Some cities more prepared than others for LGA cuts

UPDATED THIS NOON AS MORE CITY OFFICIALS WEIGHED IN. IF YOU'RE COMING BACK TO THIS POST, SCROLL DOWN PLEASE.

As part of the flurry of budget bills the Legislature passed and Gov. Mark Dayton signed, most cities saw their local government aid (LGA) funding for the next two years reduced to 2010 levels. Cities had been promised an increase for 2011 and it seemed possible they might actually receive larger amounts as the first of two yearly checks was supposed to be issued today.

But those checks were delayed until July 27th (the second round goes out in December) and the amounts will match those originally proposed in a GOP bill Dayton vetoed earlier this year.

The 2010 amounts also fell short of what was originally promised, so some cities saw the writing on the wall and prepared for cuts. "We budgeted at 2010 levels with the assumption that that was what we were going to get," said John Chattin, city manager for Bemidji, which has raised property taxes and cut 15 percent of its workforce over the past five years. "You can't look at a $5 billion deficit and think you are not going to be part of the solution."

"For the third year running we're not looking at any increases in operational budget," Chattin added. "As gas prices go up and other prices go up, we tighten the belt a little more. As a city staff, we're grateful we still come to work anymore. We're surviving as well as we can."

Others, after weathering significant budget reductions in recent years, crossed their fingers and had planned for the bigger numbers.

Bradley Swenson, city administrator for Wadena, which will see its LGA reduced from the promised $1.3 million to $1.2 million, said, "We budgeted for the amount they promised us." The fact that 2011 is more than halfway over will make absorbing the cuts more difficult, he adds. "The sad part is, we planned on it and we're seven months into the year and now we have five months of budget left to try to fix it."

To fill the gap, Swenson says Wadena may hold off on planned capital expenditures -- which are normally scheduled for late in the year--or tap into the city's reserves. "We will have to look at special projects we had budgeted for," he says. "Maybe we'll delay them or not do them."

"This will impact us somewhat significantly," says Chad Adams, city manager for Albert Lea, which will receive $4.7 million instead of the $5.3 million the state said it would get. Since the city is in the black for now for this year, he says, "There is a chance we may be able to get through 2011 without significant cuts."

But 2012 could be another story. "We will have to make some tough decisions," says Adams. "We'll look at service cuts and raising fees." He added, "We had safeguarded ourselves by a few hundred thousand dollars, but not by a million dollars."

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Brad Martens, the city administrator for Winsted, which was scheduled to receive $667,000 in LGA funding but will now receive $548,000, says his city had planned on the higher amount, out of a mixture of hope and desperation. "Because of previous cuts, we've been behind on capital improvements, debt pay-down, and road maintenance."

The city, he says, has already made some improvements that it will now have to find new ways to pay for. "That's the problem with cutting in July," says Martens. "Coming up with $119,000 for the remainder of the year will be difficult for the city of Winsted."

He's not sure where the money will come from, though tapping into funds remaining from the construction of a new city hall in 2008 might be an option. That one-time fix won't help 2012, though, when Winsted citizens could see increased fees and reduced services.

"It's tough," says Martens. "We're currently trying to maintain snow removal. Do we reduce that? Do we reduce the hours our police are on the job? We have a beautiful downtown on the lake that needs redevelopment. This will hinder that too. This is going to be tough for our future."

According to Duluth mayor Don Ness, his city was prepared for some reduction in its LGA allotment, which went from an expected $31 million to $27 million. But add to that the elimination of almost $1.2 million in market value homestead credit reimbursements, money that offsets taxes on homeowners, and Ness says, "The total impact is a $4.7 million cut."

While that's better than the zeroing out of LGA funding for Duluth GOP legislators had proposed, the total cuts will be hard to absorb, says Ness. Duluth has already reduced its general fund budget by 12 percent in recent years through staff cuts and reductions in retiree benefits. "We've been budgeting conservatively and trying to set money aside by holding positions open but we still are going to have about a $2 million budget gap to address," he says.

Ness isn't sure how the city will make ends meet, but, he says, "I think everything has to be on the table at this point. We have been holding a large number of positions open but that is not going to get us the whole way. We will be looking at having to make some even deeper cuts and the result is going to be fewer services to Duluthians."

"We're scrambling at this point," Ness adds. "Unfortunately this has become a pattern with the state of Minnesota in which it is the second half of our fiscal year when the state announces these massive million dollar cuts. And we're forced to react."

And Ness had some thoughts for the state leaders who came up with the latest deal:

"We've made a large number of very difficult and structural changes that have been painful to the citizens of Duluth. It's frustrating when the state of Minnesota seems to be unwilling to make those same types of structural and sustainable changes to its budget. We all recognize that despite the pain that is coming from this so-called deal, the state of Minnesota will be facing the exact same situation with their next budget. But they won't have the tobacco dollars to help them out next time. Nothing from our perspective has been solved."

For more on the way Minnesota cities have been grappling with tight budgets, see our Ground Level topic page "Cities in Crisis."

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