The tumultuous pandemic summer of 2020 was a busy one for the Kingfield Neighborhood Association’s volunteer membership. They spread the world about COVID-based closures and pandemic assistance programs in multiple languages. They helped board up businesses amid the unrest following George Floyd’s murder. They worked with Incarnation Catholic Church to build awareness of the 2020 Census in the area’s Spanish-speaking community.

And they did it all on a shoestring budget. But that wasn't always the case.

The City currently allocates $4 million annually to about 70 nonprofit neighborhood organizations under a framework that began more than 30 years ago. From 1990 through 2010, the Neighborhood Revitalization Program distributed $400 million annually to neighborhood organizations. The additional funding was to stem population loss and disinvestment across the city.  Its successor, the Community Participation Program, distributed tens of millions more between 2010 and 2020.

Some neighborhood organizations, including Southwest’s Whittier Alliance, have more than $1 million in the bank from these previous programs, though most have less.

The City revamped neighborhood organization funding again in 2020, which created financial and logistical challenges for some organizations. Through the new Neighborhoods 2020 Program, organizations now receive far less in guaranteed City funding: just $15,000 in 2024, down from a minimum of $25,000 in 2019. Additional funding for organizations is now contingent on efforts to engage with renters, seniors, people of color and other underrepresented groups in neighborhood organizations.

Despite some additional funding in the 2024 City budget, the reduction in guaranteed money is pushing some smaller neighborhood organizations to reduce programming, consolidate operations, or enter formal resource-sharing agreements with other neighborhood organizations. Even groups with hundreds of thousands of dollars in the bank are rethinking ambitious equity-building plans, like the Lowry Hill East Neighborhood Association’s proposal to redevelop the former Herkimer building.

Here’s what Southwest residents should know about these city-wide changes — and what they could mean for the future of the city’s most localized units of government.

What’s Going on With Neighborhood Organization Funding?

Southwest neighborhood organizations’ staff and board members are doing their best to deal with a reduction in guaranteed funding while utilizing new sources of City cash.

The Neighborhoods 2020 Plan drastically changed neighborhood orgs’ funding model

In 2019, the Minneapolis City Council approved the Neighborhoods 2020 Program, which replaced the Community Participation Program.

For most of the 2010s, the Community Participation Program provided at least $3 million in annual City funding to neighborhood associations. By law, most funds had to be spent on housing-related activities, a broad category that covered everything from home improvement grants to renter assistance.

Community Participation Program funds were allocated in three-year cycles based on plans developed by neighborhood organizations with input from their organizational boards and community members. Neighborhood and Community Relations staff reviewed and approved the plans, then kept tabs on organizations’ activities through required annual reports.

The complex arrangement provided a minimum annual allocation of $25,000 per organization plus $900 more for insurance expenses. Some organizations got much more than the minimum, based on their plans’ scope.

The Neighborhoods 2020 program reworked the Community Participation Program to encourage neighborhood organizations to have more engagement with underrepresented populations through four core funding sources:

  • Neighborhood Network Fund: Covers administrative expenses, placemaking, community organizing, and communications costs. Every neighborhood association received $20,000 in Neighborhood Network Funds in 2021, $15,000 in 2022, and $10,000 in 2023. The City’s 2024 budget bumped Neighborhood Network Funds back to $15,000. The Neighborhoods 2020 program decreased Neighborhood Network Fund money to allow for more Equitable Engagement Fund money.
  • Equitable Engagement Fund: For efforts to engage historically underrepresented residents in neighborhood organization activities and decision-making processes, including neighborhood board participation. Equitable Engagement Fund levels vary widely based on neighborhood population, housing cost, and other factors. The funds are generally higher in lower-income neighborhoods with more diverse populations. For example, because of neighborhood demographics, Whittier qualified for up to $138,266 in funding in 2023 while Linden Hills maxed out at $4,052. A budget amendment introduced by then City Council Vice President Linea Palmisano set the floor at $5,000 per association in 2024, no matter the neighborhood’s demographics. “[Palmisano] felt strongly that each neighborhood needed a minimum of $5,000 of the engagement funds to do authentic and creative work in their communities,” said Ruth Olson, Palmisano’s policy aide. The change affects four of six neighborhoods in Ward 13: Armatage, Kenny, Lynnhurst and Linden Hills.
  • Partnership Engagement Fund: Enables partnerships between neighborhood associations and community-based organizations to engage historically underrepresented residents. For example, the Sheridan Neighborhood Organization in Northeast Minneapolis partners with Black Business Enterprises Fund and Colectiva Bilingüe, among other local nonprofits.
  • Collaboration and Shared Resources Fund: For voluntary consolidation or resource-sharing among neighborhood organizations. This program sunsetted in 2023, but 14 neighborhood organizations used the funds to explore mergers. Two organizations have already merged and the City expects four to six more to merge or share resources by summer 2024, Kingfield and Lyndale among them.
A Kingfield Neighborhood Association volunteer helps people cross Nicollet Avenue at 41st Street on Election Day, Nov. 7, 2023. The neighborhood organization raised funds that fall to pay for an illuminated stop sign during the early morning and evening hours of voting.

