2010 City of Minneapolis Budget
Mayor R.T. Rybak
Thursday, August 13, 2009
These are no ordinary times. We are in the middle of the greatest economic recession since the Great Depression. Foreclosure, and all the factors related to it, continues to rack neighborhoods. Our state government is in a financial meltdown, putting huge pressures on cities and communities all around the state. People are suffering and many of the things that improve the quality of our lives are in jeopardy.
These are also no ordinary times because extraordinary things are happening in Minneapolis. In North Minneapolis’ Cottage Park-the scene of a notorious murder of an 11-year-old boy nine years ago, and for too long a magnet for crime-the drug dealers are now gone. Houses around the park have been rehabilitated or rebuilt, and the playground has all new equipment. When I walked through the Park last month, seven-year-old Onea Miller, who lives there with her grandmother and father, came up and said simple but powerful words we are hearing more and more across the city as crime continues to drop. "Thank you," she said, "for making my neighborhood a good place to live."
At Coloplast’s headquarters, 500 people have new high paying jobs in medical technology, because we worked with the Danish medical device company to locate its headquarters on the Upper Riverfront. On Marquette and Second Avenues downtown, the heart of the financial district is being remade into transit corridors that will dramatically improve service for bus riders. It’s the first step in the Access Minneapolis plan that will reinforce downtown as the center of the region’s growing transit network of light rail, commuter rail and high-speed buses.
In tough times we are delivering results, crime has dropped by double-digits for three straight years. For the first time on record, the annual unemployment rate within the city of Minneapolis is lower than the suburbs, the state and the country. We are in the middle of a five year plan to repave one-fourth of all city streets. And while doing all that, we have paid down more than $100 million in debt.
Even in tough times, and especially in tough times, this city has invested in jobs, safety and infrastructure. We are showing that smart investments can continue to make this a city of opportunity.
Facing extraordinary economic challenges, in a city making extraordinary progress, we now have the challenge of developing a budget for the coming year. Like every budget I have delivered, this one will be balanced over not just one, but five years into the future. None of the choices we face are simple and almost none are easy. That’s why I have spent much of the past six months, and especially this summer, with our budget team and managers, mapping out a course of action.
As we went through those meetings a phrase stuck with me, "Change is inevitable but progress is optional." Today, we choose progress. We will continue making Minneapolis a city of opportunity. That’s what we need to lift us out of this recession, and what we need to continue to build a great city.
We will have to do many things. First, and most important, we will cut spending. Second, we will continue the reforms that helped us deliver results to our residents, even when we have fewer resources. Third, we are going to ask the residents of Minneapolis to invest in a long term plan that tackles our problems head on, and asks for sacrifice this year to make it better in the years to come.
Our goal is a budget that protects our priorities with a balanced, long term strategy. But most important, knowing the core of our problem is the economy, we have crafted a budget that is focused on getting people to work and helping businesses grow. The budget I am delivering has three key priorities: first jobs and economic opportunity, and second, the priorities that create the environment for opportunity: public safety and quality infrastructure.
Let’s start where we should, by talking about how we help get this economy moving. In 2008, we created the Great Streets Neighborhood Business Program to help businesses develop and succeed along commercial corridors throughout the City. We created innovative and unique low interest loan and business financing tools to help businesses grow. We provided gap financing for transformative commercial development projects; targeted funds to help businesses acquire property for redevelopment along commercial and transit corridors; and façade improvement matching grants to businesses in 26 commercial corridors, nodes and LRT station areas.
One of the many success stories of this program is the Seward Co-op grocery store. They used a combination of four different city loan and financing programs to relocate to a larger, improved location to better serve their growing customer base. This $10 million project more than doubled the size of the grocery store and added 50 new jobs.
Small businesses are the strongest engine for job creation. Businesses like Seward Co-op, African Development Center, Mercado Central, Northside Arts Collective, and others are ready to expand, but have trouble getting financing in this tough market. Great Streets helps them grow and hire. That’s why this budget not only protects this program from cuts, it increases its funding to $4.3 million in 2010. By investing in our small businesses, we are growing jobs and creating income that benefits the local economy.
