In this report:
- Data overview on Brooklyn Center’s fiscal justice issues
(which we define as issues at the intersection of fiscal health and racial justice) - The Activest theory of change and organizing tactics & strategies for leveraging municipal bondholders in a coordinated organizing strategy.
Overview
The Cost of Police Brutality in Brooklyn Center is More Than Duante Wright’s Life
The April 11th killing of Daunte Wright by a Brooklyn Center police officer is a horrific yet all-too-common occurrence in Black communities. Black lives, like Duante Wright’s, may be priceless—but taxpayers are paying for the policing, killing and incarceration of people of color. In late June 2022, the courts awarded the Wright family $3.2 million in the police brutality settlement for the fatal traffic stop. Earlier this year, Wright’s convicted killer was sentenced to two years for the fatal shooting—an additional cost to the taxpayers for poor policing. But many saw this tragedy coming.
Wright’s shooting is a direct outcome of how an ideology of “Property over People” shapes local municipal budgets and fuels massive economic division, racial tensions, and civic unrest. The conditions in Brooklyn Center in many ways resemble those of Ferguson, MO leading up to the killing of Michael Brown by local police in 2014. While each is a tragedy in its own right, the similarities in the city policies and practices that surround the murders suggest that there was already significant fiscal justice risk exposure. For example, Brooklyn Center issues bonds to fund these liabilities annually at a similar pace to business development fees and revenues—bringing the outstanding bond debt to $66MM at the taxpayers’ expense.
Racial injustice in U.S. cities is built on a long history of sordid financial practices, and the current public finance capital markets do a poor job of integrating the social and fiscal cost of racial equity into the evaluation of cities and bond issuances. Municipal revenues often serve as the supply lines to fueling state-sanctioned, taxpayer-funded racial oppression. U.S. cities annually lose $70 billion in corporate tax giveaways, $11 billion from exclusionary school discipline policies, and $1.2 billion for municipal settlements and judgements, while bringing in $7.2 billion in predatory revenue from fines and fees (U.S. Census Bureau 2017; authors’ calculations) – all disproportionately harming BIPOC communities.
Brooklyn Center Fiscal Justice Analysis
Police and Crime
Crime within Hennepin County has steadily decreased over the last 2 decades, however police budgets have only increased with more officers being hired. According to the most recent financial statements, 38% of Brooklyn Center’s $24 million General Fund expenditures budget was spent on police and ambulance.
In 2020, a study of police stops and practices showed that police subjected Black and Latinx people to stop and frisks at higher rates than white people. Out of 2,144 total traffic stops stops in a town that is 45% white and 55% people of color, 62% of individuals stopped were African American, 25% were white, 6% were Hispanic, 5% were Asian, 2% had an undermined race, and less than 1% were Native American.
Brooklyn Center’s police stops mirror national data, where in most communities of color, the vast amount of traffic stops are pretextual. Black drivers are 20% more likely to be pulled over than white drivers. Because of high fines and surcharges, each traffic stop can result in hundreds of dollars in penalties. Failure to pay traffic fines that result from these stops can result in a driver’s license suspension in as few as 60 days. Since 86% of working adults drive to work, and many jobs require a valid license, license suspension can quickly lead to a financial crisis for those without significant savings. According to the MN state legislature, over 60% of low-income workers whose driver’s license is suspended lose their jobs
In Minnesota, fines and penalties from traffic tickets are not discharged in bankruptcy. Minnesota is one of more than 40 states across the country that suspends people’s driver’s licenses for outstanding tickets and fees, a practice that disproportionately harms low-income people, and impacts 80,000 Minnesotans with suspended licenses. At the state level, 38,472 convictions for driving after suspension or revocation in 2018 cost the state millions. The state calculated that at “nine hours of personnel time per violation only on cases that resulted in conviction equals 346,248 personnel hours, or over $10,000,000 cost to taxpayers, not including time spent by public defenders, judicial clerks, jailers, bailiffs, and administrators involved in processing license suspensions and reinstatements.”
