Business Day at City Hall

Last Friday, September 29th, was Business Day at City Hall. This was a gathering organized by the City of Lakes Chamber of Commerce aimed at developing an open and constructive dialog between the business community and City officials. I was the only candidate from my Ward—and perhaps the only non-incumbent City Council candidate—who thought hearing from business interests was important.

It was a worthwhile event. The day began with a short talk by Mayor Rybak. R.T. listed many benefits the city has offered to businesses in recent years. But he never mentioned the costs. And many of the things Rybak highlighted—like commute rail—benefit suburbanites much more than Minneapolis residents. We make it as easy as possible for outlanders to come work in tall buildings owned by other outlanders. It seemed like R.T. saw Minneapolis as a destination, not a home.

After the Mayor, we heard a report about taxes from the Chamber. Businesses pay 33% of all property taxes collected by the City, while homeowners pay 44%. Minneapolis taxes are the highest in the Metro area. In addition, business fees have risen over 11% in the last four years. The Chamber did credit City Hall for keeping spending down.

Next up was an expert in commercial real estate. There was no good news. We can expect zero speculative development downtown for the next decade. The Minneapolis central business district (CBD) is overbuilt in retail and office space. A significant concern was the lack of industrial zoning throughout the city. It’s tough to realize the economic benefits manufacturing offers if we do not allow any new factories to be built.

A few of the business owners shared their experiences working with the City. High fees came up again. It was obvious that there is a very strong lobby for downtown interests, and a few CMs were recognized for having a “balanced” perspective between the CBD and the rest of our city. I’m not sure we have the balance right.

After the presentations, attendees broke into several small groups, each focused on an area of government—essentially the committees of the Council. I chose to sit in on Budget and Taxes. There were only a handful who made the same choice. The rumor was that Regulatory Services and Economic Development were the two most popular groups. That’s where the fines, fees, and handouts come from.

In the Budget group it was made clear that the City is facing a much larger fiscal imbalance than most folks are aware of. As a glaring example, the General Fund is currently about $385M, while the outstanding fire/police pension liability could cost $50M in a few years, depending on the outcome of lawsuits and other maneuvers. That cost must be paid from the General Fund, which would mean cutting core services by 13%. Or another 20% increase in property taxes.

And this doesn’t factor in an expected record number of tax challenges resulting from lower property values. The process takes two years before a successful challenge impacts the City’s budget. That’ll be just about when the pension bomb blows. Essentially the City is broke.

It was an encouraging event for all the entrepreneurial spirit assembled, but bleak for anyone who pays attention to economics. Despite what the Mayor claimed, Minneapolis has not been managed to be a “City of Opportunity”. The bills accumulated over years of fantasy funding are coming due. City Hall figured out how to finance their wonderful wish lists, but had no apparent accounting for the small economic value of those dreams.

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