Re-examine ‘Legacy’ fund or cut neighborhood promises in half?

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Many people in Northeast neighborhood organizations already know their Neighborhood Revitalization Program (NRP) funds will be cut for Phase II. (Phase II is the second 10 years of the 20-year program.) Problem is, many don’t know, yet, how big the cuts will be.

And according to NRP Director Bob Miller, if the city doesn’t take some sort of action, neighborhoods might end up with about half of what they’re expecting. Or less.

NRP was originally intended as a 20-year revitalization plan, through which Minneapolis neighborhoods were to get $20 million a year from 1988 to 2009. More than half the money was supposed to be allotted to housing programs. But tax cuts from the state legislature in 2001, Miller said, cut revenues generated by the “Common Project,” the primary source of funding for NRP.

(The Minneapolis City Council set up the Common Development and Redevelopment Project–short name, Common Project–in 1989. Tax increment money generated within Common Project areas was used to fund all NRP related expenses, as well as some citywide Minneapolis Community Development Agency [MCDA] housing and economic development programs. With tax increment funds (TIF), a city typically borrows money to help a development. When higher post-development taxes are received, the city gets the difference between pre-and post-development property taxes for a specified period. After that period other entities, such as a school district or county, receive their share of the higher property taxes.)

Miller said, “We’ve been expecting $180 million for Phase II, but now it looks like it’s going to be closer to $90 million.” Initially they thought they could fund 70 percent of the original money promised, but now it looks like it will be closer to 50 percent. Certain things the city has done, he added, such as renegotiating repayments from the Saks parcel at Gavidae (making it exempt from having to pay back the Common Project) and paying off the Brookfield property at City Center, cut more money out of the Common Project.

For a Northeast neighborhood such as Logan Park, Miller said, it has a potentially huge impact. “Logan Park was originally scheduled to get $418,000. Under the new formula, if we have to make the cuts the city is projecting, they’ll get $227,000 for the second 10 years of the program [Phase II].” Windom Park is expecting $219,000 for Phase II, he added. “If this change goes through they’ll get $158,000.”

Miller presented his figures to the NRP Policy Board on Aug. 22. He wrote in a cover letter, that because of revenue projections, “To provide at least some funds to every neighborhood NRP will have to reduce its allocations to neighborhoods by a minimum of 50 percent from the level originally approved in April, 2007.”

He also pointed out that many neighborhoods have already been spending money out of their Phase II allocations; three neighborhoods received approval of their neighborhood action plans in 2004 and three received approval in 2006. The amounts they intend to spend (which were approved by the NRP policy board) are more than the 50 percent NRP can now give them.

“The plans approved in 2004 could now approach the board for their remaining 30 percent. This situation will only grow worse as time passes, neighborhoods implement their plans, and contracts are executed,” he wrote.

“If the Board were to immediately stop any further funding of Phase II plans, we still would not have enough projected revenue to fully fund the neighborhoods already approved, and 36 neighborhoods would get nothing. At 50 percent of their original allocation, every neighborhood could be funded.”

According to the chart he attached, those 36 neighborhoods include seven in Northeast: St. Anthony East, St. Anthony West, Holland, Waite Park, Windom Park, Beltrami, and Marshall Terrace.

Miller said he has proposed a solution to solving the NRP Phase II funding gap by removing all obligations of the Common Project other than debt service and NRP. He recommends discontinuing yearly payments to the Legacy Fund, which the city–in his view–more or less bumped out of order of payment, putting it ahead of NRP. Payments to the Legacy Fund have to do with a loan on the Saks Parcel and, in 2005 and 2006, according to Miller, $14.5 million of the city’s pension debt.

Miller said that none of the money in the Legacy Fund was ever used for housing, although the city claimed it created the fund to aid development.

“The development objective given as the reason for developing the fund was bogus,” Miller said. “If these investments aren’t made in the neighborhoods now, we will need to make investments in the future that will be far greater than this. Our civic infrastructure has a significant value. Neighborhoods use their NRP money for housing programs, home improvement loan programs, youth programs, parks and libraries.”

State representative Joe Mullery, who is a member of the NRP Policy Board, said he missed the August meeting, but has read Miller’s memo. “I think finally he is saying they’re [the NRP board] going to push the city to pay back the money that in my opinion, the city took out illegally from NRP for the Legacy Fund. I remember looking it up at the time and finding it was clearly contrary to the law.”

First Ward City Council Member Paul Ostrow said that he has talked to Miller about the NRP shortfall, and is aware of Miller’s proposal to solve it. However, he said, he sees the NRP problem as involving two different issues. “The question, in terms of program funding, is what the city can do to engage the neighborhoods and better support neighborhood work. Certainly, many great things have come out of the NRP program, but a lot of neighborhood work will continue even if the program funding is not at the level people might want. We’re scheduling a meeting specifically about this in Ward One in October.

“There is a dramatic shortfall in money, even from original projections several years ago,” Ostrow said. “What really happened, and the issue that the Lane proposal brought forward, is that in light of the rapid drop in Common Project money and tax law changes, the NRP phase of the equation had the most risk. The community development side of the ledger, had less.”

(The Lane proposal, named for then-city council member Barret Lane, was an amendment to a city ordinance passed in 2003 by the city council. It called for changing the priorities of the Common Project so that meeting debt service and contract obligations would come before NRP funding.)

“What we’ve seen,” Ostrow added, “because of the lack of money available in the Common Project, is that neighborhoods are faced with not even having 70 percent [of their Phase II allocations].”

Ostrow said he has not made any commitments to Miller or NRP. “There’s no easy pot of money. I don’t support using property tax money to additionally fund NRP. I think my biggest concern is that NRP is below the 70 percent figure.

“Depending on when they [the city] make their funding decisions, neighborhoods could be left with little or no resources. Time is of the essence for the mayor and the city council to weigh in. I thought it was unfortunate that the legislature got involved without waiting for the city to take a position. We need to provide them with that position,” Ostrow said.

“Neighborhoods are spending money right now in an environment where the resources are inadequate to fund their plans. The resources are far less than what all of us would have hoped, because they depend on resources in the Common Project. It’s all about trade-offs.”

When asked what he thinks of Miller’s plan to resolve the NRP money shortfall, Ostrow said, “I think Bob minimizes the trade-offs in the proposals that he’s bringing forward. His idea comes at the expense of other development dollars, money that goes for job creation and commercial corridor work.”

Miller said he is in the process of writing a letter that will soon go to all the Minneapolis neighborhoods, regarding the status of NRP and the money they will be receiving through Phase II NRP.

Miller’s number is 623-673-5140. Ostrow can be reached at 612-673-2201.