Policing Youth
Recent research on the Hennepin County Juvenile Court reveals an alarming racial disparity in juvenile crimes. In 2018 Black youth were 61% of the cases prosecuted, but only make up 22% of the county population of 10- to 17-year-olds. Daunte Wright’s initial documented interaction with police was at 17 years old, where he pled guilty to a petty misdemeanor charge.
Use of Force
While roughly a quarter of all police officers have ever fired their service weapon while on the job, according to the Pew Research Center, those that do incur high social costs for the victims and their communities, and increasingly they create significant legal and settlement costs for the city. Little, if any, of this cost changes the behavior of the officers and rarely is anything done to reduce the risk of this happening again. This should be cause for concern for both bondholders and the credit rating agencies assessing risk, however the severity of the social and financial impact of these shootings has yet to be recognized by the municipal markets.
Police Pension
Publicly available data shows that Brooklyn Center’s 49 licensed, full-time police officers, 22 full and part-time non-sworn staff and 3 fire department employees qualify for the city-funded, state-managed pension fund. A third of the city’s budget pays for police; however, further research must be conducted to determine the full pension obligation for all of the police officers, both current and retired. Our preliminary estimates show that the full cost of police, meaning salaries plus pension, consumes over 50% of the City’s annual budget. Similarly, additional research must be conducted to determine the pension liability for Police Chief Tim Gannon and Police Officer Kim Potter, who were both allowed to retire before being fired, thereby retaining their pension.
For the year ended December 31, 2020 the City recognized pension expense of $1,003,794 for its proportionate share of the Police and Fire Plan’s pension expense. The State of Minnesota contributed $13.5 million to the Police and Fire Fund in the fiscal year ending June 30, 2020.
| Police and Fire Payroll | Annual Cost/Allocation |
| 2020 | $ 5,013,084 |
| 2019 | $4,829,945 |
| 2018 | $4,703,405 |
| 2017 | $4,449,784 |
| Police Pension Public Employees Police and Fire Fund (PEPFF) Contribution | Annual Cost/Allocation |
| 2020 | $887,315 |
| 2019 | $818,676 |
| 2018 | $761,952 |
| 2017 | $761,952 |
As of December 31, 2020, the City reported a liability of $5,806,261 for its proportionate share of the PEPFF’s net pension liability. The net pension liability was measured as of June 30, 2020, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The State of Minnesota contributed $13.5 million to the Police and Fire Fund in the fiscal year ended June 30, 2020. The contribution consisted of $4.5 million in direct state aid that does meet the definition of a special funding situation and $9.0 million in supplemental state aid that does not meet the definition of a special funding situation. The $4.5 million direct state was paid on October 2019. Thereafter, by October of each year, the state will pay $9 million to the Police and Fire Fund until full funding is reached or July I, 2048, whichever is earlier.
Although already a loss or waste of funds, these numbers fail to include the cost of years of protecting police officers like Police Chief Tim Gannon and convicted Police Officer Kim Potter, who were both allowed to retire before being fired, thereby retaining their pension burdens on taxpayers today.
The cost of policing is higher than what bondholders see in the consolidated financial statements because of the police pension obligations. The challenge then is not that investing in policing is risky at just this moment in time but that the pension obligations actually saddle cities with long term investment risk that the city has to pay for much longer into the future. For instance, even if a city reallocates police funding to other much needed social services, tax revenue will still go to paying the pensions of bad police/ing, long after residents have morally and fiscally defunded the police.
Corporate Welfare over Schools
The State of Minnesota tracks the local cost of tax increment financing (TIF) districts, which subsidize companies by refunding or diverting a portion of a municipality’s taxes to help finance development in an area. Minnesota has around 2,000 TIF districts, which divert hundreds of millions of dollars in property taxes, which would normally fund public schools, towards private interests in the hope of increased property values. Brooklyn Center has eight TIF districts which steer upwards of 10% of the City’s annual property tax revenues from schools to private firms and developers. According to the city’s most recent comprehensive annual financial report, TIF #8 has a near $900,000 deficit fund equity balance, which is substantial given the city’s $22 million annual budget.
