A City That Works
Mayor Rybak’s 2012 budget speech
Paris has the Eiffel Tower, San Francisco the Golden Gate Bridge. But what's the iconic symbol of Minneapolis?
We have some stirring images: St. Anthony Falls and Minnehaha Falls. The skyline over the lakes. Spoon Bridge and Cherry. All beautiful and appealing, but none of them tell the story of Minneapolis.
If I had to pick just one picture to tell who we really are, I wouldn't pick any of these very familiar and very beautiful places. Instead I would show a street scene in one of our solid middle-class neighborhoods: houses not too big or too small, homes and lawns well kept, neighbors talking to each other, maybe some trees shading in the sidewalks.
Every city has rich areas and poor areas, and we do too. But Minneapolis is almost unique among big American cities in that we have mile after mile of these strong, middle-class neighborhoods. They make up the largest part of our city. They are core to our ability to continue to attract families and the core to our livability. At this time of great economic instability, at this time when so much around us is in flux, we need to be especially focused on maintaining the strength of these neighborhoods that virtually don't exist in many other American cities.
I've spent a lot of time in these neighborhoods. I grew up in one. And as Mayor I spent hundreds of hours door-knocking, going to block parties and National Night Out. I've spent many, many nights in people’s living rooms, sometimes when something big has happened on the block, sometimes when nothing has happened at all.
If you spend enough time walking these streets and in these homes, you realize that there aren't very many people there who start discussions by talking about what government is doing. When people talk to me, they want to go about their lives and ask for some pretty straightforward things out of city government.
They want a safe, livable neighborhood in a vital city with good public services and affordable property taxes. It sounds like common sense because it is common sense, or at least it ought to be — but that doesn’t mean it’s easy. Delivering that requires those of us in City Hall to balance many competing interest and needs:
• Our neighborhoods are safer than they have been in many years as crime has been driven to historic lows, but in the wake of several tragic shootings, we know we can't let up. We also face serious challenges in funding the level of public safety that we want.
• Our neighborhoods are almost always rated among the most livable in the country, but we know we face serious challenges maintaining the quality of the common ground we share. Specifically, too many of our streets are in plain old bad shape.
• Our vital city, where commercial corridors are coming to life like never before, is coming out of the recession faster than almost any other American city. But in today's unstable financial climate, prosperity can vanish in an instant. And prosperity is still not shared equally.
• And our property taxes? They are simply too high.
Safe neighborhoods, a vibrant city, good services, affordable property taxes: in short, people in Minneapolis want a city that works. And that’s what they deserve.
It shouldn’t be asking too much, but lately it feels like it is. There’s a debate raging in America right now about the role of government. What should it do? How much can we afford? Can it really help? Should we have any at all?
There are two main reasons why this debate is going on.
First, our nation’s economy is struggling to recover from the great recession — or rather, middle-class and working families across our nation are struggling to recover while those at the very top are concentrating their wealth in an alarming fashion that we have not seen in over a century. Unemployment remains too high, home values have not recovered and retirement savings are precarious in a wildly unpredictable stock market. Many people don’t believe that the economy will ever work for the benefit of the middle-class again and don’t believe that there’s much, if anything, that the government can or will do to help them.
Second, our state and federal governments are dysfunctional: the state government shutdown and a near-default on our nation’s debt are both without precedent in our history. Although I don’t believe that the blame for this state of affairs is equally shared, many people just wish a pox on all politicians’ houses.
I think there’s more productive way to look at it. Government isn’t the problem and it isn’t the solution: it’s a tool. And like any tool, it only works when we choose to make it work.
The great thing — and the tough thing — about city government is that cities are where the rubber meets the road. We don’t get to push our problems down onto anyone else: instead, we choose to roll up our sleeves and use the tools we have to solve our problems cooperatively and pragmatically and build a city that works.
Fortunately, it’s not rocket science. To build a city that works, a city government needs to do two things well: control spending and taxes and make the right investments.
Balancing these competing needs is tough and we haven’t always struck the perfect balance, but I believe the strength of our bedrock, middle-class neighborhoods — which have almost vanished in many cities — is evidence that Minneapolis has mostly gotten the balance right. By their continued strength, they show this is a city that works.
If we strive to build on that success — if we strive for a city of safe, livable neighborhoods in a vital city with good services and affordable property taxes, if we strive for striking the right balance between when government should invest and when it should get out of the way, then we have to put our money where our mouth is. And that’s what the budget does that I’m delivering today.
A City That Works: Managing the city’s resources well
We are a city that works because we have managed the city's resources well.
