Rybak budget proposal does not raise property tax; keeps last year's levy

Minneapolis Mayor R.T. Rybak said Monday the city's property taxes are too high. He's proposing a budget that would not increase the city's property tax levy next year.

Over the past decade, Minneapolis has trimmed spending 8 percent, cut the number of city workers by 10 percent and paid off a lot of debt, according to Rybak. Even so, he and the city council have heard a chorus of complaints from city residents that property taxes are too high.

Rybak's proposal for no increase in the city's portion of the property tax for residents is a change from just a month ago, when he said he'd ask for a levy increase of 2 percent.

Part of the savings comes from laying off as many as six city firefighters and permanently cutting funds for a batch of vacant city positions that might have been filled.

Details of the staffing and service reductions won't be known until December when the city council approves the final budget.

At the same time, Rybak proposes a $150 million city street paving effort over the next five years, to deal with rash of potholes caused by weather and deferred maintenance.

"That is an increase of $57 million over five years," said Rybak. He added that the city will borrow the money to pay for the road work; and that's money that can't be used to stem any city staff losses due to budget cutting.

Rybak said the borrowing is possible in part because the city has paid off hundreds of millions of dollars in debt.

Over the past 10 years, the city paid off $183 million in debt including $114 million in internal-service debt and deficits. The debt that led to the city's credit downgrade more than 10 years ago. Rybak said $69 million in pension bonds have been paid off as well, freeing up capacity to fund police, fire, public works, public health and other critical services.

The city also paid down $296 million in general obligation bonds.

"It's a little like paying off your mortgage so you can take out a home improvement loan to fix the kitchen," Rybak said.

Rybak says the city has to maintain infrastructure to keep its economy growing, saying that Minneapolis is recovering from the recession faster than the country generally.

Rybak says the city consistently gets high marks and top ranks on a range of livability factors. An exception is the jobs picture for African Americans compared to white residents.

"Ours is one of -- if not the highest -- in the gap between white and black unemployment," he said. "That must end; we must take more action."

Rybak proposes using $300,000 to address the problem.

Rybak's 0 percent property tax increase proposal for next year's budget is seconded by another taxing authority, the city's independent park and recreation board.

Even so, it's likely most Minneapolis property owners will pay higher property taxes.

The main reason is that state lawmakers changed a formula for calculating property tax relief, according to Betsy Hodges, who chairs the Minneapolis City Council's Ways and Means Committee.

There are also property tax decisions still to be made by Hennepin County and the Minneapolis school district.

"Even if every single one of those entities proposed a 0 percent increase, residents of Minneapolis will experience an increase on their bill due to the state's elimination of the market valuation homestead credit," said Hodges.

Rybak's proposed budget now goes before the committee Hodges chairs, and a final budget will be voted on by the council sometime in December.