City Finance Primer

Budget Management

The City of Minneapolis adopts a biennial budget, with regular revisions to address economic conditions. This means it adopts a two-year budget and just tweaks the second year(in theory).

The City Council must authorize all city spending. The Mayor and his/her departments spend the dollars to carry out City services.

The 2025-26 Mayor’s Recommended Budget includes $1.9 billion in spending in 2025 and $1.9 billion in 2026, exclusive of the City’s independent boards and transfers. This represents a 3% increase from the 2024 Adopted Budget of $1.8 billion. At the end of 2023, the City of Minneapolis employed 4,256 individuals.

Funds

Accounting standards require the city to use discrete “funds” to separate key activities. You can think of these as separate checking accounts, which allows the City to track expenditures. The following are the most important funds:

• General Fund: The largest operating fund supports day-to-day general services. It includes funds that can be used for any purpose, and thus is the fund that gets the most attention.
• Proprietary Funds: Loosely speaking, these funds act like businesses, where they raise revenues through fees or charges, and then use those revenues to pay for services. This includes things like the Water Fund or Parking Fund as well as activities that function as sell services only to city departments like the Print Shop.
• Permanent Improvement Fund: The City invests in infrastructure upgrades through a multi-year capital improvement program (CIP). This makes long-term investments, primarily in city infrastructure like streets, parks, water infrastructure, sewer infrastructure and similar things. Much of this is funded either through borrowing money or through grants from the state or federal government.
• Debt Service Funds: Funds are segregated to repay City debt from city borrowing.

General Fund Revenue Sources (2025)

The General Fund is the most important fund at the City because it has funds that can be used for any purpose. Because of this, it is the most discussed and debated fund.

The city derives its revenues primarily from property and sales taxes, state and federal grants, and charges for services and sales in the general fund:

• Taxes (58%): The largest source of revenue is taxes derived from primarily property taxes, and lesser amounts come from sales taxes.
• Intergovernmental Revenues (13%): Minneapolis benefits from federal and state aid for transportation, housing, and public health. The largest state grant is Local Government Aid (LGA), used for general purposes.
• Transfers from Other Funds/Fund Balances (12%): Additional funding comes from other City funds, for example, the Water Fund to pay for the administrative activities provided to them.
• Charges for Services and Sales (8%): These revenues are for the activities of some City functions.
• Licenses and Permits (7%): These revenues come from businesses in the city allowing them to operate.
• Other (2%): The City receives fines and forfeits, special assessments, interest earnings, and other revenues.

General Fund Expenditures (2025)

Minneapolis allocates its expenditures to maintain City services, address community priorities, and invest in capital improvements.

• Police (32.9%): Police represent the largest share of the General Fund budget.
• Fire: (13.1%) Fire and emergency services.
• Public Works: (10.9%) The City prioritizes spending for City roads, bridges and traffic control to support sustainability and economic growth.
• Public Services (9.2%): This includes the departments like Finance, Human Resources, Communications, Emergency Management and other activities that support the operations of the City.
• Community Planning and Economic Development CPED (6.9%): The City dedicates resources to affordable housing initiatives, business support programs and workforce development.
• Other/Non-Departmental (4.5%): The General Fund transfers dollars to other City funds.
• Health (3.8%): These funds support the Health Department and other activities.
• Other Departments: (14.3%): This category includes other departments like the Mayor, City Council, City Attorney, City Assessor, Regulatory Services, and other departments.

Debt and Financial Health

Minneapolis has a history of prudent debt management and diversified revenue streams resulting in the strongest credit rating (AAA).

• Debt Issuance: The City uses bond financing to fund large-scale projects, while ensuring that debt levels remain within policy limits. The City has approximately $1 billion in bonds outstanding.
• Reserves: Significant reserves provide a cushion against economic downturns and unexpected expenses. City policy requires: “The City shall maintain a minimum unrestricted, unobligated fund balance in the General Fund equal to 17% of the following year’s General Fund budgeted expenditures, not including transfers out or payments to internal service funds which are in compliance with their own cash balance requirements.” For the 2024 adopted budget, the balance was $148 million in the General Fund, and $769 million in all funds.

Conclusion

Minneapolis’ finances reflect a commitment to fiscal responsibility and a strong community. The City balances operational needs with long-term planning to ensure sustainable growth. Continued focus on efficient services, economic development, equity initiatives and infrastructure modernization shape the city’s financial trajectory.