Despite council promise to cap spending, parks and libraries will probably keep the new money
Earlier this year, the Minneapolis City Council approved a tough new policy limiting spending by the Minneapolis Park and Recreation Board and the Minneapolis Library Board. However, on Sept. 11, the city's Board of Estimate and Taxation -- which sets tax levies for all three groups -- approved a budget over city objections giving $403,000 more to the Park Board and $103,000 to the Library Board.
The money came from a less-than-projected pension levy and anticipated savings from lower interest rate payments on city debt.
"What this does, in my impression, was to provide the park and library board the same resources in 2003 as they had in 2002," said Jack Qvale, staff to the Board of Estimate.
The seven-member Board of Estimate has three representatives from the city, one each from the Park Board and Library Board, and two independently elected members. The measure passed 4-3 on Sept. 11, with the three city representatives -- Mayor R.T. Rybak, City Council President Paul Ostrow and City Council Ways and Means Chair Barbara Johnson (4th Ward) -- voting no.
Peter Wagenius, a Rybak aide, said the budget change, while relatively small, violated the council's budget resolution.
Pension payments: found money?
The Minneapolis Employees Retirement Fund levy triggered the flap at the Board of Estimate. The city had budgeted more for MERF than it ultimately requested, freeing up $460,000. The Board of Estimate also assumed that borrowing costs on variable-rate bonds would drop $77,000.
The question became: what do to with the extra $500,000-plus?
Johnson said she would have used the money to pay down longer-term MERF debt.
The city had planned to make a $4 million MERF payment -- which would match employees' contributions and help close a long-term fund shortfall. That shortfall amounts to $125 million over the next five years, city budget staff said.
Early retirements have put the city in a cash-flow crisis. While legally required only to levy $4 million, staff projects it needs to find $18 million more for MERF in 2003 alone, a city memo said. City officials had already begun to make plans to borrow the $18 million and pay it off over 20 years.
Johnson said the city would have had to borrow less had the Board of Estimate allowed the $500,000 to pay off longer-term pension debt rather than for more park and library spending.
"I thought it was important that the city maintain our integrity with our tax policy resolution as well as show a unified front," she said.
The city could effectively take back the $500,000 by reducing state aid payments it distributes to the park and library boards.
Despite Johnson's "no" vote at the Board of Estimate, she's not ready to go that far, she said.
"The staff of the Board of Estimate did some really good work trying to find some extra resources for the Park Board and Library Board in a transition year," she said. "It would not be my intention to go after Local Government Aid."
The City Council's Inter-Governmental Relations Committee reviewed pension fund management of two other city pension funds Sept. 10.
Patrick Born, the city's finance officer, said the Minneapolis Police Officers Association and the Minneapolis Firefighters' Association had management shortcomings, according to a memo he sent to the Council. It suggested seeking state legislation to transfer fund management to the State Board of Investment.
Born's memo was most critical of the fire fund management, but the fire fund has outperformed the State Board. The police fund has lagged behind. Taxpayers have to meet the pension obligations, and face the risk of stock market losses.
The city plans to borrow $11 million in 2003 to meet police fund payments.
City Coordinator John Moir said that he recommended against the city waging a legislative fight for pension fund control.
Committee chair Scott Benson (11th Ward) asked city staff to work with police and fire fund members and report back in a month.
"It makes some sense to try to resolve the management issues on our own," he said.