“while some people claim that budgets are moral documents, to me they’re really a reflection of priorities in light of reality”
As Vice-Chair of the Budget Committee, I listened with great interest on Wednesday when the mayor laid out his proposed budget for 2027. The $2.3 billion proposed budget includes $20 million in spending cuts – including about 100 jobs – and an 11.3% property tax levy increase.
While I am happy that the mayor is taking our financial predicament seriously, my headline reaction is this: the levy increase is “too damn high,” to slightly alter what NYC political gadfly Jimmy McMillan said about the rents in that city.
While the nuts and bolts of a budget are complicated, from a bird’s-eye view the basic dynamic is simple: it’s revenue versus expenses. The city’s expenses have been increasing while our biggest revenue sources have been shrinking. Federal COVID relief money has dried up, and commercial property values — especially downtown — have cratered. The numbers tell the story: in 2017, commercial/industrial property accounted for 34.8% of Net Tax Capacity in Minneapolis, compared to 48.6% for residential and 16.6% for apartments. By 2026, commercial/industrial had fallen to 24.9%, while residential rose to 55.6% and apartments rose to 19.5%. That’s a 28% relative drop in the commercial sector’s share of the tax burden — with homeowners and renters absorbing the difference. This is not a sustainable trajectory, especially given that commercial properties pay at a rate of 2.5 times that of residences.
Now is the time for tightening our belts — even a notch or two more than the mayor has proposed. But spending cuts alone can’t close a structural gap this size.
On the revenue side, I see two ways forward: growing the pie or fracking it. Fracking the pie is a metaphor one of my aides gave me from the world of sports journalism, where leagues that aren’t growing try to extract more and more revenue from their existing customer base by doing things like raising ticket prices, spreading games across an ever-proliferating number of streaming services, expanding the playoffs so that almost every team qualifies, and partnering with sports betting companies. This is like fracking, which extracts hard-to-pump oil from tightly packed shale rock. We can take this same approach for our city by continuing to extract more revenue from the same residents as the levy continues to climb year after year, this time by double digits.
Or we can do what I’d like, which is to grow Minneapolis’s economic pie so that the tax burden is shifted and shared from overburdened residents to a thriving business community. Throughout this budget process, it is imperative that the council alters its tone and its posture so that we send the message that relocating your business to, or starting or growing your business in, Minneapolis is good. You’re not the enemy; in fact, you’re a crucial component to supercharging the economic engine of our city and our state. A thriving business community made up of enterprises of all shapes and sizes is part of making our city more affordable. When the pie grows, we can loosen our belts and invest more in the policies and programs that reflect the priorities of residents. A rising tide of commercial property values lifts all boats and can lower all residents’ property tax burden at the same time.
Taking a step back to look at the process: while some people claim that budgets are moral documents, to me they’re really a reflection of priorities in light of reality, and in a resource-constrained environment all these priorities compete for public dollars. Is investing in affordable housing less morally significant than public safety? I don’t think so. The same question applies elsewhere: are we morally wrong and against workers if we need to make periodic cuts to maintain the long-term health of our enterprise? Again, I don’t think so. Our record of historic pay increases over the last few years proves otherwise. But as elected representatives we’ve got to choose how much we can afford to invest in each city department and weigh what is ultimately in the best interests of our constituents because our true moral responsibility is to be wise and responsible stewards of your tax dollars.
The way I hope that this plays out on council is less like a morality play and more like a respectful negotiation about competing goods. Unlike the federal government we can’t run a deficit, and unlike the state we’re limited in the ways we can bring in revenue. Basically, we’ve got fees and the levy — and I have zero interest in lobbying the capitol to let us impose a city income tax.
With that framing in mind, here’s what happens next: the budget process now moves to the City Council as we begin receiving budget presentations from city departments, holding public hearings, looking to the maximum levy set by the Board of Estimate and Taxation, taking up budget amendments proposed by each council member, and hammering out a deal with the mayor’s office by the middle of December.
11.3% is too high, and I think my colleagues and I all agree on that. My hope is that we will be able to respectfully work together through a process where at the end of the day we agree on a budget that preserves the core services our residents rely on, lessens the financial burden on our residents, and sets us on firm financial footing moving forward. The mayor’s proposed budget is a good start, but we’ve got to take it further, remembering it is all of you who foot the bill.
