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MINNEAPOLIS-The Minneapolis Community Development Agency is warning that the sweeping changes to Minnesota property tax system enacted this summer will “severelyshrink funding for community development programs throughout Minnesota.” In fact, Steve Cramer, the executive director of the agency, claims Minneapolis is especially hard hit because of “our commitment to use development resources for neighborhood revitalization.”

Cramer says his agency figures the combined effect of property tax revisions and the statetakeover of school funding will reduce by one-third the amount of tax increment generated by current and future tax increment financing districts. This means the city will lose up to $27 million in MCDA revenue each year — about $226 million over the next 10 years.

“This means many projects and programs, especially those in neighborhoods, will be reduced or eliminated without an alternate revenue source,” according to an issue summary developed by the MCDA staff. The effect of property tax reform on large commercial development projects will be less severe, because they typically generate enough revenue to pay off their debts well within the limits imposed by state law.

More likely than not, this will still be true despite property tax reductions for commercial and industrial property.

This shortfall, however, compounds an anticipated financial challenge facing the MCDA, Cramer says. In 1990, the Neighborhood Revitalization Program was launched using TIF dollars made available by rescheduling some debt payments to 2001 and beyond.

These increased debt payments, which result in fewer funds for community development programs, are taking place at the same time the commitment to fund the second phase of the NRP through 2009 begins, stipulating an annual commitment of $20 million.

Also, increasing legislative restrictions on the use of TIF throughout the 1990s, along with current property tax reform, also greatly reduce funds available for community development, he says.

“If no action is taken, the combination of existing financial obligations and the new reality of property tax reform will dramatically reduce resources for community development needs,” Cramer wrote in a recent public letter to community officials. “This will affect not only the NRP, but also a wide range of community development initiatives, including affordable housing, neighborhood commercial development, polluted land cleanup, jobs creation, and historic restoration.”

A work team appointed by Minneapolis Mayor Sharon Sayles-Belton and city council President Jackie Cherryhomes is taking a look at this problem, Cramer says.

Among the possible solutions that will be looked at include: Increasing support from the Metropolitan Council, state and federal sources: reinstating the Housing and Redevelopment Authority levy; continue to collect user fees from developers who useTIF, a practice begun last November; and make the agency more efficient and cost effective.

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