We didn't just wake up to this idea a couple weeks or months ago. We have been reforming Minneapolis city government for a decade and that work is paying off.
When I took office 10 years ago — in the wake of 9/11 — Minneapolis:
• was hundreds of millions of dollars in debt,
• had lost one of its AAA bond ratings,
• had an unresolved problem with our closed-pension funds that was about to suck millions from our taxpayers,
• and above all, was not giving property-tax payers the results they were paying for.
Tackling these problems has not been easy, especially because of factors outside of our control — such as two recessions that strained every part of our city and an ongoing State fiscal crisis that State leaders have repeatedly chosen to balance on the backs of cities and their taxpayers.
In these past 10 years, righting the fiscal mess has been one of my highest priorities. As a result of tough choices we have made, Minneapolis is now more efficient and more effective. A lot of people talk about doing more with less. We've delivered, and this is how:
Responsible budgeting. This is where it starts. We got the City’s budget into structural balance and now match expenditures to revenues not year to year, but five years out — without gimmicks, without shifts. We haven't lurched year to year from budget deficit to budget deficit. We plan ahead.
Controlling spending. Today, after adjusting for inflation, the city of Minneapolis spends 8% less than we did 10 years ago. Compare this to the State of Minnesota, which is spending 23% more than it did 10 years ago.
We also have 10% fewer full-time positions than we had 10 years ago. This means that some very good public servants have lost their jobs and many others are doing much more. Especially at a time when some politicians stoke resentment and fear of government, these hard-working public servants all deserve our thanks.
Paying down debt. We have paid down several kinds of debt in the last 10 years. First, we have paid off $183 million in debt that has a direct impact on our General Fund. This breaks down to:
• $114 million in internal-service debt and deficits. This is the debt that led to the City’s credit downgrade more than 10 years ago, and we don’t have much more to go before it’s all paid off.
• We have also paid off $69 million in pension bonds.
• These debt repayments free up capacity to fund police, fire, public works and other critical services.
Like any City, we also carry general-obligation debt:
• In the last 10 years, we have paid down a total of $296 million in general-obligation debt, which includes $43 million of the internal-service bonds and the $69 million of pension bonds.
• When you pay down your credit card, you pay less in interest each month. By paying down this general-obligation debt, we’ve cut our interest payments by $12 million a year.
Restoring our credit rating. As a direct result of years of hard work to pay off debt, last year we restored our AAA credit rating. After what Wall Street and Congress did to the federal government’s credit rating, everyone understands how important this is.
A better credit rating means it costs us less to sell the bonds whose proceeds we use for projects like fixing our roads, bridges and water systems. In a minute, I will tell you how reestablishing our credit rating and paying down debt means that we can make a major investment to address one of our biggest challenges.
Budgeting responsibly, cutting spending, reducing the size of government, paying down debt, restoring our AAA credit rating: these are the kind of results that very few governments anywhere — and certainly not the State and federal governments — have been able to accomplish.
But there is a blemish: Property taxes are simply too high.
The factor that most directly affects property taxes is the one over which we have the most control: our spending, which we continue to watch carefully. But there are other factors over that affect property taxes over which we have less control:
• Local Government Aid, which has been radically cut by the state;
• Funding for Target Center, which is supported by property taxes; and
• Obligations to our closed pensions.
This year, we have made progress in all of these areas.
Local Government Aid. From 2003 through 2012, Minneapolis taxpayers have sustained a cumulative $405 million in cuts in LGA, including another $23 million in 2011. But we did two things this year that the Legislature appears unable to: we planned ahead for our cuts, and we compromised over how to implement them.
Remember that LGA is not a handout: in 2011, we will send approximately $400 million more in sales and commercial/industrial property taxes to the State than we will get back in LGA.
As bad as this year’s cut was, it could have been far worse: the majority in the Legislature passed a bill in the last session not just to cut our LGA, but to eliminate it entirely for Minneapolis, Saint Paul and Duluth. Never mind that the core cities are the economic engine of Minnesota, or that Minneapolis is keeping the State’s budget afloat.
We were successful in fighting back because we have spent so much time building a coalition of mayors from across Minnesota. When that bill was first proposed, the loudest critics were mayors of some of Minnesota’s smaller cities, from Park Rapids to Granite Falls, who have been our partners in defending LGA. I also thank Governor Dayton for his support as well: he and these mayors recognize that we are One Minnesota and all in this together.