Neighborhoods 2020 emphasizes community engagement and board diversity over brick-and-mortar projects

With this new funding model, neighborhood organizations are expected to spend less on grants for home or commercial facade improvements and more on programs that increase people of color and renter membership on their boards, along with broader participation in community activities, said Aryca Myers, a neighborhood support specialist at the City of Minneapolis’ Neighborhood and Community Relations department.

The idea is to make neighborhood organizations look more like the communities they represent, said Myers, whose department advises and supports nonprofit neighborhood organizations in Minneapolis. Right now, white homeowners make up the vast majority of neighborhood representatives across most of the city.

The shift in focus from infrastructure-type work to community engagement is a challenge for some long-serving board members and staff.

“We’ve had a lot of conversations with [neighborhood organizations] to help them understand how to make engagement more equitable, emphasizing the positive aspects of more representative boards,” Myers said. “But there has been some resistance.”

Renter and people of color board representation have ticked higher since 2018. The City’s 2022 survey of neighborhood boards found increases of 3.1% and 4.3% for renters and people of color members, respectively. Preliminary 2023 survey results show 5% to 7% increases in diversity, said Steven Gallagher, neighborhood programs manager at Neighborhood and Community Relations. That sounds modest, but it’s the most significant increase in the past 15 years.

It comes amid higher board turnover rates in general as longtime members step down and new ones step up. The remaining veterans tend to be more open to Neighborhoods 2020 objectives, reducing the “gatekeeper mentality” that can impede progress, Myers said.

Southwest neighborhood orgs are adjusting to a new financial reality

Southwest’s neighborhood organizations are also navigating a new financial reality that’s already forcing staff and programming cuts across the area.

Under Neighborhoods 2020, total annual funding remains around $4 million across the city, but much less of that money is a sure thing. Only the Neighborhood Network Fund, known as “base funding,” is guaranteed. While the City’s 2024 budget bumps each neighborhood organization’s base funding from $10,000 to $15,000, it’s still far less than most got before Neighborhoods 2020.

For example, the Lowry Hill East Neighborhood Association received $10,000 in base funding in 2022, down from $30,000 in 2020, and $60,000 in 2017.

That’s barely enough to keep the lights on, let alone pay a full-time staff person. A City analysis from this year estimated the typical neighborhood association’s annual administrative costs at $15,430. And that’s optimistic, said Sarah Linnes-Robinson, who recently stepped down after 25 years as Kingfield Neighborhood Association’s executive director. A few years ago, Kingfield calculated its “bare minimum” administrative costs at more than $17,000. The figure would be even higher today due to inflation, she said.

“You’re being asked to run a complex nonprofit organization on $15,000 a year,” said Linnes-Robinson.

And that’s just the overhead. A qualified executive director commands about $70,000 in salary and benefits, said Joe Schifsky, neighborhood coordinator for Lowry Hill East Neighborhood Association. Like many of his peers, Schifsky works part-time for the organization as an independent contractor due to budget constraints.

Amid the financial crunch, neighborhood associations are scaling back their activities and relying even more on volunteers. Lowry Hill East’s core programming is largely volunteer-driven, often in coordination with outside organizations. This year’s inaugural Uptown PorchFest was only possible thanks to private sponsors like Red Cow, Wrecktangle Pizza, and Up–Down, said Jordan Peacock, the organization’s board president.

