Minneapolis' proposed budget would raise taxes and cit agency funding.

CHICAGO -- Minneapolis Mayor Sharon Sayles Belton wants to hike the city's property tax. by 1.5% and slash funds for the troubled Minneapolis Community Development Agency to help balance her $181 million budget for 1995.

The proposed budget, Sayles Belton's first, would raise spending 2% from the current level and calls for about $36.6 million of bonds to be issued next spring. Of the $36;6 million of general obligation bonds, about $16.4 million would be so-called net debt bonds to be paid with revenue from property taxes.

'qttis is consistent with the city's debt management policy," said city finance director John Moir. Moir noted that of the city's current outstanding debt of $1.173 billion, "only $110 million is supported by property taxes. That small debt burden carried by the taxpayers explains why we have a AAA rating from Standard& Poor's Corp. and a Aaa rating from Moody's Investors Service."

The Minneapolis city council is scheduled to vote on the plan Dec. 15. In addition to proposing a total capital budget of $63.8 million, the mayor stressed public safety, economic development and streamlined management in her budget address.

She asked several agencies, notably the Minneapolis Community Development Agency, to reduce overhead and rejected the agency's request for $1 million to administer its residential housing program.

"I recommend funding only half the request," she said in her budget address. "That would free the remaining $500,000 to actually finance and guarantee residential mortgages."

Sayles Belton denied the agency's budget request just weeks after announcing her support for a plan to dismantle the agency as an independent entity and fold it into city bureaucracy. The reorganization was proposed by a group of freshman city council members, and the full council will probably vote on it early next year.

The agency employs about 165 people and issues free-standing revenue bonds to finance local business ventures, in addition to overseeing economic and housing development. In 1993, it issued $334 million of debt to refinance outstanding bonds and fund new projects.

Even if the agency remains independent, it will probably undergo some reforms. Sayles Belton outlined her concerns about the agency in her budget address. "We must shift [ agency] strategies away from projects, deal-making, and competition with other cities," she said.

The job of overhauling the agency's strategies has been assigned to its former finance director, Rebecca Yanisch. The city council last week voted to offer the job of agency director to Yanisch, who resigned this summer. Critics charged her with ethics violations for allowing her husband and father to participate in the agency's private placement of Historic Orpheum Theater bonds, but a state auditor cleared her of any wrongdoing last month.

Despite perceived flaws with the agency's strategy, Sayles Belton said the city has undergone an economic revival in recent years.

"This year we had a 26% increase in retail space occupancy, bringing the occupancy rate up to 87%. We had a 5% increase in commercial occupancy, bringing that occupancy rate to 91%. The msuit, a city-wide tax capacity increase of 2% over 1993, reverses a four-year trend," she said.

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