Guidehouse tells Minneapolis council the city can diversify revenue but major options face legal and political hurdles

Guidehouse consultants presented a landscape analysis of municipal revenue options to the Minneapolis City Council on March 25 and urged the council to weigh trade-offs between revenue scale and implementability.

The report, introduced by Andrew Hawkins of the legislative department and presented by Guidehouse directors Margaret Chows and Lucy O'Keefe, found Minneapolis leans more heavily on intergovernmental funding than comparable cities and produces less revenue per resident than nearly all peers. "When we compare Minneapolis to similar cities, two things stand out: first, the city relies more heavily on intergovernmental funding, and second, Minneapolis generates less revenue per resident than nearly all of those cities," Chows said.

Guidehouse highlighted five strategies for deeper study. A real estate transfer tax was modeled to generate an estimated $101 million to $159 million annually depending on whether a progressive or flat structure is used; Guidehouse stressed the estimates are illustrative and sensitive to rate choices and market cycles. "All of these revenue estimates are high level and intended to be illustrative of the generation potential," Chows said. Consultants noted a transfer tax could be collected at point of sale by title/settlement agents but would likely require state authorization and possibly local referendum.

Guidehouse modeled payments in lieu of taxes (PILOTs) — voluntary payments by tax-exempt institutions — at roughly $10 million to $19 million annually, but cautioned participation could be limited and negotiation-heavy. An empty homes tax, using Berkeley as a case study and Minneapolis vacancy data, was estimated at about $6 million to $12 million annually; presenters warned current state statute does not permit Minneapolis to levy an empty homes tax and enforcement depends on vacancy data availability.

The largest modeled option was an individual income tax, estimated at $291 million to $410 million annually under the study’s scenarios; Guidehouse said such a tax can be progressive and stable but faces substantial legislative and political hurdles and would require state-level action for local implementation. Asset monetization and an outdoor advertising tax were described as lower-yield but administratively feasible approaches that would first require a city asset inventory and further study.

Council members pressed presenters on methodology and local context. Members asked whether per-capita comparisons accounted for county or park levies, whether the state deed transfer tax would combine with a local transfer tax, and whether Guidehouse had sized Minneapolis’s concentration of universities, hospitals and other tax-exempt institutions. Guidehouse said household-income inputs came from the American Community Survey and that localized sizing and legal questions would be sensible next steps if the council chose to pursue any option further.

With quorum lost near the presentation’s end, the clerk received and filed the Guidehouse report for the record and the council adjourned. The presentation and council questions made clear that while several revenue tools could increase local resources, each option presents legal, administrative or political constraints that would require additional study, stakeholder engagement and, in many cases, state action.