Questions linger among neighborhoods about how to maximize the Neighborhood 2020’s Equitable Engagement and Partnership Engagement funding. The application process is new and unfamiliar, and while neighborhood stakeholders like Peacock and Schifsky speak highly of Neighborhood and Community Relations staff tasked with helping, the payoff isn’t always clear.

“With the Equitable Engagement piece, we’re tasked with doing [outreach activities] that entire teams at the City typically do,” Schifsky said.

Peacock agrees. “We were definitely not set up for success in what was communicated to us” about the shift in how neighborhood organizations were getting funded through equitable engagement, he says.

Some Southwest neighborhood orgs are sitting on a lot of cash — with strings attached

Despite all this, some Southwest neighborhoods are in good financial shape.

Citywide, many neighborhood organizations used cash from earlier Neighborhood Revitalization Program phases for self-funding initiatives like home improvement and down payment assistance loans, which borrowers repay with interest. Those initiatives produced a windfall for the organizations.

“We have this surplus because neighborhood organizations got really creative with their programming to create funding streams that often went out and came back multiple times,” said Robert Thompson, a longtime former Neighborhood and Community Relations employee who worked for Loring Park’s neighborhood association in the 1990s.

Much of that cash remains unspent. Neighborhood organizations had more than $26.1 million in unspent funds as of August 2022, according to City documents. Gallagher estimated the total remaining balance was at about $22 million in December 2023.

But the bounty is unevenly distributed. In Southwest, Citizens for Loring Park and the Lowry Hill Neighborhood Association (not to be confused with the better-off Lowry Hill East Neighborhood Association) had less than $100,000 on hand last year. Whittier Alliance had about $1.5 million in the bank and continued to generate significant revenue.

Even for flush neighborhood organizations like Whittier, leftover funds aren’t exactly liquid. Every dollar still in the program is spoken for in approved neighborhood action plans and is either being spent down or awaiting a specific contract. Reallocating amounts larger than $25,000 requires an action plan modification with “robust” community input.

Tough choices — and more changes — could be ahead for Southwest orgs

A recent City review nods to community calls to reallocate unspent neighborhood org funds to the Neighborhoods 2020 program. In theory, that money could be used to increase base funding or boost the Equitable Engagement Fund balance.

But some organizations that would benefit most from more Equitable Engagement funding already have sound finances, such as Whittier in Southwest and Near North on the Northside. Reallocation could leave them weaker at the expense of neighborhoods that currently qualify for less Equitable Engagement money.

A potentially bigger problem is that State law requires neighborhoods to spend Neighborhood and Community Relations funds on specific activities. Reallocating funds for another purpose would involve a lengthy public comment process and revisions to Neighborhoods 2020 program guidelines, among other steps. According to the Minneapolis City Attorney’s office, neighborhoods would have to comply with both the older legal restrictions and the new guidelines, “creating difficulties for both neighborhood and City staff” and possibly creating new legal exposure for the City.

Another reason neighborhood organizations have a surplus in funding is because 70% of the funding is reserved for housing-related work, up from 52% earlier in the program’s history. This rule restricts some organizations from using savings for other purposes. But a potential compromise could emerge from the City review’s recommendation to again reduce the funding percentage reserved for housing-related activities.

A reduced housing requirement would give neighborhood organizations more flexibility to divert some Neighborhood Revitalization Program money to non-housing uses without jeopardizing more ambitious housing initiatives like Lowry Hill East’s proposal to build affordable housing in the former Herkimer building.

Lowry Hill East has $500,000 in unspent funds earmarked for the project, which was more than half of its reserves as of last year. Even if the Herkimer building doesn’t work out, the organization still wants to spend that money on a signature housing effort, said Peacock.

“We’ve developed the competencies to pursue similar opportunities elsewhere in the neighborhood,” Peacock said. He’s aiming to chart “a clear path forward” and an argument for why Lowry Hill East should invest in affordable housing by April.

Regardless, neighborhoods will soon need more money to sustain their services. Traditional nonprofit funding sources, like private foundations, are likely out of the question, Kingfield’s Linnes-Robinson said.

“No outside funder will support you with so many nearby place-based organizations doing the same thing,” she said.

Local government organizations could provide some additional funding. The City review that spawned Neighborhoods 2020 identifies a “fee per activity” model to cover costs for initiatives that were previously folded into neighborhood associations’ operating budgets, reducing the load on base funding. Possible sources include Hennepin County, the Park Board (which already collects park dedication fees that have funded neighborhood organization projects like Whittier Alliance’s futsal courts), and various City departments.

