City Council - Regular Meeting

You're slipping. Good afternoon. My name is Elliot Payne. I'm the president of Minneapolis City Council. At this time, I'm going to call to order uh this meeting of the city council and I will start this meeting by ensuring we have a quorum of the city council and adopting our agenda. Uh we what do you what do you want to do for BET? Mr. Clerk, we can just start with the quorum for city council.

Yeah. Thank you, President P. I will call the role on city council to verify that we have a quorum of city council. At this point we do not have a quorum of the board of estimate taxation yet. So we can continue the meeting, allow participation of the members as you please. Uh and if at any point we get a quorum of the board, we'll make sure to officially call that meeting to order as well. Sounds good. Uh the clerk will call the role to verify the presence of a quorum of city council. Council member Chuktai is absent. Whiting uh present. Chowry is absent. Stevenson present. Rainville present. Vita present. Palmisano present. Chavez present. Warren is absent. Schaefer present. Wamsley

present. Vice President Osman is absent. President Payne present. There are nine members present. Let the record reflect that we have a quorum. With that, the agenda for today's meeting is before us. I will ask for a motion from a member of the city council to adopt the agenda. So moved. Second. It's been moved and seconded. The clerk will call the role. Council member Whiting. I. Stevenson. I. Rainville. I. Vita. Hi. Palmisano. I Chavez. I Schaefer. I Wanssley I President Payne I there are nine eyes's

that carries and the agenda is adopted. Before we begin the meeting, let me remind all members and staff that this meeting is broadcast to enable greater public participation. The broadcast includes real-time captioning as a means to increase the accessibility of our proceedings to the community. Therefore, all speakers need to be mindful of the rate of their speech so our captioners can fully capture and transcribe all comments for the broadcast. We ask all speakers to moderate the speed and clarity of their comments. Our only item today is receiving and filing a report from Guide House, Inc. related to alternative municipal revenue sources. I will ask Andrew Hawkins from the clerk's office to introduce this item and our presenters. Welcome. Thank you. Um, Council President Payne, uh, BET President Brandt, uh, and BET Vice President Harris Bernstein, uh, members of the city council and members of the board of estimate taxation. Take a breath. Um, good afternoon all of you. My name is Andrew Hawkins and I serve as a director um, of legislative research and oversight uh, for the city's legislative department. Uh, today's joint session provides an opportunity to deliver the report on national landscapes of municipal revenue sources to both bodies through a single platform to ensure that all parties have the opportunity to receive that information together. Um the intent of this work was to provide a landscape analysis on the range of options or the range of municipal revenue options currently utilized across cities nationwide. Uh this analysis includes example programs and revenues um as well as um as well as identification on the feasibility and availability and applicability to the city of Minneapolis. Um with that brief introduction, um I'm going to turn the floor over to guideouses Margaret Chaus and uh Lucio Keefe. Good afternoon, city council members and members of the board of estimation and

taxation. My name is Margaret Chouse and I'm a director in the state and local government practice at Guide House, a professional services firm that delivers advisory, technology, and managed services to a public and private sector clients. I'm joined today by my colleague Lucio O'Keefe and we will be presenting guideouses research on municipal revenue diversification. First, I want to thank the city council and BET for the opportunity to share this work with you today uh fittingly during the peak of tax filing season. And I also want to thank the office of the city clerk for their sponsorship of this research. During this briefing, we will lay out the purpose and context for this work, summarize our key findings, including areas where Minneapolis's revenue practices are aligned with comparator cities and where it is distinct, deep dive into details of revenue strategies adopted by comparator cities that could support new revenue generation for the city, and invite your questions at the end, although Lucy and I will be sure to periodically pause throughout in case there are questions that you have uh during our presentation. The primary objective of this research was to identify uh potential opportunities for revenue generation that met key characteristics including sustainability of revenue, size of potential revenue, and the ability to structure the strategy equitably. This included our assessing Minneapolis's current revenue base, comparing the city's revenue performance to other cities, and evaluating leading practices by comparator cities for potential impact and applicability to the city. We also examined the ease and feasibility of implementing these strategies. We conducted this work from September through December 2025. And I believe you all have a copy of the final 63page

report from which this briefing is derived. And our primary sources of data for this research included the city's open data portal, the Lincoln Institute of Land Policy's fiscally standardized cities database that allowed us to uh normalize comparison of revenue data across our 10 cities in our sample as well as additional budgetary fiscal and policy research. So to summarize some of our key findings, when we compare Minneapolis to similar cities, two things stand out. first that the city relies more heavily on intergovernmental funding than most of the comparator cities and second that Minneapolis generates less revenue per resident than nearly all of those cities. I'll show you the state on the next slide but what it suggests is that there is room to strengthen and diversify the city's local revenue resources while staying in family with peer cities. Also, Minneapolis can increase revenue generation by implementing new strategies and/or adjusting existing sources. Other cities are doing this in a variety of ways. Common approaches include uh levying real estate transfer taxes, local income taxes, adjusting excise taxes, or introducing payments in lie of taxes. Of those options, we found that a few may be more promising candidates to consider. For example, an individual income tax, real estate transfer tax, and payments in lie of taxes demonstrate a higher alignment with the city's goals of sustainability, equity, and generation. We understand that most new revenue generation strategies will require multi-year approval and adoption process, including state authorization. To that end, uh should the city pursue this path, uh the city may wish to consider longerterm strategies balanced with uh more immediate opportunities uh such as examining existing rates or

improving how the city collects current revenues. In our baseline review of Minneapolis's revenue composition, we looked at the last five years of budget data or revenue data rather. And over this period, we found that the city's revenue picture has been relatively stable overall. Uh but the composition is shifting due to a number of factors. And what I'm about to describe is increasingly a common picture in municipal finance across the country. First is COVID era federal funding has phased out. Intergovernmental revenue is declining. Uh and the city's relying more heavily on taxes and fees in the current budget. There's also growing pressure on the federal side as federal funding reductions, particularly in areas like housing, healthcare, workforce programs could directly impact service delivery. Property taxes of course remain the city's largest single revenue source and they become more volatile as property values decline. And at the same time, the inflationary pressures uh are resulting in higher labor costs and growing capital costs that are pushing expenditures upward. So, taking all of these together, these dynamics create a structural challenge and the city's trying to manage rising costs and uncertain external funding without continuing to lean more heavily on property taxes. This context frames uh the following considerations for Minneapolis, which is what mix of revenue strategies could provide a more resilient and diversified revenue structure that better aligns with the city's long-term fiscal goals. For our revenue benchmarking, we identified nine comparator cities shown in the table on the left on the right. They include San Francisco, New York, Denver, Seattle, Philadelphia, Portland, Boston, Atlanta, and Kansas City. And these city uh these cities were selected in consultation with the city uh using

the following qualitative and quantitative selection criteria. Uh, have they been cited in previous city of Minneapolis research or in other studies on municipal revenue generation? Have they adopted innovative revenue strategies? Are they comparable to Minneapolis in budget, population, or median income? Andor do they demonstrate alignment with the city's priorities and goals? The intent here was to create a broad comparison group to give a grounded view of what revenue practices have been successfully adopted in other peer cities uh for further consideration. Looking across these 10 cities, we found that compared to its peers, Minneapolis brings in less revenue on a per capita basis. both overall where the table shows in that first column uh the city is ranked ninth place amongst its peers as well as from taxes specifically where the city comes in 10th place with respect to charges. Minneapolis is ranked fourth in per capita revenue generation and ninth in per capita miscellaneous revenue and that includes um things like rents and licenses and permits. So there are reasons for these rankings. Um, first, Minneapolis leans heavily on property taxes. About 87% of the city's tax revenue comes from that single source, uh, with relatively um, little coming from sales tax or other options. And certainly, that kind of concentration creates risks and highlights, uh, a potential need to diversify. Also, compared to pure cities, uh, Minneapolis's residential property values are relatively lower. Among the 10 cities in our sample, only Philadelphia and Kansas City had lower median residential property values than Minneapolis. By contrast, many peer cities have diversified tax structures that also include income taxes, sales taxes, or business taxes.

