City revenue: Where does it all come from?

For next year’s budget, the city of Minneapolis expects to get $2.3 billion in revenue. While property taxes represent only about 30% of the revenue, most of those amendments will relate to how to divvy up the anticipated $474 million coming from them.
The general fund
Property taxes generally get most of the attention not just because people are most likely to notice and feel the increases, but also because they are the largest source of revenue that is unrestricted. Unlike much of the other revenue, they are not required by state, federal or city law to be spent in defined areas or for specific programs.
They also end up in what the city calls the “General Fund.” It pays for many of the services citizens notice, including most of the police, health and fire departments needs as well as city elections, the city attorney’s office and salaries for all elected officials and their staff.
The city is also set to receive over $81 million in Local Government Aid (LGA) next year and allocate $71 million to its unrestricted General Fund, $9 million to the Park and Recreation Board, and $245,264 to the Municipal Building Commission that maintains and manages the city hall building that is shared by the county and city.

Restricted Funding
Most other revenue comes with strings attached.
For example, the fees the city charges for services like water, sewer, and trash pickup are required by state law to be no higher than the cost of providing these services. This includes both operating costs like staff salaries, and infrastructure costs like treatment plants, storage buildings and water pipes.
Services charges represent the largest source of revenue for the city, anticipated to be around $728 million next year. Most of that, roughly $194 million, comes from water and sewer charges. Solid waste services is expected to bring in close to$51million and city-owned parking ramps $42 million.
The city is also required to use most sales tax revenue for specific purposes as identified in the state law that allows the city to collect them.
Taxes account for the second largest chunk of city revenue. In addition to the $473 million from property taxes, there is $90 million in local sales taxes and $50 million from gas and electric utility franchise fees. Some of those funds are restricted by state law and some by city ordinance.
Grants are expected to bring in $46 million in 2026. They come from federal, state, local or philanthropic sources and typically must be used for a predetermined purpose. Their use is defined by the granter and in the grant agreement. Some of the largest grants go to support housing programs like Community Development Block Grant, the Housing Opportunities for Persons with AIDS Program, and the Emergency Shelter Grants Program.
The city also uses fund transfers from within the city and borrowing from outside the city to help pay for things. For 2026, the mayor, for example, is recommending transferring $94 million from a Downtown Assets Fund to the General Fund and selling $200 million in city bonds (that will need to be paid back) to cover costs.
The Downtown Assets Fund comes from local sales, liquor, restaurant, entertainment, and lodging taxes. It was established to support the Minneapolis Convention Center, Target Center, Peavey Plaza, and the Cowles Center, but, according state law, is now also allowed to be transferred to fund other things.

Could there be more revenue sources?
Some people, including Board of Estimate and Taxation (BET) member Steve Brandt have advocated looking for more alternative revenue sources that relieve pressure on the property tax.
“I believe that we should seriously examine the feasibility of a city income tax on higher-earners – looking for pros, cons and unintended consequences,” he said. “There are more than 5,000 local jurisdictions nationally employing a local income tax, according to the Tax Foundation.”
At the BET’s request, the city council has started to study the possibilities and Brandt believes that “preliminary results show that we have options for relieving our high and growing reliance on property taxes” and wants to see the council and residents scrutinize the options.
Any proposal will require a change to state law, which currently prohibits Minneapolis from collecting wage, payroll or income taxes of any kind.
Ginny Halloran, in a recent letter to the paper, said, “I believe there are a lot of wealthy people in Minneapolis that care about city services that help build a vibrant city that might contribute directly to the city, as opposed to other nonprofits in their charitable giving if they saw how that private revenue stream was being spent.”
The city does accept donations of money as well as supplies and services. They may be for general use or restricted for a specific city use and can be made anonymously, or in the name of the donor. The city council must approve all donations. To learn more and make donations, contact finance@minneapolismn.gov.
“It might become a ‘thing to do,’” wrote Halloran, “for those that have benefited greatly from living in a safe, vibrant, and ecological and culture diverse city.”