Minneapolis is also unique because of the way that we help train people, and find them work. We believe if you have a talented workforce where people are trained and ready, innovation flourishes and companies can grow. The City of Minneapolis plays a vital role in helping to train people for employment and to find a good job that matches their skills and experience. Since 2002, the City has helped directly place 10,000 people into good, quality jobs.
To understand why that is so significant, think about the personal toll of one person losing a job: the toll on their family, on their neighborhood, and - most importantly - on them. Now, think about what we have been able to do by giving 10,000 people a better way to live.
Minneapolis is one of the few cities in the country that coordinates our own Work Force Centers, which means we have much more flexibility to tie the work of these Centers directly into our other job placement and economic development strategies. Our Centers are the only ones that provide over-the-phone and in-person job counseling. The Minneapolis Work Force Centers also provide a one-of-a-kind, two-week program called Employment Ready U that helps people like Steve update the skills they need to get back to work, and provides the vital human touch of peer support and motivation.
It’s about people like Steve Kvasnik. He had a successful career in real estate until the market fell. So he went through our job training and placement program at the Northside Workforce Center. He sharpened his job skills, networked about job openings and today is back at work as an account executive at a telecommunications company.
In normal times many residents of Minneapolis didn’t think they would ever need these Workforce Centers, but today’s economy has destabilized many people who never thought they would need help. About 40 percent of the people served at our Work Force Centers had college education or a more advanced degree. A number of them come from the suburbs, including Steve Kvasnik, who is from Maple Grove.
Our Centers serve the most people of any in the state – nearly 60,000 last year alone – and the number increases every month. There are many more people who need our help so, in spite of all the tough choices we have to make, this budget will not have any cuts to our job placement programs. In fact, I am proposing to more than double the funding for our adult job training, placement and retention programs from $511,000 to $1.2 million in 2010.
These programs are not paid for from our General Fund. They are supported primarily from Grants and the one-time repayment of city loans. This means they do not compete with funding for basic core services like police and fire. I want to thank the council for having the vision to support this work well before the Recession began and for continuing to support it in these tough times.
To be a city of opportunity we first must be a safe place to call home and grow jobs. Minneapolis is a safer city today than it has been in many years. We fought crime head on and delivered results. Crime in Minneapolis is at the lowest level in nearly a decade:
- Violent crime midway through 2009 is the lowest in eight years.
- The homicide rate is the lowest in 25 years.
- In the first half of this year, not a single homicide involved a juvenile.
- Other types of violent crime—robbery and aggravated assaults—have seen double-digit percentage reductions every year, for five years in a row.
- "Livability’ crimes are down more than 22 percent.
This wasn’t easy and it wasn’t an accident. We got to this place because we made safety our top budget priority, we gave police the tools they needed to be more effective, and we paired tough law enforcement with aggressive crime prevention, especially with preventing youth violence. Working together, we made Minneapolis much safer – all in the middle of the worst economy since the Great Depression. We made life much better for people like Onea Miller and her family.
We've taken many steps to bring crime down, but we can never be satisfied. A single break-in, a single robbery, a single act of vandalism is a serious crime to those involved and we will not let up. Our police are working hard to implement proactive, community-oriented policing. And we will continue our investments to reach the goal of having every block, ever day, every hour a Safe Place to Call Home.
We are focused on jobs, and we know safe communities help business grow. We also know that economic success depends on people being able to move easily and safely around the city.
As I stood in front you to deliver the budget two years ago, the 35W bridge had just collapsed. I called our attention to the sad fact that our state and our nation have not invested as we must in roads, bridges and transit – and our lack of investment has serious consequences. I also said we also had to look in the mirror, because our city had also fallen behind and too many of our streets, bike trails and light poles were in disrepair. We needed to act or the problems would get even worse – and more expensive to solve.
So in last year’s budget I proposed – and you passed – the Infrastructure Acceleration Program, a $27.5 million investment of $5.5 million each year to address the unacceptable backlog of unmet infrastructure needs. This budget protects that program from cuts. I am also proposing a major investment to rebuild the Camden Bridge. Of any community in America, Minneapolis should know the importance of ensuring safe ways to cross the river.