And while there may be room to adjust change charges and fees, uh understandably that comes with constraints. Many of those fees uh feed into the enterprise funds where the use of those funds are restricted. So even if rates for charges were to increase, uh that doesn't necessarily translate into flexible dollars for the city to use for general operations. With that context on where Minneapolis stands today, the next question is what are other cities doing differently? And more importantly, which of those approaches could potentially apply to Minneapolis? To answer that, we conducted a broad scan of revenue strategies adopted by peer cities. We initially identified a dozen different taxes, fees, and charges. And uh in uh discussions with the city, we focused further on the five strategies that you see highlighted in the yellow on top of this table uh due to their higher potential uh for meeting goals for sustainability, equity, and magnitude of revenue generation. So over the next 23 slides, we will be delving into more details of each of these five strategies. Each of them have different strengths across those three characteristics as well as measurements of how feasibly they could be implemented by the city. And I'll take a moment here to just introduce each of them. Uh first we'll delve into real estate transfer tax uh which is levied at the transfer of property ownership. Uh next payments in lie of taxes uh also called pilots which are voluntary payments made by nonprofit entities to offset the cost of public services that they use. Individual income tax which can be levied on wages, salaries, investments or other forms of income earned by an individual or household. An empty homes tax which is imposed on residential or commercial properties that remain unoccupied for a spec specified period of time such as over

six months. And then finally, asset monetization, which involves generating uh public revenue from public assets such as land, building our infrastructure through leasing partnerships or userbased charges. to assess the value and applicability of of each of these strategies to Minneapolis as well as to assess and compare these strategies against each other. Uh we created this scorecard uh qualitatively for which we scored each strategy low, medium or high across the six uh factors or categories you see on that first column. And I'll walk through each briefly here. Uh the first three of which you'll recognize. So total generating revenue uh potential uh we deemed an annual generation range of 0 to$100 million as low 100 to $200 million as medium and $200 million or more as high and that's annually. Next looking at equity of tax or fee burden uh a one-sizefits-all approach would be deemed low. The ability to moderately or modestly tier the strategy is deemed medium and the ability to structure even more progressively is deemed high. And sustainability where a high variable revenue source would be rated low. A relatively consistent source source with some fluctuation would be rated medium and a fairly steady predictable source is rated high. And then we also added three additional factors to assess feasibility of implementation. that includes ease of administration. So, for example, would the city need to set up new structures to implement that strategy and that would earn a low rating? Or on the other end of the spectrum, are there pre-existing structures that the city could take advantage of which would earn it a high rating? For public acceptability, based on the experience of peer cities that have implemented these strategies, we included a rating

on the level of opposition they faced, low, medium, or high, from the public and/or special interest groups. And lastly, we rate the ease of implementation, which takes into account factors such as the level of stakeholder engagement needed based on the experience of peers and whether state or local legislative action is required to advance. Here is our qualitative scoring of each strategy in descending order based on overall rating. Perhaps not surprising, but when we look at the most sustainable and equitable revenue options, they also tend to be the hardest to implement. Uh clear example, individual income tax. Uh while it has the highest revenue potential across these strategies and can be designed to be progressive, uh there are legal, stakeholder, and policy hurdles that may make it a longer term approach to implement. On the other end of the spectrum, tools like pilot programs can be more feasible in the near term, but are unlikely to generate the revenue at the same scale. We also acknowledge that the challenges today faced by nonprofits in today's environment make pilot a less palatable strategy and the green scores here reflect uh the experience of implementing those uh pilot programs by pure cities and during a different time. Now, a real estate transfer tax sits somewhere in the middle. It can generate meaningful revenue. It can be structured in a progressive way. And it faces uh relatively comparatively fewer barriers than something like an income tax. So let's dive into real estate transfer tax, but I will pause there in case there are any questions.

Council member Schaefer, did you have a question? Oh, no. Oh, okay. Uh I have a quick question. Yes, please.

Uh for your revenue per capita calculation, uh I'm I'm curious what's inclus included in that. So, for instance, we have we have both a city and a parkboard levy. Uh but that's different from the actual tax burden per capita, right? So, the county is assessing the levy as is the park board. And so I'm wondering as you're looking at those comparative cities, the total revenue generated per capita that goes into the city's general fund is different than the total levy including the park board is different than the total levy that like an individual taxpayer is experiencing and so I don't how did you harmonize that to make it an applesto apples comparison?

Oh that's a great question. So um to answer your question, the numerator is the total revenue that the city received based on the the data in the city's open portal and then the denominator is is the size of the population. So it would not account for the tax burden that each citizen is experiencing in that per capita. It is just the mathematical reflection of revenue over population. Right? because I I I I wonder how much tax burden there is coming from King County versus Seattle and like what that ratio is. But we should be mindful then that that's something that's outside of the scope of what you're presenting, right? Yes.

Okay. Thank you. Um, Vice President Harris Bernstein, hi. Thank you for this uh excited to dive in. I just want I think you might have just said this, but the ones we're going to go through are just the ones selected for further study. Is that right today? That's right. Okay. Thank you. All right, looks like that's everybody.

Yes, I do want to circle back the question you asked. We do have in the full report a table that does show that per capita um calculation for each of the 10 cities in case that was uh something that you're interested in taking a look at. All right, let's dive now into real estate transfer taxes. So, this tax would diversify the city's property tax revenues and could be designed to promote equity via progressive fees and reinvestments into the community of those revenues earned. Now, in terms of revenue generating potential, this score is a medium representing an estimated 101 million to 159 million in annual revenue potential for the city. And I'll walk through how we arrived at that estimate in a subsequent slide. On equity, it scores high as it primarily impacts those engaged in property transactions and as noted can be structured progressively for example to focus on higher value properties. It scores low on sustainability due to the sensitivity of this revenue source to real estate cycles and it scores high on ease of administration as the tax collection could occur at the point of sale by the title or settlement agent. And based on peers, public acceptability earned a medium score uh from public opposition. And uh what this story really tells is that uh how you structure this tax uh is really important to how it is accepted and messaged to the public. And then ease of implementation. We scored it a medium due the existence of this tax at the state level, the deed tax. Uh but still understand that implementing this tax would require legislative approval at the state level as well as local uh voter approval. On this slide, uh what I'll highlight is the taxable population of entities which describes who would be potentially impacted by the adoption of this tax strategy. Um, and as I mentioned, the

application structure of this tax could be designed in a wide variety of ways in terms of the tax rates, the tax threshold levels, the rate structures, the tax base, revenue uses to reflect Minneapolis's unique real estate market dynamics, and community priorities. So drawing on a some of the examples from our pure cities in New York City they use a tier transfer tax with higher rates on more expensive properties. While in Washington DC they apply a relatively flat uh rate but pair that with a high deed recordation tax which results in a higher burden at the point of sale. Meanwhile, cities like San Francisco have highly progressive structures where rates increase significantly for luxury and commercial transactions. and Chicago applies different rates depending on the property type with a portion dedicated to specific purposes like affordable housing. So these differences reflect the local choices where often you see cities with higher cost uh housing markets often adopting more progressive rate structures while others prioritize simpler flatter taxes or uh choose to dedicate revenues to targeted policy goals. On this slide, I'll walk through how we estimated the revenue potential of adopting a real estate transfer tax for Minneapolis. And I'll caveat that uh all of these revenue estimates are high level and are intended to be illustrative of the generation potential. And we would also recommend uh to conduct more in-depth uh combined modeling of impacts across local and state taxes if uh if one were to pursue these. and that was outside the scope of this study. Um, so for this we estimated the upper range of 159 million by applying uh the city of Philadelphia's flat rate to the total value of Minneapolis's 2023 residential and commercial property sales. We then dipped outside of our

peer city cohort for a progressive tax example and apply Berkeley's tiered and progressive tax approach to the same 2023 figures for Minneapolis to arrive at that lower range estimate of 101 million. To close out real estate transfer tax, let me highlight some of the uh pros and cons on the right side of this slide. So on the pro side, these taxes are generally easy for the public to understand and often receive voter support, at least in the comparator cities that we looked at. They also have relatively low administrative burden compared to other new taxes. On the con side, as I noted, careful policy design really matters. Poorly set thresholds can distort the market, for example, causing buyers or sellers to cluster just below tax cut offs. And importantly, because these revenues can be volatile, it can make long-term budgeting more challenging. Finally, I want to highlight in that yellow box uh that many cities have successfully used real estate transfer taxes to fund housing policy priorities uh in cities like Baltimore, Los Angeles, and Santa Fe. They've generated meaningful funding for housing initiatives uh through this revenue strategy. Let me pause there and see if there are any questions on real estate transfer taxes.

