Minnesota cities will get an $80 million increase next year in Local Government Aid from the state under a provision in the tax bill that seems to be near legislative approval. The increase would bring the LGA total to $507.6 million for the year 2014.
That’s nearly a 20 percent increase over this year and reverses a slide that started more than 10 years ago. It does not bring LGA levels back to their 2002 peak of $565 million. Also, a provision to let the total rise at the rate of inflation was removed from the bill, so the amount rises by a few million dollars the next two years and then is frozen.
LGA is money intended to let local governments provide basic services without leaning too heavily on local property taxpayers. In recent years, as cities didn’t get what they had counted on, pressure mounted on mayors and city councils to trim spending on parks, streets, city hall positions and even police departments, which are typically the last places cities cut spending. In some cities, the state aid amounted to half their local budgets.
This year, outstate Minnesota cities received two-thirds of the money, an imbalance that wasn’t really intended when the program was set up years ago. Aid to the cities is based on a complicated formula and as lawmakers cut into the aid over the past 10 years the reductions weren’t based on the formula.
The new law changes the formula. It’s still complicated but not as much so. What a city needs is determined mostly by three factors: population, the number of jobs in a city compared to its population and how much of its housing is old.
The jobs factor helps regional centers that workers commute to. Those workers put pressure on a city’s infrastructure but don’t contribute property taxes.
The housing factor lets the formula now consider post-World War II housing as a reflection of an aging infrastructure, so many suburbs gain. In fact, the LGA cuts of the past 10 years have left some suburbs with no state aid. Most will now see some money return.
The new formula means the $80 million that cities are gaining in the legislation will be split pretty much half and half between outstate and the Twin Cities, said Gary Carlson, League of Minnesota Cities director of intergovernmental operations. That will bring the Twin Cities’ share of the total up to about 35 or 36 percent, Carlson said.
Minneapolis, for example, continues to be the largest recipient and will experience an increase of nearly $12 million to $76 million. St. Paul LGA will rise $10 million from this year to $60 million.
Suburban gainers include:
Golden Valley, up from nothing to more than $200,000
Maplewood, up from nothing to more than $500,000.
Hopkins, up from nothing to nearly $300,000.
New Hope, up from $41,000 to more than $500,000.
Richfield, up from $1.2 million to $1.9 million.
Outstate, major cities gain a little:
Duluth, up $1.6 million to $29 million.
St. Cloud, up $1.5 million to $11.7 million.
Rochester, up $1.8 million to $6.9 million.
Regional centers tend to be up more modestly:
Bemidji, up $300,000 to $3.2 million.
Mankato, up $600,00o to $6.8 million.
Moorhead, up $300,000 to $7.1 million.
Winona, up $500,000 to $9.7 million.
But some cities, including outlying suburbs like Apple Valley, Blaine, Eden Prairie, Lakeville, Minnetonka and Plymouth, will continue to receive no LGA.
You can see all the cities at the House Research Department’s web site.
The provisions have passed the House and are in the tax bill Senators are debating today.