We clearly know our priorities, but how will be pay for them? Given the many complicated fiscal pressures affecting this budget, we are able to make this plan a reality by applying the values I just articulated: by thinking long term and using a balanced approach.
The first step is to look for and make major spending cuts. We did that in March when we revised this year’s budget and we will need to do much more in 2010. In all, my budget proposes more than $19million in cuts to the general fund. Every city department is being cut, although our largest departments (police, fire, and public works) are seeing the smallest cuts as a percentage of their budgets. In order to achieve these cuts, I urged all city employees to "look under every rock" to find cuts big and small and they did, including:
- Consolidating cell phone plans to save $120,000 in Police and $81,000 in Regulatory Services.
- Decreasing its car fleet by 15 cars saves Police $370,000.
- Installing LED traffic lights to save Public Works $30,000 in electricity costs.
- Eliminating a Health department newsletter to save $2,000.
- Reduced staff training in the Human Resources department to save $17,000.
Scores of small savings like this add up to big savings throughout the budget. We have $19 million in cuts in this budget that will result in the elimination of 226 positions, but it will not lead to that many layoffs. Many of these positions have already been eliminated due to the foresight of the cuts we adopted earlier this year, and because of the hiring freeze we imposed last November. In addition, due to our innovative job bank, promoting voluntary leave, attrition, targeted retirement incentives and reforms, we believe that few of these position eliminations will actually result in layoffs. For example, of the 63 positions eliminated in the Revised 2009 budget I delivered in February only four were ultimately laid off. The rest were vacant positions or involved people who found other jobs in the city or retired.
Minneapolis is also an example of fiscal responsibility when it comes to saving money by reducing debt. Since 2002, we have reduced more than $116 million in debts, which frees up millions each year to fund basic services like public safety. We will make budget cuts, but we will do that work in the context of a long-term plan that keeps Minneapolis on a course of fiscal health.
Now some at the State Capital have criticized city spending decisions. Well it’s time to set the record straight. In fact, city spending adjusted for inflation has increased just one percent since 2003. During that same time state spending has increased twelve percent.
Cutting spending comes first but we also have to continue to reform the way we deliver services. That’s how we can continue to deliver quality services, even in these tough times.
Some might say that in a financial crisis we should retrench – that given these difficult financial times we should retreat, do less, to lower our expectations. It’s true that we have less money but I can tell you that this budget does not retreat from the innovations that we have implemented over the last seven years. We can’t afford to abandon the efforts that are improving services for our residents, enhancing our quality of life, and making this a better place to grow jobs.
Let me highlight a few innovations that continue to be supported in this budget.
- Four years ago we implemented the 311 phone system because when people call City Hall they shouldn’t get the runaround. They should get answers. 311 has been a huge success. More than 200,000 calls have been answered this year, and 85% of those callers to 311 got their question answered by the first person who answered the phone. My budget protects 311 from reduced hours even though the 311 budget is reduced. How can we do this? Thanks to the creativity and collaboration of the 311 staff, who have figured out how to restructure staffing to get good service with fewer people on-call.
- The second innovation I want to draw your attention to is our work around Youth Violence Prevention. Earlier this month we celebrated our successful efforts to reduce youth violence in the city – juvenile crime is down nearly 40 percent since 2006. This work has been lead by our Police Department and Health Department, but we could not have achieved this victory without the active participation of literally hundreds of people and organizations in this community. This integrated approach combines tough enforcement with upstream prevention. We cannot, and we will not afford to abandon this effort. My budget maintains our support for the juvenile supervision center, puts $458,000 into our successful youth jobs program – which helped put 2,500 kids to work this summer and continues funding to transport our kids to quality out of school activities. These relatively small investments from the city leverage other public and private investments across the city and region. We aren’t done with this work, and we won’t give up on it even in these tough times; because it is working.
