Minneapolis communities in conversion


The small office space on the corner of 15th and Rollins avenues is akin to home for four employees.

The building is the headquarters of the Southeast Como Improvement Association, which has been the center of hundreds of community programs in the student-heavy neighborhood over the past 15 years.

But the space could soon be empty.

That’s what James De Sota, neighborhood coordinator with SECIA, said is likely to happen under Minneapolis Mayor R.T. Rybak’s latest budget proposal, which suggests spending no more than $6.5 million per year on neighborhood programs over the next decade.

The proposal is much less than the $8 million per year Rybak proposed last year, and almost half of the $12 million the City Council ultimately approved at the end of 2008.

Though the neighborhoods are not alone – the city is trimming funds to every department in an effort to meet ends in a financial crisis – most neighborhood organizations agree: the cut is steep.

“It’s a freaking joke,” Bob Miller, director of the outgoing Neighborhood Revitalization Program (NRP), said. “Here you have $6.5 million, half of which will go to administration and the central office.”

The city is in the process of replacing the NRP with a new department they estimate will cost $1.7 million per year out of neighborhood funds. A large portion of the rest of neighborhood dollars will go to city-designated community projects for which neighborhoods can compete, Miller said.

Moving forward, De Sota fears SECIA will revert back to an organization with one or two volunteers and almost no programs.

“Some of the estimates on the negative side show that perhaps neighborhoods can still put out a quarterly newsletter,” De Sota said. “It’s going to be a radical shift in the way neighborhoods are able to address the concerns of its residents.”

And while some city officials say replacing the NRP saved the future of neighborhood programs, others fear the new commission will not have the authority to take a stand when the neighborhoods need it most.

Tax-increment financing

The source of funding for the neighborhoods and the subject of Rybak’s budget change lies in the intricacies of tax-increment financing (TIF) districts.

When local governments choose to invest in community improvement projects, the value of surrounding real estate goes up. This increased site value generates increased tax revenues, called tax increment, that are used to finance the project’s debt.

Minneapolis has used TIF districts to redevelop areas such as downtown, but in the late 1980s the city sought an avenue of funding to start up a major neighborhood initiative.

City officials went to the state Legislature to pass a law that allowed the use of several TIF districts to fund the NRP.

In 1989, the Legislature authorized the use of $20 million in TIF revenues per year through 2009 for NRP purposes. While that $20 million was maintained through the 90s, it took a hit in 2001 after the state passed a tax omnibus bill that changed the property tax system.

Since then, NRP spending has averaged $13.5 million per year, Mark Hinds, executive director of the Lyndale Neighborhood Association, said.

But facing a $35 million cut in local government aid in 2010 and rising pension and healthcare costs, Rybak proposed certifying no more than half of the approved TIF properties to fund neighborhoods.

That means a pool of $26 million in TIF revenue – to be split two ways between funding neighborhoods and paying off the city’s $120 million in debt on the Target Center – dropped to $13 million. This leaves $6.5 million for each from 2011 to 2020. The reason: the more properties tied up in TIF districts to support neighborhoods and debt relief, the fewer go toward the rest of the city’s property taxes, which pay for police, fire and road projects, Patrick Born, chief financial officer for Minneapolis, said.

In 2011, an average homeowner could face a more than 22 percent property tax increase if all the TIF properties go to funding neighborhoods and the Target Center. But under Rybak’s proposal, the average homeowner would see a 15.7 percent increase, Born said.

“This is a combination of helping pay off city debts, especially Target Center, and keeping property taxes down,” Jeremy Hanson, spokesman for Rybak said. “That has meant that we are not able to put as much into neighborhood programs, but the world is very different now than it was a year ago.”

The mayor’s proposal is a fiscal middle ground, Jay Kiedrowski, a fellow at the Humphrey Institute of Public Affairs and an expert in local budgets and financial management, said.

“The problem we have in Minneapolis now is that these tax-increment finance districts have already paid for the improvements that were made,” he said, adding that some would argue that cities should never use TIF revenue for anything beyond paying debt on the original investment.

A fiscally liberal move would be to leave all of the districts in play to pay for neighborhoods and Target Center debt, Kiedrowski said. The conservative route would take them out of the picture entirely.

On Dec. 7, the City Council is expected to adopt the final 2010 budget, with chances that none or all of the TIF properties could be certified to fund neighborhoods and Target Center debt.

‘Starvation diet’

For most neighborhood organizations, this level of funding is unacceptable.

De Sota has a long list of programs that could go out the door, along with staff, if the mayor’s budget is approved without changes.

Programs out of Southeast Como include its home improvement loan program and many green initiatives, including pollution prevention programs that received the 2008 Governor’s Award.

“If it doesn’t hamstring us, it will cripple us entirely,” De Sota said.

And while neighborhood organizations often use funds generated from their own development projects or from federal grants, these dollars are also drying up with the economy, he said.

Rita Ulrich, associate director of the Nokomis East Neighborhood Association, likens the level of funding to a “starvation diet.”

Because of the uncertainty and likelihood that dollars will come in low, Ulrich said the organization hasn’t started planning how they will use the money.

“Right now the funds are worth about as much as the mayor’s word,” she said.

