Minnesota Gov. Tim Walz pitches $276 million in bonds for affordable housing

Gov. Tim Walz unveiled the first phase of his 2020 state bonding proposal Thursday, recommending to the Legislature that Minnesota borrow $276 million to pay for affordable housing projects across the state.

The DFL governor said the figure, an increase from levels proposed by previous administrations, would go a long way in "addressing a need that all Minnesotans know is real."

A supermajority of the Legislature must ratify the governor's borrowing proposal, meaning that it will require votes from both Democrats and Republicans to pass into law.

"The need is there and the coalition is ready to go," Walz said. "We simply have an opportunity here to make a historic investment, get ahead of this curve and put Minnesota in a position to make sure all Minnesotans have affordable housing."

The funding is part of a sweeping public works package that Walz intends to roll out in four phases over the next week. He also will focus on investments in water systems, higher education buildings, public safety, roads and bridges. Walz said the full package includes more local projects than any bonding bill proposed by his predecessors.

The governor said Thursday that the total borrowing package, known as a bonding bill, would total roughly $2 billion. But he has so far declined to give a specific number. The full picture will not come into focus until next Wednesday, when Walz presents the final piece of his proposal.

With a multiday debut, Walz aims to focus public attention on specific public funding needs rather than the overall amount of borrowing, which is likely to be a point of contention in the legislative session that starts next month. Historically, bonding proposals have drawn a strong reaction from Republican lawmakers.

During an announcement of the state's budget surplus in December, legislators hinted at the size of the borrowing bill they would like to see in 2020. House Democrats noted that Rep. Mary Murphy, chairwoman of the committee that focuses on capital investment projects, had suggested a $3.5 billion package. Top Republicans, meanwhile, say a $2 billion bonding bill would be too large.

Senate Majority Leader Paul Gazelka, R-Nisswa, said Thursday he would be "much more comfortable" with sticking to a package that's under $1 billion, similar to what legislators approved in recent bonding years.

"We should carefully consider that today's borrowing impacts tomorrow's spending," Gazelka said. "Surpluses come and go, but obligations remain the same; like a household budget, we don't just borrow money because we can or because we can get a good deal."

House Minority Leader Kurt Daudt, R-Crown, has echoed that position. In a statement, he said the GOP caucus "will prioritize a responsibly-sized bill that invests in job-growing infrastructure like roads and bridges, water projects, and maintaining state-owned buildings and facilities."

Minnesota Management and Budget Commissioner Myron Frans argued that the state should take advantage of its solid financial footing and low interest rates to invest in local infrastructure updates now, before costs rise further. He noted that the administration received $5 billion in requests for projects. "Why now? We can afford these projects now," he said. "We are in a very good position."

The vast majority of the money in the housing proposal unveiled Thursday, up to $200 million, would be awarded to developers to construct or renovate affordable housing and permanent housing and services for the homeless. An additional $60 million would be earmarked for public housing complexes. Housing Commissioner Jennifer Ho said some of that money could be used to pay for adding sprinklers to aging public housing buildings, such as the high-rise in the Cedar-Riverside area that caught fire in November, killing five people. It will be up to local housing authorities to identify top priorities for the funding, she added.

An additional $15 million would go to the Minnesota Department of Veterans Affairs for maintenance and repairs at veterans' homes across the state, including security upgrades.

Advocates for more affordable housing say the money could make a big difference, though they cautioned that more would be needed to fully address the shortage of affordable, quality homes. Ho estimated that the investment in affordable housing would create or preserve between 1,200 and 1,800 units statewide.

The Minneapolis Public Housing Authority said in a tweet that the funding "would not single-handedly solve the challenge to preserve our essential low-income public housing in Minneapolis and around the state. But it would be an unprecedented amount, if passed."

The specifics of the bonding bill likely will be negotiated throughout the upcoming legislative session, which starts Feb. 11. However, the deal-making to determine what gets funded usually comes together in the final days, or even hours, of the legislative session in May.

Unlike other bills in the Legislature, bonding measures require the support of 60% of the members in the House and Senate to pass. That gives power to the Republican minority in the House and Democratic Senate minority members.

Torey Van Oot • 651-925-5049 Jessie Van Berkel • 651-925-5044