The City of Minneapolis is facing a huge financial crisis as the State cuts Local Government Aid again. If we had gotten the same amount of LGA as we did in 2001 (adjusted for inflation) we would be getting $140 million this year. Instead, we were slated to get $85 million and now have to absorb $13 million in cuts. That is real pain.
Four major things are funded out of property taxes: Cops, firefighters, public works (primarily street-related items like fixing potholes, running traffic lights and paying for streetlights) and parks. After that, there are a bunch of small things that are needed to provide the four big tax-supported costs – the Finance Department, the Human Resources Department, the City Clerk, the Attorney’s Office, etc. These things have been bled dry as the City has adjusted services downwards to match LGA revenues. We have finally gotten our cops back to somewhat reasonable levels but the streets and parks are falling apart. Pretty soon we are all going to be driving on gravel if we don’t change those trends.
So where can we find more funds to deal with the state cuts? I think that the questions that need to be asked are about money that is “fungible.” “Fungible” is a finance term for money that can be swapped around. Typically, money is collected in one pot but can be moved around to another pot. The problem with keeping money in separate pots is that when it comes time to figure out what should get money, each pot is evaluated separately. So one pot can go to really important things while another pot gets spent on less important things because the stuff in the different pots don’t get weighted against each other. This is why the City needs to evaluate its options more holistically. If so, I think it would choose different options. I have listed some examples below.
One option is opening up the sales taxes to other expenses. Right now, the sales taxes can only be used for Convention Center-related expenses. I think that police costs in particular should be eligible for funding from the 1/2 cent sales tax. That sales tax exists to tax visitors to the City, both short-term visitors and people who come into the city for employment. I think that the Meet Minneapolis software debacle would not have happened if more competition existed for those dollars.
The current budget assumes $1.7 M a year on-going to the Target Center. I don’t think any private money should be going to sports teams (sorry guys you are private businesses and should not be getting an on-going stream of tax money).
The Target Center green roof is another expense that I do not believe would have happened had those expenses been weighted against other priorities. Although I appreciate the importance of the environment, the amount of money spent on the Target roof was way out of proportion to the benefit received.
Other expenses in the Parking Fund should be more closely scrutinized. I do not think building a parking ramp that will never sustain itself by the Guthrie was a good idea, a ramp that needs an on-going subsidy from funds that are fungible with property taxes, in essence meaning it needs a property tax subsidy.
The City just voted to not make expensive improvements to the City’s water production process. This means that water rates will not go up as quickly as they might have. This is also an example of fungible money because these rates come out of the same pockets as the people who are paying taxes. The City needs to seriously examine these fee-based costs also to find ways of not overburdening citizens.
These are just a few examples of places where “fungible” money should be examined more carefully to help address our funding crisis.