Yes. Uh, President Brent, yes,

I was uh glad to see the real estate transfer tax uh rank highly. I think it's one of my top three. Um I um think it hits people when they u are flushed with cash and that makes it a little bit less painless. However, um the revenue estimates that you made here based on other states transfer tax percentages seem considerably higher than what we're what we've employed here in Minnesota. I just did some back of the envelope calculations based on trans on transactions in Minneapolis in the course of a year and the state rate here is um 33% um considerably lower than the 1.5 and for um Henipin County it's I think 0.01%. my calculations um we'd be struggling even if the legislature were to approve us at the state rate which I doubt they would um to reach 10 million um in Minnesota u but I'm wondering if there's something I might have overlooked or if generally other states have higher uh transfer rates than we do.

That's a great question. Yes, the the examples we modeled here were based on the real estate transfer tax rates of those other cities. Um but you rais a great point going back to uh looking at the impact of multiple taxes knowing that the deaxes you mentioned at the state level uh if this were to be considered a local level would be a compi a combined effect. Um but you gra you rais a great point which is because there are so many ways that you could structure this tax if you were to consider it um but the tax rates the thresholds uh which tax base applies there are probably infinite ways to estimate what the revenue potential could be. So this was definitely very straightforward.

Uh Council Member Whiting. Thank you President P. A quick question here uh kind of on the administration piece of of uh when these taxes uh show up for home buyers. Uh are these taxes seen more on like the closing cost level or are they able to be wrapped into a into an individual home purchase mortgage?

That is a great question. Uh that is certainly one of the decisions that can be made u in constructing such a tax. In our research, it doesn't even always specify whether that tax is born by the buyer or the seller, but we have often seen that that point of collections would be um uh when that point of sale happens and is being filed with the um uh with the agent. So there are I think various ways to potentially structure this. Okay. So you're saying so so in in kind of deciding the level of tax it could be a possibility of the the city or otherwise uh when they're deciding this tax of where that burden hits whether it's in like a closing cost level or uh if you could wrap it into a mortgage but that sounds like that's yes that would be a design feature. Yes.

Cool. Thank you. Council member Stevenson. Thank you. Um, I have a question about the difference between uh low and medium under ease of implementation. So, for the real estate tax, you you've rated it as medium uh ease of implementation, but then you also note that it would require both state action and voters to pass it. Um, what is harder than getting the state to change the rules and voters to pass?

That is a great question. And I will say this requirement is true of nearly all of the strategies that we're going to describe because of Dylan's rule and min Minnesota like many states um requires that approval to to pass new taxes. And so this was a more of a relative rating across uh what pure cities have um what pure cities have experienced. But I dare say if we were to rate all of those high, you're right. Many of these um I think except for asset asset monetization and pilot programs require state approval. Okay. So most of these almost all of these require state approval.

Yes. Because these are all new taxes. If um Minneapolis were to consider adjusting uh current taxes uh uh that you have, that would not necessarily require uh state approval. Okay. Thank you. Council member Wanley, thank you. Um, actually, Council Member Stevenson's question, uh, really good at one that I wanted to ask you around some of the procedural uh, pieces that would be needed to unlock is very there's already a state tax and actually I'll start with my first question on that. Do we have a sense of how much revenue is collected via the existing tax that's on the books right now or range

or vice president vice president? Sorry, as a fan of the Minnesota Department of Revenues tax handbook, I pulled it up. Um, and so our deed transfer tax, which I believe is what we're talking about here, raised 140 million in 2024. So it's around there. Um, yeah.

Okay. Does it say if there's any dedication kind of I what I most liked about seeing um the the yellow kind of box complementing this is having it be dedicated towards a specific initiative. And we've talked a lot about that too um in our our discussions of bringing in additional revenue. Can it be dedicated towards meeting our needs to create more affordable housing or public housing? Those things but want to know if does it say anything on the DTEX? So, right now it's just general fund. Okay. Um and if that then is how much is reappropriated to different cities of that 100 million? I'm not sure if it says anything about that. Vice President Bernstein,

President Payne, Council Member Wanley. Um it's uh 97% goes to the state general fund, 3% goes to the county revenues. Okay. So it goes to Okay. So that is clarifying how the existing revenue works. Um I'm I'm very much interested in this piece of it sounds like there will have to be a complimentary lobbying effort at the state level to get that um exemption or approval for Minneapolis. And then you mentioned at that point it would need to go through a ballot process as well. Is did I hear that correct? Um yes I believe so.

Okay great. And then earlier in the presentation you mentioned something about fees and I want to make sure I have the same assumption of how you all are looking at fees. So part of our conversation around revenue is about looking at this unlocking new taxes, but also right now the only way in which we do have some very modest and restricted you know income uh that allows us to support some of our our goals is through fee collections. Um but again that's heavily regulated and restricted at the state level. But you mentioned there were fees that we could be charging. Did you mean fees in the sense of the taxes or or I see those often as separate things by our state definition. So just wanted to see. So it is under fees.

Yes, I was thinking of that as a distinct uh category from uh revenue created by taxation. Awesome. Could you speak a little bit more of that? I'm not sure. I couldn't really see where that was broken down in the report or the presentation of like where are some of those because those are things that potentially we could be doing also with a little bit of ease and administration based off of our existing like fee structure in our initial research. Uh when I showed that table of 12 actually let me go back to it.

We did look at um I'm trying to see if we did look at any fees. uh we looked at service fees um and so there was a limited review um of the applicability there and then uh we down selected to these the smaller group. Okay. Gotcha. So does seem like it was worth the bang. Okay. All right. Those are the questions I had. Thank you. Uh Vice President Bernstein.

Uh Council President Payne. Um I just had a question about uh the base for the estimate. Um there's a note at the bottom that it includes highv value commercial real estate sales that occurred in 23. So it might not be representative but it does include residential transactions as well. It just also has some commercial. So the base of this is all trans real estate transactions theoretically.

Yes. Theoretically one thing the team did note is that there were some very high commercial real estate transactions. So we removed those so that it did not overinflate what the uh revenue potential could be from a real estate transfer tax. Got it. Thank you. And then just a comment, I also am interested in this one. Um, President Brandt's point about uh a tax that applies when people have the cash. People already pay uh, you know, transaction fees like closing costs when they're selling homes or selling commercial properties. So, that makes it interesting. But I share his note about the tax rate is, you know, uh, so we do have the deed transfer which is a third of a percent and then we also have a mortgage registry tax which is a quarter of a percent or so. So when you add that up, that's a little bit over a half a percent. That's what folks in Minnesota are paying in taxes when they sell a property. So ostensibly, this is something that the city council could get behind, but it's not going to it's going to be, you know, a tenth at best, I would imagine, of the tax rate that's estimated here. So just so folks are thinking about that, but thanks. Uh, President B want to question you on something that uh is sort of a theme running through many of these revenue options and that's the assumption that a referendum would be needed. Um, is that based on uh practice elsewhere or Minnesota law or city charter? The reason I ask is I've been a property owner in Minneapolis for 50 years now and I the only um taxes that I think I've voted on have been uh schoolboard operating levies uh when they go to a public referendum. Um I think more typically the legislature gives the city the authority to do something and then uh we proceed. for example, we didn't vote on the ballpark extra sales tax. Can you enlighten me on that?