- A third innovation is the Graffiti Micro Grant program: Two years ago, we used data from Results Minneapolis and 311 calls from citizens to develop a GIS map of graffiti hot spots. We then provided micro 17 micro grants for neighborhoods to do what they thought would cut graffiti. They used these grants for many approaches, including painting murals and planting vegetation on walls that had been targeted. Every single micro grant showed reductions in graffiti, half of them a 100% reduction. This budget expands this successful partnership with our neighbors.
This budget also supports other innovations that have proven their effectiveness:
- Clean energy investments save money and reduce energy consumption in city buildings and vehicles
- Wireless technology improving public safety, and making the Internet affordable
- Outreach workers to prevent homelessness, and
- Our nationally recognized, innovative strategy to reduce the impacts of the foreclosure crisis.
Minneapolis has a record of innovation, and we can’t stop this work just because of the economic downturn. We have to stay focused on opportunity – not in spite of the financial challenges we face, but because of them.
I’d like to highlight one example of the kind of reform that is happening everywhere in the city. The Minneapolis Police Department has an annual budget of about $132 million – representing 38% of the city’s General Fund. It employs 1,092 people - about one in every four city employees - including 880 sworn officers. Since 2003, the MPD budget has grown by $35 million dollars, and the sworn budgeted force has grown by almost 100.
The Police Department – in deep partnership with our community – has driven down violent crime in every neighborhood of the city, with the biggest gains happening in the most challenged neighborhoods. We need to protect this work. But the Police Department is such a large part of our budget that we cannot make substantial reform in the way we spend money without getting substantial reforms in the administration of the Police Department.
Chief Dolan has brought new focus to this work this year. First, the Chief and I have worked together to simplify and streamline the Department’s management structure. This will mean:
- fewer specialized units and more collaboration across divisions and
- fewer supervisors behind desks, and more officers working in precincts – and with the community.
The reforms protect vital intelligence and investigations functions, but put more emphasis on developing specific, actionable community policing plans that neighborhoods develop with the Department.
Second, there has been progress in cutting overtime. This year, the MPD overtime budget is down 38% from last year. This has been accomplished through reforms and increased accountability, and it is making a big difference in the 2010 budget. To give you an idea of what this means – saving that $1.7 million in the overtime budget saves the jobs of 17 police officers.
Third, a focus on retaining, and continuing to hire, the diverse new officers we have recruited to the force.
A police force needs to reflect the community it protects so bringing in new officers of color has been a very high priority of mine. The police force is now 18.6 percent people of color, the highest it’s ever been, and the new officers we have brought on since 2008 are have been 27% people of color. Our budget challenges mean we won’t be hiring as many officers but we have to keep up our progress.
Knowing diversifying the force is also a priority of the Obama Administration, we applied for, and thankfully just received, a federal COPS grant that will help us start a new class of recruits in September that is 50% people of color. One of them is with us today: Abubakar Ahmed Muridi, who will become the fourth Somali officer on our force and, to our knowledge, they are the only Somali officers in the U.S.
Joining these recruits in that new class is Officer Jennifer Diamond. She started in a recruit class two years ago but in the first week got a call that she was deployed to Iraq. Officer Diamond is now coming back to our force. She is out of town today but with us today is Officer Wesley Brown, who joined our force in 2008 and has also just returned from active duty. Please thank Officer Muridi and Officer Brown, and the rest of our officers who have done so much for our city and our country.
We’ve talked about the budget cuts we have to make, and the reforms that help us still deliver quality services. The third part of our strategy is to increase revenue. I’m not happy about that because I know the pressure all of us are under in our own homes and family budgets. But after spending many months working through all the challenges, I do not believe we can balance this budget and keep our commitment to core services, without adding serious debts in later years - unless we add new revenue. To explain that, let me give a quick outline of the five serious financial pressures facing the City and its taxpayers:
#1 is the most serious – the Recession. The recession has had many impacts on the City including: a reduction in revenue to the State, which is part of the reason for the State’s budget crisis, which led to massive state aid cuts. The downturn on Wall Street has significantly hurt the City pension funds. The foreclosure crisis has increased public safety costs and lowered property values. The property values on commercial property have also fallen significantly, so for the first time in many years, both residential and commercial values are down. The impact of that is that everyone who pays taxes has to share a larger burden.
