ve had to solve the State’s problems by making difficult decisions about core services and property taxes.

Despite the cuts of recent years, my budget for next year is premised on our receiving all the LGA that the State has promised us in law for next year. But if they break their promise and cut us mid-year again, I have submitted a plan to make another $21 million in cuts to City spending.

3) Balance between residential and commercial property values. Think of property taxes as one big pot that we’re all responsible for filling: when one person contributes a lot to fill up the pot, you have to contribute less; but when another person contributes less, you have to contribute more to make up the difference. The latter scenario is exactly what has happened recently to the balance between residential and commercial property values: because commercial property values have fallen faster than residential values in the economic downturn, residential property owners have had to pick up a greater share of the overall burden. In addition, other changes to State law about 10 years ago also lightened the burden on commercial property owners and put more of it onto residential owners.
 
4) Recertifying special taxing districts. The reason that most taxpayers saw no increase in their property taxes last year but are seeing big increases this year is that the City recertified a special taxing district to help pay off debt on the Target Center that we inherited many years ago and to pay for neighborhood programs. This recertification accounts for about one-third of the overall increase you are seeing this year.

Keeping the tax increase down

The Truth in Taxation statement that you received in the mail was based upon a maximum 7.5% tax increase, higher than the 6.5% increase I initially proposed in the budget that I sent to the City Council in August. However, because there is some reason to think that the State budget deficit will not get significantly worse than the $6 billion hole it is already in, I believe we will be able to keep the tax increase to 6.5% — even though, because of the other outside pressures I described above, for many people the increase in the amount that you pay will be higher.

But I’m also looking for ways to bring down the tax increase farther than that. I’m meeting with top elected and budget officials on this topic almost every day, and I want to hear from you, too.

What you can do

1) First, if you believe the assessed value of your home is too high, you can appeal it. Go to the City Assessor’s website to learn more about how to do that.

2) Attend a City Council public hearing on budget adoption on Monday, December 13 at 6:00 in Room 317 of City Hall and tell us how you feel.

3) Above all, please share your ideas with me about how to keep property taxes down, because I am working every day on this issue and want to know what you think. You can reach me anytime at rt@minneapolis.org or by filling out this form. I will read every message I receive.

A final note about the timing of your Truth in Taxation notice

Many of you received your supplemental Truth in Taxation notices in just the past few days, and as a result, you did not have much or any notice about last night’s public hearing on the budget. For that, please accept my apologies: we at the City of Minneapolis supplied the document to Hennepin County many weeks ago, but the County — whose responsibility it is to send the notice out — failed to mail it in a timely manner.

I will do my best to keep balancing our community’s needs and the pressures we face in an effort to keep your taxes as low as I can. But I’m going to need everyone’s help, so please stay in touch with me.

What we can learn from Stockholm, and Stockholm from us

I was invited last month to help represent Minneapolis and U.S. cities at the European Green Capital conference in Stockholm, Sweden. This gave me a great chance to learn about new ways to make our city more sustainable, and to help spread the reputation that Minneapolis is developing as one of the world’s leading green cities. I’d like to share a couple related observations from that trip: about something we can learn from Stockholm, and something Stockholm can learn from us.

Standing near the Stockholm harbor last month, I heard a simple fact that says a lot about what we can learn from the capital of Sweden, and a lot about the future of Minneapolis.

I learned that in 1955, Stockholm had 500,000 people, which at the time was about the same number of people that Minneapolis had. Since then, Stockholm grew, like most European cities — by expanding transit and growing at the core of the city. Since 1955, Minneapolis and our region grew, too, like most of the rest of the U.S. — by ripping up streetcars and replacing them with freeways. Both regions grew: but by the 1990s, Stockholm’s core-city population had burgeoned to 900,000, while Minneapolis’ population had shrunk to 325,000 while our region sprawled.

