I suggest that formal annual and per-project limits be placed on the TIF
program in Minneapolis in the immediate future. An innovative limitation
mechanism would preserve the value of the program, yet limit abuses. In
addition, CC policy should explicitly state that existing TIF districts
should be decertified on schedule or earlier to grow the general fund. It
is evident that elected leaders cannot manage the program as currently
structured in a fiscally prudent manner, and I question why I am even
suggesting they place these restrictions upon themselves-- it's like asking
the kids to stay out of the cookie jar!
Yesterday's STrib (2-20) reports that the MCDA and Brookfield Properties are
negotiating a proposal put forth by the MCDA to 'settle' a $52 million
package of city loans to Brookfield for $35.5 million ($29.5 million in
principal and $22.5 million in accrued interest). The loans were for
Gaviidae I and Gaviidae II in '87 and '91 respectively. Seems MCDA
Director, Steve Cramer, and Mayor Sayles-Belton are worried about a default
when the principal and interest come due in 2002 and 2009. Mind you,
Brookfield earned $170 million on a billion in revenues last year and has
properties all over the US and Canada.
Supposedly, Brookfield will try and link the early negotiated payment to a
commitment from the City allowing them to use some of forgiven interest to
help refurbish the vacancy-prone City Center, which Brookfield also owns,
and connect it with Block E across Hennepin Ave... which they are also
involved with! Who are these guys, and who's minding the store-- the store
being the City's purse and the taxpayer's money? Why should City taxpayers
forgive $22.5 million in accrued interest that is owed us by a profitable
international real estate development company?
According to a recent post to this list by Steve Minn ('The fiscal shoe
drops' 1-27-01), "Brookfield has been in 'default' on the Gaviidae loans
ever since they converted from retail to office space. Office does not
qualify for TIF and is a single purpose user violation of TIF law. The
default allows the City to foreclose upon the second position mortgage,
which gives the City one of two options... "(
http://www.mnforum.org/pipermail/mpls/2001-January/000277.html ) Assuming
Steve Minn's interpretation is correct, why are we offering Brookfield this
settlement??? Why should we settle for 68 cents on the dollar owed, in
return for some refurbishment scheme for their City Center property?
Cramer touts the millions in property taxes paid by these properties, yet
the general fund sees none of it due to the TIF process. Meanwhile
Brookfield takes our money to the bank! This proposed settlement represents
just another expansion of unnecessary TIF redevelopment subsidy in downtown
Minneapolis. MCDA is short on funds and this effort would pump needed cash
into their coffers immediately. Remember, in the "Priorities 2000"
document, the City Finance Department questioned the viability of the
MCDA... and believed a 'workout' strategy would be needed to salvage the
MCDA... What does the new City finance officer think of this deal? The
City Council? Of course the City Council makes up the MCDA Board of
Commissioners... an all too incestuous relationship maybe?
Why should city property tax payers take on more commercial development
risk? Let these developers finance their own commercial ventures.
Taxpayers have subsidized Target ($60 million), Block E ($39 million),
Gaviidae ($30 million), City Center, Schubert, Milwaukee Depot projects,
Block F projects, and more. Enough already.
I remind CC members and the mayor, list members and city residents in
general-- In Minneapolis,
1) We are a hundred million dollars behind in city infrastructure
maintenance and development (excluding parks and libraries); the internal
services fund deficits will amount to $45 million by year-end ( the workout
plan amounts to $62 million through 2008 including interest); and, we have a
$30 million public safety initiative program being implemented with no
defined funding strategy. These are taxpayer obligations! (albeit, in
addition to the daily, routine costs associated with sewer, water, roads,
police and fire).
2) We have a ill-defined $8 million affordable housing program in place this
year that is overly dependent on uncertain, and over-obligated federal
(CDBG) funding; existing office towers are experiencing increased vacancies
(lower rents and taxes), and most new towers are in TIF districts (w/no
incremental taxes going to general fund); the values of residential homes
and apartments are rising dramatically, along with their tax burden. Many
city residents will experience difficulty paying dramatically increased
property taxes/rents over the next decade- just because of increased
property values; this on top of higher energy bills that will likely
continue for several years. When the property tax rates themselves are
increased, we'll get a real double whammy!
3. We have added upward pressure on residential property taxes due to
passage of recent school and library referendums. Neither of these groups
included the cost of inflated property values in future years in their
'tax-impact analysis' on property owners over the life of the bond issues--
eight years for MPS and 25 years for the library. And there is currently no
provision for the increased operating costs associated with the new downtown
library. I believe both of these involve a phase-in period, so you won't
see the real impact for a couple of years.
For added background on the 2001 city budget, the "Priorities 2000" document
prepared by city departments, and the white paper titled "Management of
Stresses on the City's Limited Financial Resources Work Team Report",
authored by Steve Cramer and John Moir, see my previous lengthy post, 'City
Budget, Nov. 2000' at: <
http://www.mail-archive.com/[email protected]/msg00746.html >
Michael Hohmann, Principal
Michael A. Hohmann and Co. (MAHCO)
4100 Ewing Ave. So.
Minneapolis, MN 55410-1021
612-922-1490
[EMAIL PROTECTED]
http://www2.visi.com/mahco
~Market research, financial analysis, business plans and writing~
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