These are suggestions, not guarantees, and they might not be enough for every neighborhood organization to survive. Citywide, the Columbia Park Neighborhood Association has already dissolved, Northeast Park and Beltrami have merged, and Midtown Philips and East Phillips are close to merging, according to Gallagher. Linnes-Robinson said she sees half the city’s neighborhood organizations shuttering or consolidating within three years.

Consolidations might not be a bad thing, says Wedge LIVE! publisher John Edwards, who briefly sat on Lowry Hill East’s board in the mid-2010s. It would allow the remaining organizations to use their expanded budgets more efficiently while increasing internal flexibility for neighborhoods that want to remain independent.

“Wealthier neighborhoods are never going to have trouble advocating for themselves” and can more easily raise money internally, Edwards said.

A Minneapolis with fewer neighborhood associations would still have a community governance advantage over most other comparable cities. Cities like Seattle, Portland, and Indianapolis have all pulled city funding for nonprofit neighborhood groups over equity concerns, and no other city gives as much as Minneapolis, Gallagher said.

“We would love this to be a larger program, but we do what we can with what's available to us,” he said.

What’s Going on With the Neighborhood Revitalization Program Policy Board?

The Minneapolis City Council recently completed another important piece of neighborhood-related business last month. On Dec. 7, 2023, it approved a long-delayed ordinance to restructure the Neighborhood Revitalization Program Policy Board, ending months of uncertainty over the board’s future.

The ordinance significantly increases neighborhood organizations’ representation on the board, which is currently composed mostly of city, county, and state elected officials. The board has met only sporadically since 2021.

Elections for the new board seats will be held at the Community Connections Conference on Feb. 17. New members could be seated shortly after the vote, said Neighborhood and Community Relations’ Gallagher.

The new policy board could help shape the future of neighborhood organizations. That would be a big change from today’s reality, where the board has little direct influence on neighborhood organization operations or the City’s Neighborhood and Community Relations department.

The Board has been dormant for the the past few years

The Neighborhood Revitalization Program Policy Board met roughly every other month until Sept. 30, 2021. It has met only twice since, in October 2022 and May 2023.

That’s mostly because it has less work to do. Under the Neighborhoods 2020 plan, the board has a smaller role in managing neighborhood organizations’ finances, says Gallagher. The board still weighs in on bigger questions, like appeals of neighborhood plan modification requests denied by Neighborhood and Community Relations staff and amendments to the Neighborhood Revitalization Program itself. But with the Neighborhood Revitalization Program well into its fourth decade, those questions don’t come up as often as before.

The board’s current structure also affects its productivity. Today, most of its members are busy elected officials, which makes it difficult to get enough board members together for formal meetings when nothing urgent is on the calendar.

It’ll look different in 2024

That will change this year, when the Neighborhood Revitalization Program Policy Board has more members representing neighborhood organizations.

The just-passed ordinance allows for a total of eight neighborhood organization representatives on the board, up from four currently. Two are at-large positions open to neighborhood organization reps from anywhere in the city. Six represent Neighborhood Revitalization Program districts, which divide their responsibilities geographically and have the same boundaries as Park Board and School Board districts. Districts 4 and 6 serve Southwest Minneapolis.

The first election under the new ordinance is set for Feb. 17 at the Community Connections Conference, held at the Minneapolis Convention Center. Votes are cast by delegates representing Minneapolis neighborhoods based on the preferences of their constituents, similar to the Electoral College system for U.S. presidential elections.

The new board will have 15 members. Neighborhood organization representatives will have an eight-to-seven majority, which could make it easier to form a quorum.

The City’s Intergovernmental Relations Group is lobbying the state legislature for a tweak to the Neighborhood Revitalization Program law that would allow most elected officials to send designees to board meetings. That would make quorums even easier to form, potentially enabling more frequent and productive meetings.

The new board structure is also an opportunity to rethink how it operates, Gallagher said. He envisions an “advisory board like the City uses in other settings” that weighs in on future funding and policy questions. This steering function is necessary from time to time but can tax limited government resources.

“We don’t want to start yet another commission when we can utilize what we have now,” he said.