Not all cities see LGA gain in long run

It’s hard to find losers under Gov. Mark Dayton’s revamped formula for providing state aid to Minnesota cities. That stands to reason since the proposal he laid out Tuesday adds $80 million a year to Local Government Aid, a longstanding program that supplements the budgets of the vast majority of cities.

But some gain a lot more than others in the long run.

Most of the increase would go outstate in 2014, the first year under the governor’s proposal. But after that, a new formula would kick in and the distribution of dollars would shift, sending most of the new $80 million in later years to the Twin Cities area.

St. Paul would be a big winner, for example. Instead of the $50 million it could expect in 2014 under existing law, Dayton’s proposal would provide it with $59 million. Then by 2018, the capitol city would receive $69 million.

Minneapolis, interestingly, wins but not so big. It would go from an expected $64 million in 2014 to $76 million in the same year under Dayton’s plan. But then its dollar total would decline a little by 2018.

Rochester is another prominent gainer. It’s expected 2014 number would rise from $5 million to $8 million. And then it would rise again to nearly $9 million by 2018.

Suburbs like Cottage Grove and Blaine, which currently receive no LGA, would start receiving several hundred thousand dollars a year under the Dayton plan.

Other cities are in the category of getting a one-time shot in the arm in 2014, not to be repeated.

For example, New Ulm has been expecting around $4 million in 2014 under the existing law, a slight reduction from what it receives now. Dayton’s proposal would provide it $4.5 million instead but then drop it back to just under $4 million by 2018.

Even so, city manager Brian Gramentz will take it.

“If we had an increase in 2014 from our current $4.1 million to $4.5 million, that would help because we are looking at $300,000 just in inflationary costs. That’s asphalt on streets, ammo for police department, paper for photo copier. We’re expecting a health insurance increase of close to $200,000.

“If we see an increase in local government aid, that is helping reduce an increase in property taxes or a cut in current operations. That’s very meaningful to us.”

Albert Lea, Hibbing, Faribault and International Falls are among the cities in similar situations — getting a temporary budget increase under Dayton’s plan in 2014 but then dropping back to what they have been expecting under current law.

What’s driving the disparate treatment? Dayton’s proposal gets rid of a number of complicated factors in the current formula and bases a city’s aid on just three things:

–Public safety and street need based on population.

–Percentage of housing built before 1970.

–Percentage of parcels that are tax-exempt.

Under current law, aging housing gives a city an advantage if lots of homes were built before 1940. Under the new formula, a suburb with lots of post-World War 2 housing stands a better chance of getting aid.

Likewise, the effect of the tax-exempt property factor varies. To help a city under the formula, a particular property can’t be owned by the city and it must have a structure on it, said Rachel Walker, policy analysis manager for the League of Minnesota Cities. So Minneapolis gets no help from its expansive park land, but St. Paul is helped by the many colleges in the city.

Here’s a chart of selected cities. You can find a Department of Revenue pdf of all cities by going here.

Dayton LGA selected cities.jpg

  • Kevin Watterson

    Bookmark this for when DFLers (and cities) go around trying to prevent “cuts” resulting from what everyone knows is only a temporary increase.

  • Jim Sanborn

    It’s pretty easy to find the losers – all the people that pay into LGA with their tax money and their city receives none of the benefits. This is municipal welfare – why can’t Minneapolis and St Paul and Rochester and the rest pay their own way? There’s the real problem.