Mpls. City Hall faced tempest over tax increase

While racial equity and environmental activists spoke out against proposed cuts to the city budget last month, constituents in wealthier areas put more quiet pressure on City Hall to avoid a property tax hike.

E-mails obtained by the Star Tribune through a records request illustrate the behind-the-scenes tempest that erupted after Council Member Linea Palmisano sought to eliminate about $1 million from the mayor's proposed budget, reducing the city's levy slightly in the process. Some of the most controversial cuts were ultimately restored after hundreds of protesters descended on City Hall to object to what they dubbed the "Latte Levy" for its small per-home savings.

Only one of the 60 people who testified at that final budget hearing complained of high taxes — and his taxes hadn't increased — but e-mails to and from Palmisano over an 18-day period include more than a dozen written by residents of the Fulton and Linden Hills neighborhoods facing large increases. Some said they were already struggling to pay property taxes above $6,000 a year on modest bungalows, whose values have been driven up by the construction of massive houses nearby.

"My husband and I believe in good causes, but we are retired educators with no hope of getting a 7 percent increase in our pension or Social Security accounts," wrote Emily Knight, referring to her proposed tax increase. They will pay nearly $6,000 a year in combined taxes for the city, county, parks, school district and other taxing districts.

"This is really becoming a hardship for our family," wrote social worker and consultant Jennifer Bertram of their nearly $1,000 increase, which will bring their total tax bill close to $10,000. She added in an interview that they now set aside more per month for taxes than for mortgage payments.

"It's difficult not to compare our taxes with Edina," wrote Jeffrey Peterson, a retired Ecolab lobbyist paying upward of $8,000. "Some new programs may have to wait or be limited in order to have some semblance of competitiveness with suburban neighbors."

Mayor Betsy Hodges' office says more than half of Minneapolis homes will see lower taxes next year because of the city's growing tax base, but some neighborhoods will be hit harder than others. Data from the city assessor's office show that homes in the Fulton and Linden Hills neighborhoods will see 14.08 and 13.45 percent median market-value increases, respectively, higher than all but one neighborhood — Harrison — containing more than a handful of single-family homes. The city median value increase was 6.76 percent, though officials estimated that only homes rising more than 7 percent would see a tax increase.

"As soon as I got my tax statement, I went on the Internet and started looking at houses [in the suburbs]," Paul Hokeness, a retired Park Board employee who wrote to Palmisano, said in an interview. The $552 increase will bring his total annual property tax bill to about $6,700 for a bungalow on Washburn Avenue S.

The pressure was equal on the other side, however.

After several interest groups alerted their members about the cuts, Palmisano received slightly more constituent mail urging her to restore funding to racial equity and environmental partnership programs.

"The decrease … is meaningless to our budget and we would much rather have our money go to help solving problems, supporting small nonprofits and making our city a better place to live, work and study," wrote Christa Anders, a public policy consultant living in the Linden Hills area.

Palmisano said Hodges, who used to represent the same ward, told her that the tax increases in the ward were rougher in years when state aid was slashed. "She was saying there were [past] times when it was bad and I heard about it. And I'm saying 'Betsy, look at the data. It is bad,' " Palmisano said.

While throttling the levy back slightly won't have a major impact on her constituents' property tax bills, Palmisano said she was trying to make a larger statement that recent turnover at City Hall should not mean adding many more programs tied to property taxes. "We want to grow the city. Let's be really careful that we don't grow the city into being like a New York City or like a London or a place that guts out the middle class, because they can't afford to live here anymore," Palmisano said.

E-mails show that Palmisano faced skepticism from colleagues after announcing her intentions to reduce the levy and make funding cuts. "I am not sure if you realize it, but you went after some of my top-priority items I have been working on for 8 years and finally was seeing some investment in — fighting climate change, improving community engagement and ending racial inequities," Council Member Cam Gordon wrote to Palmisano on Dec. 2.

"If the primary goal is property tax savings, there is a pretty small impact with these changes (in my opinion) that may not be very noticeable to property tax payers," Council Member Elizabeth Glidden wrote on Nov. 29, two days after learning about Palmisano's plans from a Star Tribune article.

TakeAction Minnesota and Minneapolis Energy Options, the latter of which pushed for a clean energy partnership that faced reduced funding, sent e-mails urging their members to call on City Hall to reverse the cuts.

Palmisano felt blindsided. "As you know I had been an ARDENT supporter of your campaign, and I find all of the noise you have directed at me here disparaging to who I am and what I stand for," she wrote to the energy activists.

The City Council eventually struck a compromise that lowered the levy increase from 2.4 percent to 2.1 percent, but that restored funding for the clean energy partnership and a minority leadership program. Two new racial equity positions in the city coordinator's office were spared from cuts, while new communications staffers were axed, along with some funding for Minneapolis Convention Center marketing and a racial-disparities study.

Palmisano said it would have been nice for the council to hear the constituent tax complaints her office fields every week. "I think they didn't show up [to the hearing] because people would label them like they were labeling me: You must be against us, you must be against racial equality," Palmisano said. "Nothing could be further from the truth for all these people."

Eric Roper • 612-673-1732

Twitter: @StribRoper