Thank you. You raised a great point. Let me uh offer a response and see if Lucy has anything to add. You're right. I think we were thinking of comparator cities where uh given the option to um collect uh residential feedback on the um the uh appropriateness of that tax. some cities uh in our sample did choose to go to referendum. Um but uh let me see if my colleague has anything to add to that.

Um no nothing to add to that. I mean yeah we did base that assessment off of peer cities and sort of the process for um proposing and approving new taxes. Um but I think this would have to be further explored with the city law city legislative office probably. Yeah. Thank you. Council member Pomisano.

Thank you, Mr. Chair. Um, going back to Council Member Wanley's uh questions. I to take it one step further. In these other peer cities that you've looked at, is it ever the case that something like um the real estate transfer tax goes to gets um categorized as something like an affordable housing trust fund where all of that money automatically goes into something that is constrained. Maybe it's for affordable housing, maybe it's for something environmentally focused. Have you ever seen this in some of your reviews of other cities?

Do you mean in terms of um where those real estate transfer taxes then get um go? Yes. Yes, we have definitely heard that and um in in in a number of the cities that is uh one of the the requirements of their putting forward that local proposal how they would use that uh that new revenue source for local uses. Um and so we have seen it applied not just to affordable housing but also to address homelessness um initiatives uh within some of these cities. Interesting. Thank you.

Uh I added myself to Q because I was curious for the uh comparator cities when they implemented some of these taxes and I don't know how far back you'd have to look and see. I was curious if they were bringing on a new revenue source, did they try to implement it in a revenue neutral way by giving relief in other sources of revenue or did they bring it on incrementally as new money?

That is a great question. I'm trying to think back of our peer cities. How about I will say that um in doing our review I know that is always the desire to be able to provide some offsetting relief if one is to do that uh compounded impact analysis of of different taxes. Um it does not of course always happen which is the rub. Um so we'll have to look let us take the action to look back at our comparator cities and see where they are as able to be that I think that give and take that you are asking about. Thank you. Seeing no one else, I think we canii continue.

All right. No, thank you for those great questions. Uh let's dive now into payment in L of taxes or pilot programs. So this strategy would allow Minneapolis to grow revenues uh by creating a voluntary pathway for taxexempt organizations to contribute financially to the public services that they use. uh the strategy may be less desirable from an equity standpoint as it focuses revenue generation on nonprofit institutions that may already be resource constrained. Um on that note, I will take a lighter touch going over this strategy giving those given those pronounced constraints for nonprofits in the present environment. Uh but in terms of revenue generating potential, it scores low representing an estimate of 10 million to$19 million in annual revenue potential for the city. It scores low on equity as levies are typically uh based on a fixed percentage of a property tax value across all voluntary participants. It scores medium on sustainability due to its relative stability as a revenue source when implemented in pure cities. It scores medium on ease of administration as the city may need to set up a new system uh to administer and operate revenue collection. based on PICE uh they uh reported a high uh score for public acceptability. While pilot adoption uh did not generate significant public opposition in peer cities given that it does not increase the tax burden on city residents and participation is optional and for ease of implementation uh it was scored as high as implementing the strategy would not require a legal or policy change. Um but as previously noted, uh participation would likely be limited in the present environment. I'll uh skip ahead actually two slides to um focus on our estimate of potential revenue and again this estimate is very uh rough knowing of course that

participation would be voluntary. But how we calculated this range of 10 to 19 million dollars for Minneapolis was to look at other cities that have implemented a pilot program uh to calculate what percentage of their city's budget is um of their budgets uh revenue is generated from pilot and then applying that to Minneapolis's FY26 budget level of $ 1.9 billion. Uh so in our examples we saw um a range of 0.5% of the city's budget coming from pilot to 1%. Uh we applied that to the FY26 budget for Minneapolis and that's how we derived the 10 to 19 million uh potential range for the city. To close our pilot, let me highlight uh the pros and cons on the right side. Um, as noted on the pro side, pilot programs create a pathway for taxexempt nonprofits to contribute to the cost of public services they use, and it helps rebalance the tax burden between nonprofits and city taxpayers. On the con side, costs may be passed on through higher fees or reduced services. Uh, revenue potential may be limited if nonprofits prefer to contribute via inind contributions over cash payments. And there is a risk of damaging government nonprofit relationships if negotiations are not carefully structured. Let me pause there and see if there are any questions about pilot programs.

Member Wley.

Thank you, President Payne. Um I did wanted to see if there was some localized analysis or um kind of breakdown or percentage of what our landscape looks like as it pertains to these categories here in Minneapolis. Um, I think what is most interesting about this is in Minneapolis we do have a a concentration of universities both private and public and seeing if that that factored if there were exemptions that you saw um be lobbyed for as it pertains to like public um institutions still on even the hospitals. Right now we're also experiencing some volatile dynamics with our health care systems where larger corporate um health care institutions are are trying to absorb some of the smaller ones. Right now even our county is trying to figure out how to preserve our existing um regional hospital which is publicly owned. Um, so I just wanted to know if there was some of that more localized analysis done to um, and thinking of we do have a decent concentration of specifically both hospitals, universities right here in Minneapolis, nonprofits. That's a that's a we have a lot of nonprofits. I also call Minnesota land of 10,000 lays land of 10,000 different nonprofits as well. Um, but just want to get a sense of those two specific public sectors.

Yes. No, that's a great question. Unfortunately, we didn't do that. I understand. I think the question would be to assess the percentage of of land that um is occupied by taxexempt organizations. Yes. Because this was voluntary. We did not try to size what that would be, but I understand that would be a a potential next step. Okay. And just it's based off of the estimated land value in which these these institutions sit upon. Correct. Right. Yes. It would essentially be uh if they were not a taxexempt organization, what would be the property tax value that they would pay? And then in some of the examples we've seen, it would be set perhaps at something like 25%. Okay?

And then there would be a further negotiation um for those uh volunteer participants of whether that um assessment would be contributed as either a payment or possibly also shared with inind contributions which further um further changes what that estimate potential could be. Oh, in okay this is good to know. I know we have some of those in kind services actually with some of our university partners, but this is great to see also other ways to actually bring that into tangible and concrete revenue too. So yeah, thank you for that clarification. You're welcome,

Council Member Schaefer. Yeah, this is related to that previous comment, but in the Boston example um with you know many schools and universities are they do those schools have significant inind um situations like we have with the U of M as far as shared services around roads etc. Do you have any insight into that particular um piece of the pilot program?

That is a great question and I do know there is actually sorry go ahead Lucy if you No, we didn't really dig into that um as much, but we are. So, the city of Boston does publish the results of their program annually. And in that, you can see the breakdown of what they ended up actually paying in terms of a pilot um amount and then what was valued in terms of um inind services or those kinds of partnerships with the city. Um that we can take a look back and provide an answer to that. I I just think that maybe we need to hold these um potential revenue source numbers lightly. I mean, we've already held that been proven with the first example and I think that probably holds true to this one as well as as well.

Yes, absolutely. That is a great point. I will uh certainly double underline that point which is that these revenue estimates were meant to be illustrative for the purposes of comparison whether to see if the magnitude was um of sufficient level to warrant uh further consideration but you make a very valid point President Bran

I'd just like to point out um that buried deep in the most recent assessment report which both bodies received is a breakdown of where the um nonprofit or or taxexempt property uh lies in whose hands and uh there's a considerable amount that's in public hands that we wouldn't be taxing. Um, I think the elephant in the room here, and I would defer to uh, Council Member Wanssley or the even the attorney's office is the University of Minnesota, um, which I've always had sort of a murky understanding of in terms of whether they're subject to uh, city um, laws and and so on. Um, do you have a sense of whether uh the city could compel if a pilot law p passed or it didn't even need to be passed was happen voluntarily whether they would be um subject to that.

