Record settlement in George Floyd case forces Minneapolis to dip into its reserves

The $27 million settlement that Minneapolis leaders approved in George Floyd's death is more than the entire balance in the city's account that covers lawsuit payouts.

As a result, the city plans to use money from its "rainy day fund" that is reserved for emergencies and other unexpected expenses to help cover the costs.

The record payout threatens to deplete a key city fund at a time when Minneapolis is facing other lawsuits and claims, including other cases stemming from conduct by Minneapolis police.

Minneapolis officials stayed largely behind the scenes Monday after the judge overseeing the first murder trial in Floyd's death said he would consider a defense request for a postponement and change of venue and wished city officials "would stop talking about this case so much."

It was a sharp contrast from Friday, when Mayor Jacob Frey, City Council President Lisa Bender and other city officials joined the Floyd family and their attorneys on stage for a 90-minute news conference discussing the largest police-related settlement in Minneapolis history.

The city has been self-insured for at least the past two decades to save the costs of paying outside insurance companies. Each city department pays a premium that goes into the self-insurance fund, based on its level of risk.

The self-insurance fund then covers a variety of costs, including city employees' health care, workers' compensation claims and lawsuit payouts.

The city estimates that it has $23.4 million available in the fund to pay tort liabilities, such as lawsuit payouts. That's before paying the Floyd settlement, and it "does not incorporate estimated liabilities associated with lawsuits currently underway," city spokeswoman Sarah McKenzie said on Monday.

To help cover the Floyd settlement, the city will use money from its general fund balance, which the city described as a rainy day fund. The precise amount of money in the fund wasn't available Monday. McKenzie said the fund was bolstered by about $24 million in additional revenue in 2019, primarily from investment income, licenses and permits.

City Coordinator Mark Ruff said during a news conference Friday that "we feel that we can confidently say ... this settlement alone will not result in property taxes increasing because of that judicious nature of saving the money that is necessary."

Some city officials said during the budgeting process that they were concerned about the financial impacts of police-related lawsuits.

Robert Bennett was the attorney who represented the family of Justine Ruszczyk Damond, who secured a then-record $20 million payout in that wrongful death case two years ago.

In an interview, Bennett said he wasn't surprised by the size of the Floyd settlement.

"I just thought one marker was set with Justine Ruszczyk's case, and I figured it would be higher by $5 [million] to $10 million," Bennett said.

Floyd's relatives and attorneys said Friday that they hoped the size of the settlement would be a deterrent for police departments and encourage them to implement better accountability measures.

The settlement in Ruszczyk Damond's killing was more than quadruple the previous record for a payout in a police misconduct case. At the time, some people said they hoped the size of the settlement would be transformational.

"The Minneapolis Police Department has evidenced the historical determination not to change, otherwise we wouldn't have these things," Bennett said.

It wasn't clear Monday how many additional claims the city might need to pay. The city is facing multiple other lawsuits, including one alleging police used excessive force in the rioting that followed Floyd's death and another brought by business owners who say the city didn't provide adequate protection during the riots.

At Friday's news conference, an attorney for the Floyd family said they would be working with the city to establish a panel to review each instance of force used by police; a quality assurance unit to ensure that the Police Department is strictly following new reforms; and an early intervention system to weed out officers with patterns of problematic behavior.

"MPD policy changes were not terms of the settlement," McKenzie said Monday. "However, the city has begun discussions with Floyd's family and attorneys about ways to partner on advocating for meaningful reforms."

Liz Navratil • 612-673-4994