Funding for Target Center. About 12 years ago, the City reluctantly agreed to use property-tax dollars to help support this statewide asset — and for about 10 years, we have been trying get the State to lift part of this burden off the backs of Minneapolis taxpayers. This year, for the first time, it appears there is a way to get this done: it’s part of the package we put forward to renovate the building and renovate it with a combination of private dollars and sales taxes. If we are successful, it will reduce the burden on property-tax payers by $5 million a year.
Obligations to closed pensions.
The current closed-pension system serves no one well: it maximizes risk, volatility and administrative expenses that benefit neither pensioners nor taxpayers. As a result, the system also maximizes litigation, and the court has agreed with us that taxpayers have overpaid tens of millions of dollars in the last decade.
You’ll remember that just last year, our entire tax increase was smaller than the growth in our pension obligations.
The bill that passed is a compromise, and because it is compromise, by definition it does not represent everything that the City Council and I wanted. But if approved by all sides, both pensioners and taxpayers will benefit from it. It dramatically increases benefits for pensions while getting taxpayers out of a system of damaging volatility.
That said, I’ll be blunt: taxpayers should have gotten a better deal in this merger. If the Legislature had passed our version of the merger, between now and 2017 taxpayers would have had to pay $19 million less to meet our obligations than they will in the merger agreement.
But this merger is a compromise that was necessary to bring an end to a broken system that benefitted neither taxpayers nor pensioners.
We’ve made some progress for taxpayers on Local Government Aid, Target Center and closed pensions.
And we’ve made progress on spending, which will rise by only 1% compared to this year — even after our healthcare costs increase by 4%.
As a result of everything we’ve done to get our fiscal house in order and hold the line on property taxes, I am delivering a budget today with no property-tax increase for 2012.
That’s right: no property-tax increase. We will raise exactly the same amount of property-tax levy dollars that we raised last year. No more.
I also want to be clear that a zero-percent tax increase does not come without consequences: this budget makes many difficult cuts. But it is all the more important to make them because the State Legislature has passed a tax increase onto our residents. By eliminating the Market Value Homestead Credit, they passed the equivalent of a direct increase in property taxes for Minnesota homeowners. The only good news is that every Minneapolis legislator and Governor Dayton opposed it. But this makes it even more important for us to pass on no property-tax increase next year.
City That Works: Investing in the common ground
We are a city that works because we have managed the city's resources well. And we are a city that works because we have invested in the common ground that helps everyone succeed.
That common ground needs to be safe, which is why we continue to invest in our police department with no layoffs next year. Our investment has paid off: in 2010, violent crime fell to a 28-year low. And in 2011 so far, violent crime is 12% lower than this point last year. We’ve achieved results like these over the past several years because of the great work of Minneapolis police officers who work in partnership with our communities under the leadership of Chief Tim Dolan.
But we can never let up in our drive to make every street a safe place to call home. Sadly, we have seen a recent increase in violent acts by young people with guns — but fortunately, we know what to do to stop youth violence. Our Youth Violence Prevention initiative has brought down the number of youth suspects in violent crime by 66% since 2008. Success like this is needed now more than ever, so my budget continues to fund this critical initiative.
A safe common ground also means a strong fire department and my budget proposes no cuts to the number of firefighters and no layoffs. Part of our ability to keep all current firefighter positions means that the department will have to cut the amount of overtime it spends and eliminate one top-level management position. We look forward to an upcoming consultant report about the safest and most cost-effective way to staff our Fire Department into the 21 st century.
Investing in the common ground also means investing in our streets. After a horrible winter and too many years of not investing enough in paving, Minneapolis was riddled with potholes this spring. We can’t control the weather but we can control how we respond to the weather, and it's clear we have to do more to improve our streets.
We didn't just wake up and realize that we have a problem. Three years ago, I proposed the Infrastructure Acceleration Program to improve one-third of the busiest City-owned arterial streets within five years. And we’ve gotten results: since the Infrastructure Acceleration Program began, we have improved a total of 76 miles of our busiest, most important streets.
But even with this acceleration, we couldn’t keep up with the need.
Last year, I proposed investing $9 million more in paving each year over five years — but as a direct result of the Legislature’s latest LGA cut, we had to cut all of that additional paving this year.
Still, this summer, we paved more than 50 blocks of downtown streets by smartly leveraging federal dollars. This work has made some of the busiest streets in the city noticeably smoother, created 3.2 more miles of on-street bike lanes, and will save us $200,000 a year on patching costs that can now be deployed on streets in other parts of the city.
This work will also lead to a sharp one-year jump in the Pavement Condition Index downtown: without this paving, it would have fallen to 61, but with it, it will rise to 67.
