The Minneapolis tax board approved a maximum property tax levy to cover Mayor Jacob Frey's proposed 2022 budget, but council members on the board said they are worried it may not be enough to cover financial risks of police use-of-force settlements.

The council members' arguments at the board meeting Wednesday set the stage for a looming battle over next year's police budget, which Frey is seeking to restore to nearly the level it was before George Floyd's killing.

The Board of Estimate and Taxation voted to approve a total property tax levy increase of 5.45% — or up to $417 million — to cover the expenses of the city's general fund, pensions, Park and Recreation and other funds, as Frey requested in his $1.6 billion budget proposal for 2022.

Before the board approved the mayor's request, the two City Council members who serve on it criticized the mayor's budget for possibly underestimating the financial risks of police use-of-force settlements.

Recent years' police killings of Justine Damond and George Floyd have resulted in wrongful death settlements of $20 million and $27 million, respectively.

"The reality in our city right now is that the cost of our policing system is ballooning and there is an enormous amount of financial risk in our budget related to police-related lawsuits and legal liabilities," said City Council President Lisa Bender. She noted that the net position of the city's self-insurance fund was $98 million in the red at the end of 2020.

Elected Tax Board Member Carol Becker defended city actuaries' assessment of the risks. "I know that there was no real planning probably for the size of the settlement that the City Council chose to make, but they're professional actuaries who do that kind of work," she said.

Transferring cash to the self-insurance fund comes at the expense of other city needs and wants, Council Member Steve Fletcher said in an interview after the meeting.

"I do think the police budget just doesn't really make sense," he said. "There's a lot of attrition, and so we're starting with fewer officers than what we've budgeted for, and so there should be money there."

Frey, Fletcher, Park Board Commissioner Londel French, Tax Board Chair David Wheeler and Becker voted to approve the maximum levy. Bender opposed. In an interview, she said she was concerned about the mayor's overall proposal and the growth of the police budget while other essential city departments, like Public Works, have to eliminate positions.

The overall city tax capacity shifted onto residents and away from the commercial sector, which saw pandemic-related reduced property values and businesses moving out of spaces, according to city budget staff.

The owner of a single-family home valued at $297,000 would be estimated to pay $1,634 in 2022, or $140 more than last year. Owners of commercial property valued at $529,000 would see their city taxes increase by $120. The city property tax bill does not include county, school district and watershed taxes, which vary depending on where people live.

Residents of low-income neighborhoods, where property values rose at a faster rate, would experience a greater tax hike.

The City Council will next review the mayor's proposed budget, hear from department heads and hold public hearings to gather resident feedback. In November, residents will get estimated tax statements from the county, and the City Council will hold a final budget hearing to address the city portion of property taxes. The City Council will adopt the final 2022 budget in December.

Also during Wednesday's tax board meeting, French proposed changing the revenue source for the Park Board's $2.6 million request, which would have raised the levy ceiling.

The mayor's budget commits to raising that amount for youth programming in parks, but specifies half will come from property taxes and the rest from one-time federal COVID-19 relief funds, which will eventually run out. French asked to have the entire $2.6 million come from property taxes for greater longevity.

Tax board members rejected the motion.

"I would have really liked for the youth of the city to have guaranteed money coming in," said French. "Our city's in crisis right now. We have young folks who are victims of this crime and I think our parks are uniquely situated to mitigate a lot of the violence that's going on."

Susan Du • 612-673-4028