In the midst of a rough recession, however, all departments across the city are taking cuts, something Ward 13 councilwoman Betsy Hodges said neighborhood programs must also face.

“It would be tough for me to imagine a scenario where I would vote to make cuts to major departments like police and fire and hold any other department harmless,” Hodges said. “The alternative is the program doesn’t exist.”

But Ward 2 councilman Cam Gordon fears the cuts to neighborhoods are much larger than any other city departments and programs.

Gordon said the average city department is taking about a 7 percent cut because of the economy. The cut to the neighborhoods chalks up to at least 25 percent, he said.

Robin Garwood, council aide for Gordon, said this hurts even more for Gordon as he and several other council members reluctantly supported a move by the city last year to bring neighborhood programs into the city.

The NRP had an independent policy board and acted separately from the city.

“One of the ways that they convinced [the neighborhoods] that everything was going to be OK was to hold this dollar figure in front of them,” Garwood said. “We’ve gone back on our word that we gave to these folks to convince them that it was still OK, that giving this money to … the city was not going to result in money taken away from neighborhoods.”

‘A dark comedy’

In August this year, funds ran out for the NRP, a 20-year program with an independent policy board meant to give residents the dollars and power to implement improvement projects in their community.

While the Legislature ultimately renewed TIF funding for neighborhoods and Target Center debt from 2011 to 2020, the city decided the dollars should continue under a new program – one that would look at neighborhood engagement in a world that is considerably different than the one in which NRP was formed, Hanson, Rybak’s spokesman, said.

“The NRP was scheduled to sunset in 2010,” he said. “Status quo was not an option … so the [mayor and a few key council members] created a solution rather than let that go away,” Hanson said.

That solution reorganized the NRP’s framework under the Neighborhood and Community Relations Department in the City Coordinator’s Office and the resident-based Neighborhood and Community Engagement Commission (NCEC).

But forming an entirely new neighborhood program, especially in the midst of a financial crisis, does not bode well for neighborhoods, Justin Eibenholzl, the environmental coordinator with SECIA, said.

In 2000, the United Nations placed the Minneapolis NRP on its Global 100 Best Practices List. “So it’s kind of weird that the city would just scrap [the NRP] and try to create something new with 50 cents in their pocket,” Eibenholzl said, “and hope that people are going to be magically engaged.”

De Sota too fears what he sees as a pattern of the city tightening its grip on independent programs.

“They did that with the Library Board and tried to do that with the Park Board,” De Sota said. “It’s kind of a dark comedy, the worst case scenario is coming to pass, and people are going to say this was going to happen, even if we wouldn’t have had an economic crisis.”

A new community commission

The new commission charged with the daunting task of taking over neighborhood programs for the long-standing NRP is still figuring out how it’s going to run.

Conceived at the tail-end of last year, the NCEC is made up of 16 commissioners, with half appointed by Rybak, the City Council and the Park Board, and the other half appointed through a neighborhood election process.

Within the NCEC itself, views on the commission’s role in the city’s decision-making process are split.

Current facilitator of the NCEC, John Finlayson, said his personal view is that the city will take care of neighborhoods and the fledgling commission.

“The city has a few years to create the new commission and they’re not going to throw the baby out with the bathwater,” he said. “We will be funded in some way or another, but we are going to have to take cuts like everybody else.”

But Hinds, a member of the Lyndale Neighborhood Association and NCEC commissioner, fears the ability for neighborhood organizations to function will be at risk if the commission doesn’t take an action on Rybak’s proposal before December.

So Hinds drafted a letter on behalf of the commission that officially recommends that the City Council certify all of the districts for Target Center debt and neighborhood funding.

Hinds said the move would not only preserve neighborhood programs, but would be the most fiscally responsible position for the city to take.

By Hinds’ calculations, the city will force at least $60 million in Target Center debt onto the general fund, and could lose $45 million in revenue through the lost increment that the city only collects if the parcels are certified as part of the TIF district.

“When they are putting the numbers out all they are putting out is the amount of property tax increase on each house, and they’re not putting out what actually goes into that,” he said.

The NCEC approved sending the letter off to the City Council and hopes to work with councilmember’s on a better budget for neighborhoods.

The next phase

City staff currently uses the term NRP Phase Three to describe the future of neighborhood programming.

But the name, although tentative, does little to describe what’s ahead for neighborhoods, Miller said.

“What the city has planned next is nothing like NRP,” he said.

NRP has about $35 million dollars from its second phase that will still be contracted and spent by neighborhoods for at least five years, Miller said. And the NRP policy board, which runs the program, doesn’t expire until the end of 2011.

But these phase two dollars are going to be stretched thin by neighborhoods, some of which are further along in the spending process than others.

The city set aside $200,000 to help transition those neighborhoods through 2010 until TIF districts start in 2011. But for Miller, that money won’t go far. And now more than ever, the NCEC needs to be an advocate for neighborhoods, and not “play the role the city wants it to play,” he said.

“[The NRP] has had plenty of shortcomings and we’ve made mistakes, but we’ve learned a lot of things and we know how to make things work,” he said. “The challenge for this new group is they have to learn that, and I don’t want neighborhoods to be the ones who suffer from the learning curve of people who are well intentioned … but don’t have the ability to do that today, tomorrow or even six months from now.”