Council member Wanzi. Yeah, I think this is a situation too where if we pursue something like this, this require the stakeholder engagement and also pointing to like what we highlighted what is already on the roster like we have joint power agreements with the U of M for a variety of services. Um specifically I think of we just approved one related to MPD where in exchange for fulfilling a a training need of MPD um they're given space at a U of M uh facility. So it'll be really looking through our departments and getting a breakdown of where are some of those ininded you know service agreements where those exist um maybe also getting a value of what that could be you know attached to. Um, but I know that also exists too with public works as well. Some of the things that you mentioned of like to share rightaways. Um, but there are some things that I I would love to explore that I don't think has been quantified. Um, especially when it comes to housing. I think that's a really big piece around the U. Um, they're also doing significant development or have this this 10y year plus um like development plan for the U where they're looking at being a hub for public research. what does that allow us opportunities to further engage on like where we could expand some partnerships on? Um so I either way it will require like getting that baseline of understanding of what exists and then where are some openings to maybe say this has not been quantified you're kind of getting this right now we would love to enter into a partnership of translating that into some type of percentage to be given to the city. Does

that answer your question? President R. Thank you. Okay. I would just add I think my understanding and I'll maybe lean on the experts here is that the point of a pilot is you're you're not compelling people. They are volunteering. So, um it's kind of the exact opposite of a levy. Um uh I think that is everybody on this top. Oh, Council Member Palms.

Just one last brief point. Um the Citizens League undertook a massive project um a number of years ago. I think about eight or nine years ago with the city of St. Paul. St. Paul has yes a lot of government buildings but also a number of museums um and other nonprofits and colleges and universities and they undertook um a very kind of intense study. I can't read the article. It's 106 pages long up here on this day is to summarize it. But ultimately um they did go into it similar to what the presenter said which is ask nicely find a compelling way to show how um you're benefiting from one another. Um ultimately though St. Paul did decide not to move forward with any such thing. But it is an interesting read that is that has a lot of similarities to Minneapolis. um for whatever that's worth. Thanks.

Now, I think we can continue continue.

All right. Thank you. Appreciate all those questions. Uh let's dive now into individual income tax. And an income tax would help diversify Minneapolis's tax portfolio, increase fiscal autonomy, and offset property tax burden on low and middle inome households. Uh it comes with substantial legislative hurdles and uh likely resident push back and it has moderate alignment with city revenue goals as the tax can be progressively structured to focused on highest income residents and generates a relatively stable revenue source. In terms of revenue generating magnitude, this has the greatest potential by a wide margin uh representing an estimated uh 291 million to $410 million in annual revenue potential for the city. It scores medium to high on equity, particularly if structured progressively based on income levels uh or focused on unearned income. It scores high on sustainability as it performs relatively well, but can fluctuate with economic conditions and employment trends. It scores medium on ease of administration as the city city could leverage Minnesota's existing income tax collection uh system to administer public acceptability not surprisingly earned a low score as income taxes often faced strong opposition uh for increasing the overall tax burden on residents. Uh while uh it was raised earlier, it is possible to reduce another tax to offset the creation of an income tax. Uh this has not consistently happened in pure cities. We also acknowledge that Minnesota's state income tax is relatively high among states and that adding a local income tax would require modeling the impact of both. and uh ease of imple implementation is assessed as low uh due to level of stakeholder engagement needed to make the case for this tax and uh that it would require legislative action at the state level.

On this slide, we briefly note uh that residents and non-residents are uh potential taxable entities. Uh so similar to real estate transfer taxes, there are a wide way uh a wide range of ways to implement an income tax. And I'll share some examples from across our pure cities. Uh for example, in New York City, uh they use a progressive graduated income tax applied to residents only, administered through a state piggyback system, uh and based on broad taxable income, not just wages, resulting in a comprehensive and relatively stable revenue source for the city. Philadelphia, as an example, uses a flat wage tax applied to both residents and non-residents working in the city, uh with different rates for each group. uh and employers uh do the withholding. This creates a straightforward uh though less progressive revenue source. Notably, in Philadelphia, the tax rates are scheduled to gradually uh decrease over the next five years uh with the city reducing rates to improve competitiveness and reduce burden on workers. So, you'll note these variations really reflect local policy choices. Cities with stronger equity goals and administrative capacity, like New York City, tend to adopt more progressive uh broad-based income taxes, while others, like in this example, Philadelphia, favor simpler flat wage uh flat rate wages taxes that are easier to administer but less progressive. And then some jurisdictions also lay in targeted or high income only taxes to fund specific initiatives. On this slide, I'll highlight how we estimated the revenue potential of adopting an individual income tax uh for Minneapolis. Um, of course, a lot of assumptions also baked into this uh estimate. This calculation assumes an individual um income tax assessed on wages and earned income. And as previously noted, uh that doesn't have to be the way uh that this

tax is structured. Uh that's was used for uh the purposes of this estimate. Uh we arrived at the low range estimate of 291 million by simply assessing a flat 1% rate to total household income in Minneapolis. And then we estimated the upper range of 410 million by applying a graduated tax rate of one uh to 2% to the highest tax bracket of $200,000 a year or greater. And all other households were assessed uh 1% income tax rate. I'll also caveat that to do this uh estimate, we didn't have access to granular data on individual and household incomes for Minneapolis uh to uh refine this uh estimate. To close out individual income tax, uh let me highlight the pros and cons on the right of the slide. On the pro side, an individual income tax diversifies revenue, can broaden the tax base, and increases local control over funding. Again, it can be structured to be more progressive than other local options such as sales and excise taxes, uh, which tend to be regressive. On the con side, uh, this revenue is more volatile, fluctuating with economic cycles. It adds to already high income tax burden at the federal and state levels, raising competitiveness concerns, and depending on how it is structured, it may create a risk of uh, taxpayer relocation, although evidence of the scale is mixed. Let me pause there and see if there are any questions on individual income taxes.

Vice President Bernstein. Yeah, just a technical question. Um the what I think you is where did you get the base or the Yeah, the household incomes they used for the base of the estimate. Great question. Um they're from the US Census American Community Survey estimates. Yep. Great. Thank you. President Rat.

Thank you, President. Uh, President Payne, um, I wanted to ask first of all about the evidence of out migration being mixed. Uh, do you have any sort of addendum that we could go to for further information on that? Because that's I've made no secret of my interest in exploring the feasibility of this approach, but I agree that we know ought to know the answer there. Um before we plunge ahead, if we were to plunge ahead, uh and I say we, I mean the council, which is in the driver's seat on this um and um so is there something that you can point us to?

That's a great question. Unfortunately, um much of the data we found here was anecdotal. Um so we don't have uh data to support that at certain levels out migration is more or less likely to occur. Okay. And I assume it's outside your charge currently to uh explore the degree to which high property taxes might be stimulating out migration from Minneapolis or how Minneapolis property taxes compared to those of surrounding communities. You're right. That was not in the scope of this study. Just to provide that broad landscape view of options.

Okay. Thank you. Uh I I just would say that um um even as a advocate for exploring this area, there's many questions that remain uh regarding how an income tax might be structured um uh various technical points. Um and um I assume that the fact that you haven't moved ahead in those areas at this point means that you're waiting for a clear direction from the council on which of these possibilities for raising revenue uh you should be pursued before you uh do that analysis.

Um our scope of work uh uh concluded with this final report. Certainly, if the council were to consider to move forward, um that is work that we could we could do. All right. Thank you, Council Member Schaefer. Yes. With those cities that had the personal income tax that you studied, were they city boundaries, strict city boundaries, or there were this was there a regional metro metric within that income tax? That is a great question. Um go ahead. I'll let you um I think it's strict city boundaries like for New York City for example, it's just residents and businesses within the city.