Coupled with the remake of Marquette and Second into transit malls, we have led an extraordinary transformation of downtown streets in just a few years.
But still we have much, much more to do. Over the past several years, our Pavement Condition Index citywide has continued its gradual decline, falling from 81 in 1996 to 70 this year.
Next year, we were scheduled to invest about $17 million in our capital budget, the one we use to pave streets — but it was clear to me that it would not be enough to turn around our streets. We needed a game-changer.
So over the last few months we have been working hard to develop a plan to fund significantly more street paving. The result is that today, I am proposing five-year capital budget of $150 million, an increase of $57 million, or 60%, over the five-year program we had planned. This will begin next year with our investing about $9 million more into our streets than planned. It then ramps up in 2013 with our investing about $23 million more in our streets than planned.
With this work, we will turn around the slow deterioration of our streets — particularly on our heavily-traveled arterial streets, where much of this work will be focused. Arterial streets make up about one-fifth of all miles of our streets but carry two-thirds of our traffic — and healthy arterial streets means that traffic stays off neighborhood streets, extending their life as well.
To do this enhanced capital program, we will sell bonds — and the most important reason we can do so is because we have paid off so much debt. This level of street improvement would never have been possible a decade ago, when a debt-ridden city had lost one of its AAA bond ratings. But because we carry less debt today and have restored our AAA ratings, we can sell the bonds to make this critical investment in our streets while maintaining financial integrity.
In fact, we should think of a poorly maintained street itself as a debt that we pass on to future generations. Better streets, fewer potholes and fewer car repairs are the result of a reform-minded, fiscally-responsible city paying off its debts — in our finances and in our infrastructure.
When we do so now, when interest rates are so low, our costs will be even lower. And when we do so now, when unemployment in the construction trades is still far too high, we will put people to work in good jobs.
City That Works: Investing in putting people to work
We are a city that works because we have managed the city's resources well. We are a city that works because we have invested in the common ground. And we are a city that works because we have invested in putting people to work, especially those most in need.
We have shown that as a local government, we can make a positive impact on our local economy. Because of our efforts to leverage private partnerships and invest limited resources wisely:
• A new office building is going up downtown for the first time in years: the American Academy of Neurology on Washington Avenue.
• Working with Achieve Minneapolis and other partners, we put nearly 2,000 more STEP-UP youth to work in good jobs this summer — for a total of 16,000 youth since 2004.
• In the midst of a recession, we have helped scores of small businesses start up, grow and create jobs with grants and low-interest financing.
• We are remaking the West Bank, laying the groundwork for economic growth and transit-oriented development well into the future — and creating good construction jobs, including for neighborhood residents.
• Since 2006, we have placed 5,000 hard-to-employ Minneapolis residents in jobs, some with the help of the federal Recovery Act. In the same time period, we have placed nearly 2,000 dislocated workers in jobs.
• As a result of these and other efforts, most months of the year there is no more unemployment gap between Minneapolis, the metro area and the state.
These investments pay off in the short term with new jobs and businesses, and off in the long term as well:
• First, in private investment. For every $1 million invested in small business grants for façade investments, business and marketing assistance, we can leverage an additional $2.5 million from private and foundation sources.
• Second, in our tax base. For every $1 million invested, we expect our tax base to rise by $1.6 million. From 2008–2010, when the recession took $1 billion from the Minneapolis commercial tax base, properties with City commercial investments added nearly $300 million to the tax base. And the value of these properties continues to rise.
For these and other reasons, it's clear to us now that Minneapolis is ahead of the curve, moving out of this recession faster than other regions: Forbes Magazine has said that our region’s economy is creating jobs faster than all but three other regions of the country.
We are poised to take our place as a regional economic engine for the nation. As we look to the next year, we must keep focused on our efforts to:
• Help entrepreneurs take their ideas to the marketplace.
• Help more businesses export their goods and services to global markets.
• Help grow promising new sectors like the local-food economy.
• Help unemployed and underemployed people get back on their feet.
• Help future workers get ready for their careers.
There is one more thing we can do to spark growth, and it costs us nothing: get out of the way. We have created jobs in Minneapolis simply by reforming or eliminating regulations that no longer make sense, and by so doing, have created jobs in beer brewing, food carts, pedicabs and restaurants, to name a few. I appreciate the Council’s partnership in identifying opportunities like this and look forward to keeping it up.
There is a role for government to play in growing the economy and a role for government to play in getting out of the way, and we've shown we can do both.