While the “City’s total net position increased by $7,947,585 (5.48%) from the previous year, primarily attributed to a significant amount of tax increment revenues and utility revenues being used for debt service and capital outlay.” The offsetting cost is an increase in City’s total outstanding bonded debt by “$4,932,000 during the current fiscal year, from $58,181,445 to $63,113,445. The City retired $5,733,000 in principal in 2019, and issued $10,665,000 in new debt for infrastructure projects that included the Interstate Area Neighborhood Improvement project, Bellvue Mill and Overlay project, and construction of a new Municipal Liquor Store.”
Research shows that the unequal state property tax system’s impact on Brooklyn Center schools. According to the report, “the property tax system penalizes Brooklyn Center for having low levels of commercial property – meaning our homeowners pay more than our neighbors to support schools.” “Brooklyn Center’s current per-student local operating levy is substantially lower than all of its neighboring school districts. The last time voters approved an operating levy increase was over 15 years ago.”
TIF Financing is a process initiated by legislation and approved by the governor that gives all of the future tax revenue in an area to its developers as a subsidy. For decades, developers receive a continuous stream of revenue funded by residents’ tax dollars. If the TIF district is activated, developers will be able to capture its property taxes for decades to spur development. This also serves to redirect that tax revenue away from essential services, such as schools and libraries. The expectation is that future higher property values and revenues from (anticipated) higher property taxes will fund further economic development yet the trusts that the diverted tax revenue goes to has minimal obligation to reinvest in the community that fueled its growth—leaving the community further depleted of resources and further left behind.
More POC become displaced from city centers, that were historically the only places Black people were allowed to live, due to gentrification. TIF will effectively make it cheaper to gentrify an area. It will inflate the cost of living beyond what current residents can afford by building market rate development that will inevitably price them out. Black and Brown residents are primarily expected to be displaced or dispossessed of their property based on their annual income alone. With POC primarily being renters, landlords could in turn pass on the increased tax burden (resulting from increased property values) to residents by charging higher rents. In turn, more overpolicing of these neighborhoods and the suburbs they move to once displaced will increase such as seen in Brooklyn Center.
The Way Forward: Fiscal Justice in Brooklyn Center
Brooklyn Center currently has 20 institutional bondholders, which are all large, professional asset management firms, which together hold $56,000,000 of the city’s municipal bonds. We view investors in general, and existing and prospective bondholders in particular, as persuadable actors given the growing “conscious / responsible investor” movement and the professed commitments of major financial institutions to be on the right side of history by enacting anti-racist policies in wake of the recent racial justice reckoning.
How Residents Can Demand Change
Similarly, residents have their daily livelihoods and local tax dollars invested in a system leaking funds to support initiatives proven to be extractive and unfavorable to POC communities. It is to see some owners of capital as potential allies, if not in a project of abolition, then in trying to cut off the golden faucet that underwrites a system of cruel and unusual punishment. Residents can hold their local representatives accountable for:
- Moving budget allocations and public investment from extractive economic development practices (TIFs) to investing in schools; and/or
- Divestment, accountability and transparency in policing practices and police spending.
Whether it’s sending letters to public officials or key allies in this effort to publicly pressure and shame Brooklyn Center municipal bondholders and demand city transparency, we suggest selecting the following disclosure demands:
- Complaint details (by officer)
- Past settlement Payouts
- Detailed Police expenditures
- Police liability insurance policy details
- Any additional police data requested from the community
Conclusion
The municipal bond market brings together state and local governments, financial institutions, secondary investors such as community members, and credit rating agencies. Everyone working to get Brooklyn Center the funds it needs has a different access point and pressure point, but amongst the principal players we see the municipal investor as an important and often overlooked partner in this effort. Investors like insurance companies may have previously been unaware of the connection between municipal bonds and police brutality cases—thus have undervalued the credit risk these injustices pose to their return. Unfortunately, POC communities are reminded daily of the dangers inequity places on a society and productivity. Together, through accountability and equity the municipal bond market has the potential to affect the allocation of public funds to better align with the community’s desires and move everyone forward together.