I will I will just only caveat to say it was interesting in some cities where the income tax does apply to uh individuals who work in the city but of course reside elsewhere. Uh going back again there are so many interesting different ways to structure this. Um that that effect was uh part of some cities. Um I think I I think I had mentioned um in Philadelphia they have a slightly higher tax rate uh for uh incity residents and a slightly lower tax rate for those who work in the city for example. Council member Wanzi.

Yeah. Uh thank you President Payne. This is one and I I mean we'll have general comments after this but I think when I brought forth this motion and especially in conversations with um you know commissioner Steve Brent also vice president um Harris Bernstein and this has just been an ongoing conversation around what could we do so there what's the goal to have a more broad analysis around what is the landscape you know with comparative cities um what are some specific tools we could be exploring to bring in additional revenue and then getting this presentation ideally following up from there. Um but that said, I did also see this as one to to further explore. Um, also want to make sure that we're in our further exploration of this one, looking at some of the more localized um, dynamics we're experiencing where we're seeing corporate flight or you know, businesses lay off um, significant number of of employees and what would that mean for also the sustainability of something like this? Should we pursue it? Um, also a question that I had, I wanted to make sure if this is something very different um or maybe is similar to the payroll tax. I think of the example of the the Amazon tax that was initially passed and then repealed due to opposition by the businesses in Seattle. Um, where I believe it was a payroll tax for highend or high earners associated with those corporations that were based in Seattle. um and also complemented that with a dedicated focus. So it was to go towards addressing homelessness and housing specifically to yeah give some type of restrictions and purpose to those taxes. Is this bas is that similar like the payroll? I always thought of them as separate, but if you're saying businesses can collect it through payroll as well through administration, it sounds like it might be the same. Yes, I think that that does count as a a

potential category or way to structure. We have certainly seen that in some of our peer cities. Just what you mentioned, either a payroll tax that could be um based on certain higher earners. It could be based on the number of employees you had of course um applied to businesses that have employees over a certain um threshold number. Uh certainly could be a percentage as well. So yes, you're spot on.

Thank you for that clarity. Again, something as we're thinking through which um of these recommendations we'll like to pursue, I absolutely agree there needs to be a more municipal analysis of some of those dynamics. Um even with now the massive push to get what were large segments of remote remote workers back into uh the cities, especially to bring back downtown, what like what does that dynamic mean for something like this? So, um, you answered or provided clarity there and yeah, I look forward to having further conversations around what we're actually going to do with this.

Um, I know that tax flight is kind of like the number one critique of an income tax, especially for a municipality. Uh, it sounds like there's not a lot of hard data around that. It's more anecdotal. I'm curious if it's similar um you know the mechanism of shifting compensation from income to uh like uh shares as an example and you know there there used to be I remember there was a whole era when people would make it sound like oh the CEO is so malevolent uh they only take a dollar salary but of course that was a tax advantage for them. Do you see s where there are income taxes? Do you see a big shift to um compensation away from direct payroll towards things like equity or is that sim similarly just anecdotal?

I don't think we saw that example in any of our peer cities. Um you ask Lucy. Uh, no. We do include I'm just thinking of the Seattle payroll tax in particular. We do include an analysis of that in the full report, not the like the deep dive. But no, I don't think we parsed out the impacts of like what is sort of um it's tax on like equity or whether it's just a tax on on income, salaried income. Just a curiosity. Thank you. I think we can move on.

All right. Uh let me now pass the baton to my colleague Lucy who will deep dive into the empty homes tax. Okay, great. There's two more strategies left. The empty homes tax and then asset monetization. Um, so for empty homes tax, this is one in which the owners of properties that are vacant for more than 182 days or half a year, whether consecutive or non-consecutive in a calendar year, are charged a tax. One of the interesting insights from this research was that um it can be designed progressively uh in order to target higher income residents and businesses. However, the administration and enforcement of the strategy may be challenging based on, for example, the availability of vacancy data and existing infrastructure to implement attacks like this and enforce enforce it. Um, in terms of scoring for total revenue, we um scored this as low um estimating about 6 to 12 million generated annually from attacks like this. Um, and we'll walk through the case study example of how we arrived at that range. Um, as far as equity, we rated this medium. The tax is applied equally to vacant properties regardless of property value, so different from the real estate transfer tax. However, it may target higher higher income property owners, for example, that own more than one property that they do not reside in the city. Uh as far as sustainability, um this provides a consistent source of revenue with some fluctuations depending on again um real estate real estate market conditions. Uh and then in terms of ease of administration, kind of already touched on this, but it really does depend on the level of vacancy data that the city has or is able to collect. Um and one thing that came up in our research uh is

the potential to use so Minneapolis has an existing vacant building registration registration program and there's data tied to this program. Um how our understanding is that the data uh in this program um and the the registry of information on vacant properties is more focused on abandoned property in the city. Um, as far as public acceptability, we put this one um as low, although we we um see that this one may face less opposition from the public than a real estate transfer tax. Um, but could face more opposition from different stakeholder groups like real estate special interest groups, for example. Uh as far as ease of implementation, again really depends on um the city's existing uh infrastructure to implement this tax and uh the availability of data to track and enforce um implementation. Right? Moving on to the next slide. So an empty homes tax um I think we've touched on this with other strategies may require state and local approval um and the revenue would really depend on the number of properties in Minneapolis to which this tax would apply. So it's really important to do that that baseline research to see exactly to how many properties um would fall under this this tax potentially. Um and then as far as ease of implementation again um we rated this medium estimated revenue uh low. Um the when we looked across peer cities and the um per cap revenue generated from them it was about 12 to $47 per per capita. Um, as far as who is impacted by this tax, uh, this tax applies to property owners whose units are vacant for more

than half of the year. Um, so this includes, for example, second homes, not in regular use, inherited properties that are left empty, um, uh, and ADUs, for example. Um so there are some in cities that have um an empty host tax there there are some specific exclusions and exemptions which I can walk through a few examples of. So, um, periods of vacancy that qualify for, uh, one of several vacancy exclusion periods that do not count towards the 182 days, um, include, for example, building permit application periods, a rehabilitation period, disaster period, case of owner death, lease period. um some exemptions. So, for example, um the Berkeley in Oakland, which we we look at, um they exempt properties that are owned by organizations that are nonprofits. Um and then they also exclude properties that contain four or fewer res residential units. Um sorry, sorry, owner occupied properties that contain four or fewer residential units. So, think multif family properties. Um and then those that are owned by owned in a trust. Um so although empty homes tax typically applies to residential units, some cities also levy this tax on commercial properties as well. So it can be used to both residential and commercial properties. Um and so I did we do have this call out which I already mentioned about um the city's existing vacant building registration program. That's an annual fee uh that property owners pay for the city. Um and this is something that we could potentially look at the data further to see if it could be leveraged towards something like an empty homes tax. All right. In terms of uh the tax structure, um

this is a flat rate and annual fee. How it would be administered? The city would use vacancy data to identify vacant residential and/or commercial units in the city. They could provide a written notice that would be sent um of the amount owed and then um taxpayers would have a certain number of days to pay the statement or andor claim an exemption or an exclusion. Um how revenue generation was calculated. So we use Berkeley's empty homes tax as the case study here. So, the city of Berkeley charges $3,000 per unit for a single family home, condos, duplexes, and town houses. That's in the first year of vacancy. And then in each subsequent year, um, uh, proper property owners are charged $6,000. Um, and then the rate is higher per year for all other residential units or, for example, apartments. Um, for the first year, the unit is vacant. Um and then in subsequent years the tax goes up to 12,000. So to do the calculation um on this slide we used uh the US Census Bureau's housing vacancy survey data um for the city of Minneapolis. So the vacancy rate um based on this data set for the city of Minneapolis in 2024 was 4.9%. This is about 21,675 properties of that vacancy rate. Um it's broken down into different housing types or different unit types. So 77% are apartments, 9% are single family homes and 50% are other. Um so we group together uh single family homes, condos, duplexes, town houses together. Um and then we uh took basically we assumed that the city

