Hard Times at City Hall

The State of the City? We're Broke.

The MCDA has the potential to be flush with cash, according to Kriz, who calls the agency a "600-pound gorilla." "They're running huge balances that are not pledged to resources," he claims, referring to various funds that could be turned into cash. "It could go a long way."

Kriz stops short of saying the MCDA should quit designating TIF districts. Rather, he says, it should take a look at the districts already in place. In his view the problem is that TIF benefits continue to flow to the districts long after the area ceases to need the tax break. More often than not, TIF money just gets funneled into new big-money developments rather than rerouted to areas that are truly blighted. "That's the back-end problem with TIF," Kriz says. "How long do you need it for a certain area?"

At the same time, Kriz and others question the impact of the city's Neighborhood Revitalization Program. NRP started in 1991 as a $400 million, 20-year effort designed to let neighborhoods decide how to spend development monies allotted to their area. But the 2001 property tax law passed by the legislature has lowered the taxes gained from redevelopment projects that finance much of NRP. Only $42 million of the $136 million to be spent in NRP's second phase has been budgeted, and Rybak has recently hinted that some of that money could be used elsewhere.


Kriz, while deeming NRP "a very worthy program" in some regards, sees no harm in using the money to solve the city's cash-flow problem. "If you're not going to allocate that money that's just sitting there, what good is it?" he argues. "There's $60 million sitting there, and you can spend $5 million or $6 million of it without doing damage to the fund."

Steve Minn agrees, and he goes so far as to call NRP a failure. "The MCDA's problems began when its money was rerouted to the NRP," Minn says. "It's a noble idea whose time has never come."

The idea of restructuring NRP to wrest control away from neighborhoods may well be blasphemy to many affordable housing advocates and activists in the city. Others may positively view the MCDA as being a centralized agency for development. And TIF has cleaned up some spots of blight. But it's also true that whatever the intentions of such programs and agencies, the city has a long history of mismanaging development.

More important, these are desperate times, sure to be followed by desperate measures. "Bad investments have put us in a box," says city council Ways and Means chair Johnson, adding that she believes that some big-ticket developments, like the downtown Target, have been good for Minneapolis. Still, she says, "This has been a massive shake-up, and we can't just lurch from budget to budget anymore. Tough decisions have to be made now."

Kriz says the city's problems are so severe that simply trimming costs and capping salaries won't help. "If LGA gets cut, all bets are off," he says. "You can't just renegotiate contracts. You have to come up with a whole new plan of cuts to save money."

He even wonders if the city should go ahead and default on some of its bonds to shed a measure of debt. It happened in parts of California in the mid-1990s, and the scenario might not be so far-fetched for Minneapolis. "Is the city going to walk away from bonds or jump in and pay them?" he asks. "It's certainly a question that must be raised. Is it worth ruining the credit rating and ability to get more bonds? That's the million-dollar question."

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