Minneapolis-St. Paul — Tax Funding Available

September 2016

Approximately one percent of Minneapolis' tax capacity will be redirected in 2017 to a fund designed to pay for a streetcar line.

This unconventional method of funding a streetcar that would run 3.7-miles along Nicollet Avenue is being proposed as several new apartment towers have opened. However, the streetcar project has a long way to go for approval. The new apartment buildings now have $5.4 million in city tax capacity, which will aid the streetcar "value capture" district in 2017 rather than helping cover the increasing cost of city services.

If there were no value capture district, the one percent increase could expand city services without having an added impact on taxpayers, city finance officials said last week. Or, if tax collections remained as proposed for 2017, the tax load on homeowners would be slightly reduced.

The streetcar district was created in 2013 with the permission of the Legislature to aid a line that would run from approximately Kmart to Kramarczuk's on East Hennepin -- largely in mixed traffic. Unlike tax increment financing, which pays for development with new taxes generated by that development, the streetcar district redirected taxes from a number of anticipated buildings toward a potential future project.

 “Transit investment, particularly fixed rail transit investment, has pretty much proven itself as a development driver," said council member Kevin Reich. "And development driving, of course, adds to our tax base. And adding to our tax base is the winning game plan. Just holding tight and cutting when you want to cut is not a growth game plan.”

A draft environmental assessment for the streetcar project is expected to be complete in 2017.