may only be able to collect between 5 to 10% um of the tax from available vacant units. So we took 5 to 10% of that um 21,000 number and then calculated the number of units um of that 5 to 10% that would fall into those two categories. So the single family condo duplex versus the apartments and other units. Um and then we did not include just noting in this calculation we did not include properties that may be excluded or exempted. So this might be an overestimate of the the tax revenue here. Um some of the implementation considerations obviously uh there's the current state statute does not um permit the city to levy an empty homes tax. Um but there's some existing precedents like the city has a blight tax and a vacant buildings registration fee. Um and then as far as community engagement as we've mentioned with the other strategies important to engage community the community members and any affected uh stakeholders to um educate them on the empty homes tax, how it works and sort of dispel any potential misconceptions from an administrative standpoint. Um again this really program he heavily relies on the availability of vacancy data. Um from an equity standpoint the tax would be uh really borne by owners of multif family properties with multiple vacant units and single family homeowners with multiple properties and um perhaps it could be designed for example to have less of an impact on um smaller multi- family property owners. um some of the pros. So um the city can cities can generate um revenue in a more progressive manner by focusing the tax on property owners who own multiple vacant units. Um the empty homes tax can also incentivize property owners to sell

units that have been vacant rather than pay the tax returning housing stock to the market. Um, and then as far as cons, uh, empty homes taxes may face stronger oppos opposition from property rights advocates and real estate interests, making them potentially more challenging to implement. And then, uh, in terms of defining vacancy, establishing enforce force enforcement mechanisms, and managing expectations, there may be some challenges. Um, and in the box below, we highlight the two examples of cities in California that have passed empty homes taxes into law. Um, the San Francisco example that is currently held up in court. There's been a lot of stakeholder opposition to it. And then, uh, Oakland um, similar similarly has a empty homes tax. So, it's really an empty Yeah. empty homes tax that applies to both um residential and commercial and the threshold in terms of number of days vacant is uh smaller. Um all right, I will pause there if there are any questions on empty homes tax. I know that was quite a lot.

Council member, thank you. Um I just had a question. You said that um death is a reason for um you know having a a pause on this and I'm just wondering is it the entire time during probate cuz some homes are like years and and people don't live in them. Yeah, it's during probate. Exactly. Okay. Yeah. All right. Thank you, Council Member Wansley.

Yeah, this one I was really excited to see. Um our office has worked with CPAD on advancing vacancy fees part which is within our jurisdiction right now um to recoup the full cost of vacant properties essentially becoming a nuisance when we have to be responsive to homelessness all sorts of things as a result of prolonged vacancies and CPAD most uh recent presentation on this last year really looked at kind of the same points of 6 months to a year of prolonged vacancies and some of the things that was highlighted in trying to advance that work is we don't have when we're thinking of administration a really solid infrastructure in actually keeping track of vacant units and that has been the holdup and I I think some of the recommendations that our staff recommended was looking at utilities um as a way to try to track um you know whether or not a unit has been vacant and that's been the biggest issue and then also what would be needed to ramp up staffing support so there could be proactive inspections um to detect or detect when a a unit is being vacant in a prolonged sense. Um and something that complements our fees program because they have to legally is when you mention the sense of of inspiring property owners to either sell or activate the properties because I think this is one of the biggest things of we have empty, you know, homes, commercial spaces. I'm glad you brought that up. that do create blind sights in our communities and they also impact property or real estate values as well um when they're vacant and we see disproportionate like inequitable impacts of that across the city. So, and we do have a portion of property owners who have portfolios here and live elsewhere. And so I do think there is this piece of okay, you have the ability through our existing fee program or the vacant build uh building registry to say let's work with you to

figure out how to either activate this space or sell it to, you know, a workingclass resident who wants the dream of home ownership then. Um so this is one that I I find most fascinating. Um and also we've made some significant work. I think we've just seen a a a stalling amongst advancement and because some of the things that I I mentioned earlier with our staff and actually moving forward with this and we even looked at a phased approach of administering this fee over time for these particular type of properties that are not nuisance because we already revamped prolonged vacancy fees for properties that are considered a nuisance by our code. Um so looking at the ones who are not and are just sitting there in our community. So, I will name this is one that I do have interest in continuing movement on. Um, since there has been a foundational base of like information gathering and looking at how we ex use our existing fee system as opposed to having to lobby before a specific tax um to help activate our housing stock.

Council Oh, I'm sorry, President Brent. Thank you. Uh, just a few quick questions. is the $6 to12 million revenue estimate. Is that based solely on the residential side? Yes. Okay. Thank you. And uh San Francisco's ordinance was uh struck down uh as you note. Uh how about Oakland? Uh was that affected by the same precedent or is it different enough that uh it was able to continue in force? It's it's different and yeah, it's still in force. They have a vacant property tax. Yep.

Okay. Um, our vacant boarded registration program here, if it operates under the same uh legal restrictions it did 15 years ago, uh, is limited to provable costs of city administration related to take uh, overseeing these sorts of properties. Do you anticipate that the um that we would have any problems from a legal standpoint piggybacking a pure tax on top of a registration type tax? You see anything in your research that suggested that? I think we would have to explore that question further with legal. Okay. Thank you.

We didn't. Yeah. Council member Stevenson. Yeah. Just uh following up on Council Member Wanssley's uh questions, I'm curious, did you have any sort of empirical data on the effect of vacant buildings uh by this? Like did did you did other the numbers like went up and down or like Yeah. Um we couldn't find any data, but that would be interesting if we were able to get that from the like Oakland and Berkeley that have this tax. Um but yeah, we weren't able to explore that. We just in the full report we have an analysis of the revenue generated from both of those taxes. Um

do you happen to see in other locations like does the revenue go down over time? Uh it look it seems like pretty consistent. Um you have to look back at the report but I think Berkeley's is fairly consistent. Okay. All right. Thank you Council Member Warren.

Thank you Council President. Um just resonating with what council member Wanssley um just spoke about with respect to vacant properties. Not only are properties left vacant then by individual owners but and this fee that we're assessing for properties or for commercial properties both residential and commercial properties. But, you know, I think the fee is a a nice gesture to kind of get people motivated, but um I could see it a lot stronger. But then I'm also concerned about how the city indemnifies itself when they host vacant properties left within communities that then are not um developed or they sit stagnant for years on years on end. um because that is a significant problem within my ward specifically and how it relates to how we assess taxes with respect to um properties that are you know it's it's not an even tax base. when there are properties that are owned by the city and then a slew of additional vacant properties and then we look at areas of concentrated poverty where there's not enough income generated in the homes within themselves even those that are then occupied right that we're able to balance that revenue and ensure that we are being an equitable voice for for the community in its totality so um I'm really curious at how the city plans to indemnify the communities themselves as you know the city right hosting properties in in the ward that are then left vacant and and what that means for the communities as well. Do you did you got any information on that?

No, that we didn't include that in our research, but those are those are great points. Um we it's actually kind of dubtales with the asset moni monetization example which gets more into like valuing public assets that might be um currently underutilized or not utilized at all. Yes. Okay. Thank you, Council Member Palms.

Thank you. Um I'm not sure it the strategies for having homes occupied is quite a bit different than vacant commercial space. Um, and I see in some of these notes, and it might have been I needed to step out for a phone call that I didn't hear everything you had to say about the vacant commercial property um, fees or taxes. Um, I have a group of people who ask me about this every single month at a business association meeting saying there is so much activation that they could do on a couple of these empty commercial properties in my ward. um as I imagine others have too. I know others have too. And um there's space for artists, there's space for like popup coffee shops. There's ways to really activate a space to make it a vibrant commercial node or corridor. Um and yet the the owners of these empty commercial spaces just aren't interested at all. It would be too much of a hassle for them. They'd rather just leave them empty. They are not blighted. They are not boarded, but they are just sitting empty. And they do create a real um it it it doesn't help with the vibrancy whether we're talking about Uptown or 50th in France. And is there any while this might not have been in this bucket of empty homes, have you are you ever are you excited by some of the other things you've seen out there in terms of empty commercial space, fees or taxes? Yeah. So, the one other example that I mentioned is um the city of Oakland. Um but actually, so even though that tax applies to both residential and commercial properties, it only applies to groundf flooror commercial spaces. Um and that's $3,000 annually. Uh and then it goes up goes up in subsequent years. Um but

um to your point, like how has that tax uh impacted like the activation of those spaces? We didn't really dig into our research. Okay. Thank you. Uh, Vice President Bernstein.

