By Jake Rossen
By Jesse Marx
By Michelle LeBow
By Alleen Brown
By Maggie LaMaack
By CP Staff
By Jesse Marx
LAST WEEK, MINNEAPOLIS city officials proudly faxed around their latest AAA credit rating--the highest grade--from Moody's, one of the two major municipal-bond evaluation firms in the nation.
While municipal bonds are rarely the stuff of headlines, bond money is the staff of life for funding future city improvements. And buried in Moody's glowing reports were disquieting details that help explain why city leaders bailed out of a Winnipeg Jets subsidy plan, and may also avoid any new baseball stadium obligations like the plague. According to Moody's, "Concern arises over increasing [tax] burdens borne by residents, regardless if paid by taxes or user charges." (The report notes that the city has limited politically poisonous property taxes by increasingly relying on "user charges"--a process sometimes known as "Californication," because Golden State governments, constrained by Proposition 13 property tax limits, have instead resorted to service charges that don't show up on tax statements. Many of those fees, such as garbage charges, tend to be regressive, since they are not income-based.)
Aside from the way the city raises money, Moody's lays down the gauntlet on how much more it can grab: "Maintenance of the current prime grade rating is contingent upon the city's ability to reduce its high debt load over the next several years," notes the author. "[S]uccess will primarily rest on... alternate funding sources for large capital projects."
Translation: The city has little leeway to tax itself for big-ticket items such as a $200 million convention center or a $250 million baseball stadium (especially since the latter is not projected to pay for itself). While some politicos look to a regional solution for both projects, Moody's look at Minneapolis tax levels also includes the school district and the city-based portion of Hennepin County's monies. With the needs of those two bodies increasing--and massive federal urban-aid cuts still looming--the Moody's report gives Minneapolis precious little room to tax itself more for gaudy new playpens, even as part of a region-wide "solution."