#2 is the State’s cuts to Minneapolis. Funding to the City has been cut more than $20 million in 2009 and again in 2010. Today, Minneapolis gets $49 million less than in 2003. That’s 13% of our general fund---about equal to the size of the entire budget for the Minneapolis Fire Department. And that’s raw dollars without even factoring in inflation.
When you hear: "State aid to Minneapolis", some would like you to think of this as some sort of handout. The truth is far different. Minneapolis delivers tens of millions more to the state than we get back. We believe the cuts in the Governor’s unallotments are disproportionate, but the fact is, that’s what we have to deal with. And considering the financial crisis facing the state, it’s not likely to get better soon.
#3 is Health Care Costs. Like other cities, health care costs are the single largest uncontrollable cost in Minneapolis. Today we spend $48 million on health care and $220 million on wages and salaries. At the current growth rate of Health Care Costs, by 2026 we will spend as much on health care as we spend on all salaries. If we could just cut the growth rate in half, we would have millions more for public safety, infrastructure, and other services. So next time someone asks whether we should support President Obama’s efforts to reform health care, tell them about all those in need AND tell them the status quo is jeopardizing jobs, public safety and infrastructure in Minneapolis.
#4 is Pension Costs. People who worked hard for this city, and their families, deserve what they have been promised, but the cost of doing that is skyrocketing. These costs have drained funds that otherwise could have gone to public safety and property tax relief:
- Part of the skyrocketing costs is simply the unfortunate result of bad economic times – the drop in the market last fall alone cost us $8.8 million dollars, equal to a 3.5% increase in property taxes.
- There were also some bad decisions made a number of years ago that had the effect of protecting the upside of these plans for the benefit of the members, but not protecting the taxpayers from the downside when things didn’t go so well. In effect, all the profits accrue to the pension plans, and all the losses accrue to the taxpayers. We have spent several years trying to convince state legislators to fix this broken system so we can protect property tax payers. We continue to work hard on that effort.
- Finally, we believe taxpayers are also being overcharged by the Police & Fire fund, and are in the middle of a lawsuit to fix that.
This recession, state aid cuts, health care and pensions: those four pressures all complicate our financial picture. The fifth pressure is what we call the "Tax Base Rollercoaster." For this, a little history is required:
Two decades ago, downtown was growing but the value of property in the surrounding neighborhoods was stagnant. So City leaders made what I believe was a smart decision. They said that for 20 years some of the increased property taxes from the new downtown buildings would go into neighborhoods through what became known as the Neighborhood Revitalization Program. That good investment has helped increase property values. It helped ensure we would not be like some cities where a strong downtown was surrounded by deeply challenged neighborhoods.
The 20 years are now up. In 2010 all the tax revenue from those properties will go back on the tax base and help share the tax burden – lowering taxes for everyone else – but only for one year. For 2011, we have a decision to make. Should that revenue, now approximately $26 million a year:
• Continue investments in neighborhood revitalization?
• Stay in the tax base to lower property taxes?
• Pay off our debt to Target Center, which would also lower property taxes?
• Or should it be a combination of all three?
The answer to that question has a direct impact on your property taxes, not so much next year but in the years to come.
Having laid out all five major financial pressures, it’s time to address them all together with a comprehensive response. That will be the basis of a New Revenue Policy I am announcing today.
Over these past few years, as we responded to state aid cuts, the economy and as we paid down debt, we raised more in taxes than I would have liked. But our revenue policy was steady. That’s what I believe is most fair to people, to let them plan ahead in their own budgets. But because of those five pressures – the recession, the health care costs, the pension costs and the "tax base rollercoaster" – we need a new revenue policy.
Instead of using the same percentage each year, this policy includes a higher percentage in 2010 and a lower percentage in 2011. This new policy will decrease the swing in tax bills and allow us to avoid making deeper cuts in essential services to pay pension costs.