The good news for Minneapolis is that our city’s population is on the rebound and is now nearing 400,000. We are growing again in part because we have pursued policies that encourage density and because we are rapidly building new transit. The overwhelmingly successful Hiawatha light-rail line will be followed in just a few years by Central Corridor light rail and two more lines in the planning. They will be joined by commuter rail to the north, bus rapid transit on 35W to the south — and state-of-the-art streetcars on our streets once again, a half-century after the old system was torn up.

If you want to see what kind of city all this transit will help us become, look to Stockholm.   Housing has been built up along the transit lines that crisscross central Stockholm, and we can expect the neighborhoods that border our transit lines to grow much like they have in Stockholm — in fact, we’re already beginning to see it along the Hiawatha Line. The more people live there, the more businesses open and the more communities thrive, and the active street life you see in a dense, transit-oriented neighborhood like Uptown will become more common as we build transit lines throughout the city. Think what the streetcar we envision along Central Avenue could do to help strengthen businesses and enliven street life on an already-great street that has the potential to be much greater. Walking down the streets of one exciting neighborhood after the other in Stockholm, I saw a lot about the kind of city we will become.

Transit and density are what Stockholm has to teach us. But we have something related to teach them back.

Coincidentally, just before I left for Stockholm last month, I met with a group from Sweden that was visiting Minneapolis to look at issues of Somali integration.

Minneapolis has the largest concentration of Somalis in the world outside Mogadishu. Stockholm, as it turns out, is hast the second-largest concentration — but according to the Swedes, the Somali community is much better integrated in Minneapolis. When the Swedish delegation was here, they saw small businesses run by Somalis springing up around the city, Somali young people thriving in school, and Somalis taking on important leadership positions in the city — like Hussein Samatar, who has just been elected to the Minneapolis School Board and is the first person of Somali descent ever elected to public office anywhere in America.

This isn’t a revelation to us: Somali people, Somali businesses, Somali culture and Somali leaders are an integral part of daily life in our city. But it was a revelation to the folks visiting from Sweden, because it hasn’t happened there. Worse, the Somali community in Sweden is sadly subject to high rates of unemployment and high concentrations of poverty.

They asked how this integration has happened in Minneapolis. I reminded them that all is not perfect and we have to keep working, especially on economic development, jobs and closing gaps. But a good place to start is that point I made earlier about how the two cities grew differently.

While the center of Stockholm was growing along inner-city transit lines, poverty and immigrants became concentrated in large public-housing projects in the suburbs, making the core city a place for rich and upper-middle-class residents. In Minneapolis, however, our housing patterns are more mixed. The center of Minneapolis has rich and poor neighborhoods, to be sure, but miles of middle-class neighborhoods in between — which makes it unlike many U.S. cities, too, not just Stockholm. So in Minneapolis, it’s much more common for Somalis, even those who have very recently arrived, to be out on the street in mixed crowds and part of active life in Minneapolis, and it’s much more common for children from every race and culture here to be used to going to school with Somali children. There’s nothing unusual about seeing a woman in a headscarf walking down the street in Minneapolis or working in a Target store. Yet during the week I spent in Stockholm, when I walked around every part of the city — the city with the second-largest concentration of Somalis outside Mogadishu — I did not see a single Somali person.

Think about what this contrast means for our cities in the future, especially as all cities around the world race to compete in a global economy. The residents of Minneapolis, who come from all countries and represent all cultures, will have far more experience in crossing cultural barriers than will people from cities where cultures are less well integrated, or not well integrated at all. We will have thousands of residents with language and culture skills that will help all of us reach out to the rest of the world — including Africa, which I believe will someday represent a growing market for our goods  like China and India are today.

So we can and should learn from Stockholm how to do density and transit better than we have, at least until recently, but we can also learn from their unintended consequences. And while we are a long way from holding ourselves up as an international model of integration, it’s clear that we’re doing some things right, and that Stockholm can learn something from us. And that means good things for our future in a global world.