Um, yeah, I just wanted to just kind of put my marker down on this as well as something that I heard a lot of approval from when I was talking to voters over the summer and in the fall and it seems like we're hearing a lot of agreement here. So, I just kind of wanted to flag that. I think this is a really interesting area and um I think she just walked out, but um I really appreciated um Council Member Warren's comments as well about um the vacant city property. I think the city owns an enormous amount. We're going to talk about asset monetization next. The city owns an enormous amount of land and are we using that putting that space to good use and I think just seems like something that a lot of people agree on. And so as we're facing a difficult budget year, several difficult bud budget years possibly, um there's a range of densities in the cities that we're comparing here and density is an important driver of the strength of our tax base as well. And so thinking about how we treat empty homes, empty commercial space, and city property, I think that's all very related. And so I'm glad to hear a lot of interesting consensus on those topics. Just wanted to say that. Thanks,

Council Member Schaefer. Thank you. I just wanted to make one comment before I headed to head out for my colleagues. And I guess this is just a bigger picture thing, but these items I really appreciate this work. These items that we're looking at are $10 million or less except for the income tax. We are facing um property tax increases of 8% or more on a $2 billion dollar budget. So I while I appreciate looking at these additional revenue streams and we need to keep this on our radar, we also need to think about a study like this around the very efficiencies of our government and our departments within the city be because if we start bringing forward um additional revenue, additional taxes without having done our homework on the city, I'm talking to my colleagues here around a serious study on efficiencies around city departments. this is seems inauthentic um because of the pain that our constituents are feeling around property tax increases. And I just want to point out these these dollar amounts are are not nothing but they are relatively insignificant in light of the budgetary pressures we will be facing. So thank you. Thank you to the BET for bringing this forward. Um but I and I look forward to further discussions. I'm going to call in council member Wii click, but just to um just so you're aware, audit is actually working on an efficiency study that's supposed to be coming out in the next month or two. So,

thank you. And they've been at it for a few months. So, yeah. Council member Wley.

Yeah. Actually, in response to that too, a couple things that's moving is we asked the administration to do a fee study and fee analysis to look at the places where we are undercharging for existing city services. We also believe that performance was what was it uh management and information is supposed to be doing this work as well of an analysis of department program by program of what's not you know being basically how those programs are being administered if we actually need to be rethinking some of those things. So from my understanding we this body has been moving that analysis of where we could be more efficient where we could reappropriate and redirect existing dollars. But I want to say if we are able to find ways to recoup 1 million 2 million we should pursue those efforts regardless because that means 1 million 2 million off the shoulders of taxpayers as well. So I think this is the case of trying to figure out a multitude of efforts and initiatives to really alleviate what you highlighted very plainly in this report and presentation of the over reliance and dependence that's happening here and all across the country on just property taxes alone um to support our current service levels. We're not even talking about getting to some of the innovative work that we need to do to meet the needs of our residents.

Council member Whiting. Oh, you're good. Okay. Uh, I'm going to have you continue, but I'm going also just flag that we are at our quorum threshold for council. So, if anybody has any intentions on leaving, please let me know because we don't want to lose quorum. Okay. So, then let's uh let's get through the remainder of the presentation and hold questions till the end of the presentation. Okay. Um All right. So the next strategy and I'll try to move through these ones quickly as mentioned asset monetization. So we um also included within asset monetization even though this is a tax example an outdoor advertising tax. Um, so an outdoor advertising tax is uh an example of asset monization employed by cities including the city of Phil Philadelphia. Uh, Minneapolis can consider imposing a tax on the rental or sale of outdoor advertising space as a strate strategy to increase revenue without imposing additional taxes on residents. So the tax would be administered by the city as a percentage of the purchase of purchase or rental price of advertising space and imposed on companies that are for example advertising on billboards, benches, bus shelters and other street furniture. Uh the tax would be collected by the ad space vendor. So essentially would operate like a sales tax. Um some of the interesting uh findings from this research is that although the outdoor advertising uh tax would be relatively straightforward to implement um the revenue generating potential may be quite limited. Um so something to look at. Um we did not uh create an estimate of revenue generating potential for this one. Um just given the um lack of availability of data knowing the amount of advertising space in the city. Um so

more um exploration would need to be done there. In terms of equity, um, we rank this one as low. It requires all outdoor advertisers to pay a fixed percentage. Um, so it applies to small businesses and large businesses equally. Um, and as far as as far as sustainability, it does provide a relatively consistent but again small source of revenue. Um, and then ease of administration, relatively straightforward. The tax is collected at the point of sale. So we scored this one as medium. And then public acceptability. It might face some public opposition from small businesses just because it is applied equally regardless of of business size. Um jump to

Yeah.

Okay. Okay. Jump forward to the last one. Let me just right slide. Okay. So, sale of lease of public assets. Um, so this is a type of asset monetization that involves converting non-revenue generating city assets into sources of income. Minneapolis could conduct an asset inventory to identify underutilized public assets such as land, buildings, and infrastructure um and monetize those through sale, leasing, redevelopment, or public private partnerships. funding generated from the strategy could be ear earmarked for funding priorities like affordable housing. Um essentially the aim of the strategy is to really unlock hidden hidden revenue in publicly owned land and buildings without raising taxes. Um, as far as key insights, the sale and lease of public assets would likely face um lower public opposition, but the strategy is limited by low dependability of revenue and low ease of lower ease of administration. Um, and obviously requires some work in terms of putting together that asset inventory. Um, I'll move forward in the slides here. Um so as far as justification, the city could monetize and generate revenue from some of these underutilized assets um while um limiting additional tax burden on residents. Um again, we did not estimate annual revenue assoc associated with asset monetization. Um but this would be a first step really and exploring the strategy further um and putting together that asset inventory of existing um public infrastructure and other assets that are underutilized. Um as far as tax structure, this is this is not a tax or fee imposed. Um and then um as far as tax administration,

uh the city would identify these underutilized assets and generate revenue from them either by selling them or through leases. Um and so there are we did see a couple examples of asset monetization. For example, the city of Atlanta um joined this incubator incubator program back in 2022 uh and they conducted an inventory of all city-owned properties. Um and basically they ended up forming a uh Atlanta Urban Development Corporation, which is a nonprofit subsidiary of Atlanta Housing. And this group basically is tasked um with um utilizing those funds to then develop affordable housing in the city. Um, all right. That, uh, concludes the end of asset monetization and concludes the end of our, our slide presentation. Thank you for staying.

Okay. Uh, Mr. Clerk, any guidance? Yeah, President Payne, at this point, it does appear that we've lost quorum. So, the official meeting does need to end at this point. Um yeah, unless unless there's hope we can get quorum back, which I I don't believe there is likely to be uh any hope.

We we I mean just made it to the end. Um I think uh we can't do any more questions because we lost Kor, but uh if you have questions for our presenters, if you could just stick around for folks to come check in with you, that would be great. Uh and so with that, we've completed our business today with nothing further to come before the council. And I'll ask the clerk to receive and file this. And with nothing uh further to come before the council and without objection, this meeting of the city council is here hereby adjourned. And I will turn the chair over to be bet BET president Brent so he can adjourn that meeting.

Thank you, President Payne. Uh before I adjourn the meeting, I'd like to thank you uh particularly council member Wanssley, the rest of the council, uh guide house and LRO for uh moving the ball forward here and giving us this information. Unfortunately, the board of estimate and taxation was not able to achieve quorum today and so I'll officially adjourn our March 25th meeting that was adjourned to today and thank you. Devastating. Devastating.