FFM Bulletin 11/22/10

Minneapolis homeowners face double-digit property tax hike

Minneapolis residents turned out in droves last week to a city council meeting to discuss the city’s skyrocketing property taxes. Many had just received notice that their property taxes were set to increase by 15-20% in 2011. MinnPost reported that “for two hours one homeowner after another – from the disgusted to despondent – stepped to the podium to ask the city to reduce the increases; to issue a moratorium on new projects; and as one senior in a Teamsters cap put it, to ‘Stop it! Please! Stop it!’”

In fact, two-thirds of Minneapolis homeowners will likely see a 10-20% property tax hike next year. And they are demanding an explanation. The city is quick to blame two things for its budget mess: bad investments made by managers of the city’s “closed” pension funds and declining Local Government Aid (LGA).

And while LGA and closed pension plan obligations have unquestionably had an impact on the city’s finances, they also serve as convenient excuses that obscure the depth of the city’s fiscal woes.

Here are a just a few items the city isn’t as anxious to discuss:
  • Pension obligations for current employees– The City of Minneapolis will spend $28.2 million in 2011 to the Public Employee Retirement Association (PERA), the plan, which covers most currentcity employees. That’s $2.2 million higher than this year’s obligation. Here’s a look at the annual increases to the city’s PERA obligations.
  • City wireless internet services– Often mischaracterized as a “free” citywide wireless network, Minneapolis taxpayers are obligated to pay $1.25 million to US Internet for wireless services in 2011 (and many more years to come). And if past experience is any indication, much of that money will pay for a service that isn’t used. According to the Star Tribune, “in 2010 the city will use less than half of the $1.25 million a year worth of services it is paying for.”
  • Taxpayer-funded lobbying– The City of Minneapolis has spent millions of dollars on taxpayer-funded lobbying in both St. Paul and Washington, DC. Last year alone, Minneapolis spent at least $630,000 to lobby state and federal policymakers.
Unfortunately, the tax picture doesn’t appear likely to improve anytime soon. According to Mayor R.T. Rybak’s five-year direction, the Mayor recommends tax increases of 6.5% in 2011, 6.7% in 2012, 6.0% in 2013-2014, 5.5% in 2015 and 5% in 2016.” In other words, there’s a lot more pain ahead for Minneapolis taxpayers.

Dakota County leads by example

Dakota County prides itself on running a lean yet effective ship, and their 2011 budget proposal is no different. Despite facing tens of millions in lost state and federal revenue, most Dakota County residents will likely see their taxes remain steady or even drop slightly, due to the county’s prudent budgeting and willingness to cut non-essential programs. According to the county website, "property owners won’t pay for local government’s budget crisis—at least when it comes to the County’s share of property taxes."

In order to keep tax rates down, the county maintains a lean staff, and salaries and wages for 2011 will be reduced by 3%, dipping back down toward 2008 levels. In addition to efficient staffing policies, the county uses foresight when planning for the operational costs of future projects. For example, the county began allocating funds for a new library in 2005, even though its doors weren’t set to open until 2009. Thanks to this careful planning, there was no need to increase the allocation for library operations in the 2009 County Budget.
And finally, after conducting a cost/benefit analysis of scores of county programs, Dakota County leaders have identified and discontinued non-essential or underperforming programs, including the Master Gardeners program and bookmobile. (The Freedom Foundation recently took a look at the inefficiency and high cost of bookmobiles around the state.)
As local governments throughout Minnesota search for ways to deliver essential services while sparing taxpayers, they should follow the lead of Dakota County.

REMINDER: Reagan essay contest submissions due January 5, 2011

Entries for “A Legacy of Leadership: The Ronald Reagan High School Essay Contest” are being accepted until midnight on January 5, 2011.  The topic is “What was President Ronald Reagan’s most important public policy achievement?”
The Freedom Foundation of Minnesota seeks to encourage students to explore that legacy of leadership and the lasting effects of his presidential policies.  We offer this contest with the hope that Minnesota’s next generation of leaders will discover and value the leadership qualities that shaped the ideology and conviction of Ronald Reagan.
Winners of the $5,000, $1,000 and $500 grand prize scholarships will be announced at the Freedom Foundation of Minnesota’s Spring Awards Banquet.
Please review the complete list of submission guidelines, judging criteria, eligibility requirements, and scholarship rules. If you have any questions, e-mail Reagan@freedomfoundationofminnesota.com


And finally, all of us at the Freedom Foundation wish you and your family a very happy Thanksgiving!


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