Via constituent newsletter
Thank you MS Schaffer. “send the message that relocating your business to, or starting or growing your business in, Minneapolis is good” Well that is a good goal, however at this time most people would prefer to move their business elsewhere. When too many council members are anti common sense (not you) this is the result
Just for some context since I think it’s important and shows that the real issue is the revenue side of the equation. In 2018, our budget was $1.54 billion. The proposed 2027 budget is $2.3 billion. That is about a 5.3% annual rate of change. Inflation during the same period of time averaged 3.6%. Based on current population estimates, there are about 6.8 city employees per thousand residents. This is one of the lowest employee-to-population ratios among major peer cities. Minneapolis also has a strong financial rating. Despite math issues this year for our budget, we have a generally well functioning city enterprise. But, where do we go? Sure, it would be great to snap our fingers and have a bunch of new businesses open. But we can’t do that by simply changing our tone. And it leaves me wondering … what business are we talking about? Reality check – opening a new business in today’s environment is tough. Borrowing costs are high. Construction costs are high. Material costs are high. Labor costs are high. The job market is lousy. People are pulling back on spending. We also have a rogue and reckless federal government, who has targeted both Minneapolis and Minnesota. We can support businesses by trying to address their barriers, but we only have so many options when there is economic distress. I would also note that we’ve been increasing the tax base for apartments/multi-family. To me, population growth should be our North Star. As a council member, you will play a role shaping the 2050 plan. Let’s encourage more housing production. Let’s encourage creative business opportunities by rethinking we certain commercial uses may operate. Let’s lean into and celebrate the things that are making Minneapolis known and attractive. Like it or not, what is making our city attractive to new residents are the things that are often controversially locally – zoning changes, better transit, bike lanes, etc. People aren’t interested in moving here because we are Phoenix or Atlanta. They want to move here because we offer a lifestyle that you can only get in a couple cities that costs a lot more to live in.
After living here for more than four decades, I have never seen Minneapolis struggle the way it is right now. Earlier periods of growth were slower and largely demand-driven. The recent wave of 5-over-1 apartment buildings has added housing units, but it has done very little to stimulate commercial areas around them. The empty storefronts are hard evidence of that. What we need right now is a serious policy review. We should look at the parts of the metro (not Mpls) that are thriving and ask what they are doing differently. The biggest differences I see are public safety and basic accessibility—including adequate parking. Those two factors matter a great deal to both residents and the businesses that serve them. No one is trying to make Minneapolis into Phoenix or Atlanta. It is a landlocked city of 54 square miles. We have over-experimented with “urbanist” policies in the tiny space of Minneapolis and it has hurt us. PS- I’ve noticed lots of bikable destinations in the ‘burbs that are loaded with parked bikes. More than I see in Mpls often.
You didn’t cite any sources for your numbers. First, the city web site claims 4,194 FTEs in 2026, so the employee/1000 people is about 10, not 6.8. How does that compare to other cities?
You slid right over the fact that city spending has grown 50% more than inflation from 2018 to the 2027 budget. I think we should all be asking why.
CM Shaffer’s comments about being friendly to business are very appropriate in my opinion – the point is not that it’s tough to start a business – all the factors you cite apply everywhere; rather that if a person wants to start one, let’s make Minneapolis more attractive than, say, Bloomington, or Roseville. If there are more hoops to jump through, and it’s more expensive, startups will bypass the city for easier locales.
Thank you Ms Shaffer. I appreciate your level-headedness. I read that around 80% of DSA members are college-educated, so I find it baffling that they can’t seem to think for themselves. It’s just a bunch of follow the leader, it seems. I’m hoping that somehow one or more of DSA council members will start to see that not every DSA plan is good for our city and will begin to vote accordingly. I sense that a couple may already have a conscience but for whatever reason are afraid to break from the herd. We all know that many goals of Democracy and Socialism intertwine and overlap. They must, or DSA advocates wouldn’t be able to hide under the DFL tent so easily.
Also, I think the dollars wasted on mediation could have been better spent on consulting some finance specialists.
A lot of “studies” majors I would guess….essentially meaningless degrees that aren’t big on the whole critical thinking thing.
I AGREE, but with the election outcome last fall in Mpls, we are now stuck with 6-7 council members who are equally, anti police ( as DSA adherents are in all cities that they land) and anti business too because encouragement of private sector enterprise is in direct conflict with the/their DSA play book..
With the next local elections over 3 years out now, hard to feel optimistic about Mpls…unfortunately.
Elizabeth Shaffer is working hard to make Minneapolis a better place for everyone. It is refreshing to read a policy statement that reflects what many of us who pay taxes in the city agree with. I hope we will soon have more council members like her who can see the basic realities of governance and who possess a longer-term vision for our city.