City Council debates personal loans for its members

Several City Councilmembers have raised concerns about recent proposals that would allow councilmembers to apply for personal loans through city programs as well as give each an additional $6,000 for their office budgets.

Councilmembers Paul Ostrow (1st Ward), Cam Gordon (2nd Ward) and Betsy Hodges (13th Ward) declined to take the additional money from the city's rollover fund, and each told the rest of the City Council that they are uncomfortable with the idea of allowing councilmembers to apply for loans through city programs.

The proposed measures come as the city continues to deal with a lean budget and all departments have been asked to cut back on spending. While some councilmembers argued that they have good uses for the additional money from the rollover fund and should be eligible for city loans like any other resident of Minneapolis, Ostrow said the Council has to lead by example.

&#8220I do think it's a question of leadership for us. We have to be on the same budget diet as the rest of our departments,” he said. &#8220It is about the Council playing by the same rules as the other departments.”

The Ways and Means/Budget Committee is scheduled to hold a public hearing May 22 on the proposed ordinance change that would allow councilmembers to apply for city loans through city programs such as the Neighborhood Revitalization Program and the Community Planning and Economic Development Department.

The Ways and Means/Budget Committee had sent the proposed amendment to the April 28 City Council meeting without recommendation after Hodges and Ostrow expressed concerns with the change, but the City Council scheduled the public hearing with little discussion.

Ostrow said he's concerned because councilmembers vote on the city programs in question and their eligibility criteria, and that power could create the long-term potential for an ethics violation. Gordon told the Council that he also has reservations about the proposed change and that he thinks councilmembers should not be eligible to apply for city loans because of their &#8220extraordinary role as elected officials in overseeing these programs.”

But City Council President Barb Johnson, who proposed the change, disagreed.

&#8220It seems to me that they're city residents, and so they should be able to apply for a mortgage just like any other city resident,” Johnson said. &#8220These are mortgage products that we (the city) don't own. They're done through private companies, through banks. But we want to encourage people to live in the city, and the dollars are not fully utilized, so it seems to me that councilmembers should be able to apply for them.”

The proposed ordinance change comes just as the same councilmembers declined to take money from 2005 rollover fund to use for their office budgets. Taking additional money while the rest of the city's departments feel the pinch of budget cuts and reduced staff sends a powerful message that the Council is not willing to share the pain of a tight budget, Hodges said. She is also worried about how it will affect the Council's ability to reach agreements with its collective bargaining units.

&#8220We're asking the entire city staff to tighten their belts. That includes reduced budgets, reduced staff, a limit on how much salaries can go up,” Hodges said.

The money available for each councilmember's office budget is part of the 2005 rollover fund. The City Council under spent its office budgets by about $140,000 last year, according to Johnson. After sending about $55,000 of the leftover cash back to the general fund, the Council decided to split the remaining $83,000 among its own offices. Councilmembers had to give notice by May 1 if they were not planning to accept the $6,384.62 available to each office, which will be distributed over four years.

Councilmember Diane Hofstede (3rd Ward) said because she considers the amount of money available to each office small when spread over four years, she doesn't believe it sends a message about the Council's willingness to share the pain of a lean budget. She said the money allows councilmembers to reach out more to their constituents.

&#8220It is something that councilmembers will use for a variety of things,” Hofstede said.

But Ostrow pointed out that there are a number of city departments that could have used the money very well, but they weren't issued the funds. The three councilmembers who declined the additional money have directed the combined amount of $19,153.96 go to the Self-Insurance Fund to help pay down the city's debt.

The proposed measures to allow councilmembers to apply for city loans and take money from the rollover fund also come just months after the City Council voted to increase each councilmember's car allowance to up to $400 per month, approved a 2 percent salary increase annually and added another aide to its own staff.

Kari VanDerVeen can be reached at kvanderveen@mnpubs.com or 436-4373.