In 2010 we will raise levies for two purposes. First, a 4.1 % regular property tax levy. This is what we will use to partially replace state LGA cuts. Second, a 7.2% special pension levy solely to pay skyrocketing pension bills. In 2011 we will drop the revenue policy to 5.5%.
The 4.1% regular property tax levy plus the 7.2% special pension levy equals an 11.3% total levy in 2010. Together with the 5.5% in 2011, these will allow us to pay those pension bills and reduce the severity of the two-year tax base rollercoaster. This does not mean everyone’s taxes will go up 11%. It doesn’t work that way. Several other factors influence individual tax bills, including the tax base rollercoaster come into play. The actual tax impact on an average home will be an increase of 6.6% in 2010.
Now, let’s talk about what this won’t do. My budget does not include a Streetlight fee. Evening out the rollercoaster is a good thing, but the more important question is, "what can we do to reduce the growth of property taxes in tough times for household budgets?"
As I mentioned earlier, the City has the power to decide how many of those downtown properties will continue to help pay property taxes from 2011 to 2021. Last August, I had proposed taking 75% of those properties back off the tax rolls to pay for Target Center debts and the Neighborhood Revitalization Program. Later, the Council and I agreed to raise that to 100%. But the world has changed – we can’t afford that anymore.
We now know two things we didn’t know then. First, we know the impact of this historic recession. Second, we know the State response to that – which is to push its financial problems into the future and onto local governments –will jeopardize city services and property taxpayers across the state for years to come. So my proposal is that at least 50% of these properties should stay on the tax rolls – helping to lower everyone’s property taxes.
This will have three unfortunate effects. It will slow down paying off the Target Center debts, which as I said earlier, means we have an ongoing debt in the future. It will reduce NRP from the $8 million I originally proposed down to a maximum of $6.5 million. It will eliminate this as a funding source for Great Streets and similar programs – which I will fund from other sources in the budget.
But the good news is, that keeping at least 50% of these properties on the tax rolls will also reduce the growth of property taxes. And having spent many months working through scenarios for next year and into the future, we must take significant action to slow the growth of property taxes. If we do not adopt this new policy, it would be the same as adding an additional 3.5% to our revenue policy. That is way, way too much. We have to address revenue policy and the tax base together.
I want to make a final point, and in doing so, tell you something about those who have done so much already: the people who work for the city. Since 2002 our employees have been working with an ongoing series of budget challenges, at the same time we have been asking for better delivery of the services we provide every day. From the post 9/11 Recession to the 2003 State budget cuts, to the current economic downturn and the latest round of state cuts, our employees have been doing their jobs, and working harder, and working smarter and delivering more.
Our employees are on the front lines and in meetings with them over the past few months, they have given me great advice about how to address these budget challenges. You will see their ideas throughout this budget. What may surprise some, but not me because I get to work with them, is their number one suggestion: In meetings with employees, and the emails I got from them, the single thing they asked more than anything else was what they could do to help save the jobs of fellow employees. Many of them said they would be willing to take voluntary time off - to cut their own salaries - if it helped reduce the impact of budget cuts.
That says an enormous amount about the employees of this city, and their commitment to each other and to the work they do for the people of Minneapolis. So in the coming weeks we will be working with the employees, and their representatives, on a voluntary time off program. It will be different in different departments, and it may not work in some areas because we have cut so much we simply cannot afford to lose any worker’s time. But we did want to put this tool into the hands of our employees and work with them to help ease the impact of these tough choices we must make.
Late tomorrow afternoon a very thick budget book will arrive on the desks of the council members. Monday morning we begin working together to finalize these plans. We have worked together to do some exceptional work on budgets over these last eight years but I am confident as you go into the details of this proposal, you will see this is far and away the most complicated budget we have ever delivered.
That thick budget book is a collection of numbers on page after page after page, but as we have worked together over these years we have shown it as far more than that. The budget is where we decide whether we will put our money where our mouth is, where we send a message about the values of all of us, and all the people of Minneapolis.
The message in this budget is simple, but loud and clear: In the greatest economic meltdown since the Great Depression this Great City is doing Great Things. And we aren’t going to stop now.
Last updated Sep. 27, 2011