But for us to really make a difference, we need to marshal more resources for our economic development efforts in a CPED budget that is sustainable into the future. This budget makes progress toward that goal by introducing a new financing tools to help grow our economy: an Development Infrastructure Fund. This fund will be a portion of capital bonding dollars set aside specifically for public infrastructure to fuel private development. I am proposing $10 million for this fund over the next five years, with $2 million starting next year.
In addition, we need to continue to reform CPED to make it leaner and even more effective, continuing the work that we began nearly a decade ago to weave together the disparate parts of this organization.
As I said earlier, we have reason to be proud of the work we have done as a community and a region to come together during this tough recession. The number rankings we top is almost embarrassing: we are regularly ranked the #1 place to find a job, start a career, volunteer, walk, bike and visit, among many other things.
But there is one list, one top ranking that we should rightfully be embarrassed to lead. In this city and this region, we must own the fact that we have one of the largest unemployment gaps between black and white of any large city in America.
That's why in this budget, one of the only new programs I am proposing to fund will attack this problem. Right now, Minneapolis is a tale of two cities that we need to make one city with no jobless gap between black and white. Our proposed "One Minneapolis" initiative brings together the collaboration of Economic Development, Civil Rights, and Human Resources to ensure that low-income people and people of color are strategically connected to jobs, especially those in the green economy.
Building off the foundation of the Renewable Energy Networks Empowering Workers, or RENEW, the "One Minneapolis" initiative will provide job training and job placement for the workers we need in the new green economy. Demand for green job and training is increasing and presents us with a terrific opportunity to place unemployed and underemployed people into green-collar jobs, demand for which is growing and growing fast.
My proposed $300,000 initial investment in the One Minneapolis initiative is modest, but will leverage funds from our private sector partners, the Minneapolis Foundation, and hopefully the State of Minnesota. Minneapolis is not in this fight alone and it will take all of us to work harder to close this unacceptable gap.
Cities work
We are a city that works because we have managed the city's resources well. We are a city that works because we have invested in the common ground. We are a city that works because we have invested in putting people to work.
At a time when so many of our problems exceed the ability of national governments and international institutions to solve them, there is one thing that remains true: cities work.
Since ancient Athens, urban centers prosper because when people come together, ideas spread. One smart person meets another smart person and sparks a new idea. That idea inspires another idea and all of a sudden, something big happens. In dense urban spaces, ideas move quickly from person to person.
The greater a region’s density, the greater its potential for innovation and prosperity. In the U.S., workers in large metro areas with big cities earn 30 percent more than workers elsewhere. Americans who live in metro areas of one million or more are 50% more productive than Americans in other areas. Not because of who they are, but because of where they are.
Now, just because cities are the engines of our economy, that doesn't mean all cities have always been successful. Nor does it mean that our state or nation have always helped cities prosper and grow. But the cities that survived and continue to thrive are those that are able to reinvent themselves to fit the changing times. Cities like New York, Boston, Chicago — and yes, Minneapolis — are successful today in part because they grew out of an manufacturing, industrial past and diversified their workforce and their economy.
In today's world, we need to constantly reinvent ourselves. That's why we’re in this space today.
You are now in one of the most historic places in Minneapolis. The Grain Exchange, probably more than any other place in our city, is where Minneapolis was transformed into the Milling Capital of the World. That happened because people in this space refused to think small.
But the world changed. The trading floor that powered this space was no longer needed and the historic Grain Exchange, which once was filled with the chaotic shouting of grain traders, went quiet.
Then a few months ago, we began working with the teams from Project Skyway and CoCo, two groups creating incubators for entrepreneurs and independent workers in the technology, creative and marketing sectors. The idea was to bring innovators with promising ideas into a common space and launch a new breed of companies to power the next generation of our economy. When we heard that, we knew there was no better place for them than right here.
Once again, this historic space will create a new future. The Grain Exchange is becoming the Brain Exchange.
This story has everything to do with the budget I am delivering today and everything to do with Minneapolis' economic future.
• In this City That Works, the best way to keep all of us working is to stay ahead of a world and an economy that are changing at warp speed.
• In this City That Works, the best way to build the Minneapolis we want is to grow the tax base. The more successfully we grow Minneapolis, the less the tax burden falls on each of us who own homes and businesses, and the more we have to reinvest in the strategies that make us a City That Works.
City government can't do this alone. But if we
• manage the city's resources well;
• invest in common ground to help everyone succeed;
• and invest in putting people to work, especially those who have been left behind;
then this city that has seen so much success — where traders in this room helped grow a village on the edge of the prairie into a global powerhouse — can once again reinvent itself to meet the needs of a new world.
Last updated Sep. 27, 2011