Cities hope state funding will offset future property tax increases
Since a large cut in Local Government Aid appropriations in 2003, the Minnesota Legislature has slowly been putting money back into the budget, causing some local governments to notice small yearly increases in what they receive.
LGA is funding the state sets aside each year from its general fund and gives to local governments. Minnesota cities receive LGA based on a statistical formula evaluating several factors, including property values, age of housing and strength of tax base.
Cities have spent the years advocating for more LGA from their state legislators, according to Gary Carlson, a lobbyist with the League of Minnesota Cities.
"I think the issue has become more pronounced for our cities, because the only other real source of revenue most cities have for general operations is the property tax," Carlson said. "As LGA has not kept up or actually has been cut, it puts additional pressure on the property tax that is paid by homeowners and property owners and renters. And the cities have continued to look for restoration of that (LGA) money in the hopes that it will help reduce the pressure on the property tax."
The state is appropriating $534 million for LGA this year, about 52.4 million less than it appropriated before the cut 16 years ago. It's the same amount the city provided statewide in 2018—yet, cities are still qualifying for different amounts based on the state's formula.
"(LGA) extremely important to Crookston along with many other cities," city Crookston City Administrator Shannon Stassen.
"In our case, specifically, it equates to about two-thirds of our general fund budget, the reason being our housing stock is a little bit older. So, in terms of value and when you're levying tax dollars, there just isn't the same level of value to spread (property tax collections) out."
Stassen said most of the LGA Crookston receives covers public safety costs, including the Crookston Police Department, its fire department and emergency management.
Effect on property taxes
The struggle with property taxes has made itself apparent in data county auditors collect on their cities and property tax levy increases.
In Minnesota, local governments can levy property tax collections to fund their budgets.
Cities had until the end of December 2018 to finalize budgets and levy increases for 2019. According to information compiled by Polk County, the city of Crookston agreed to increase its property tax levy by $103,222 from what it collected in 2018.
That's about a 5 percent increase, Stassen said.
"It's a little misleading because sometimes people think 'Oh, my taxes are going to go up 5 percent,' " Stassen said. "And that's not the case, it's actually a very minimal increase to the actual property owner."
The city of East Grand Forks increased its levy by $270,208 from what it collected in 2018. That amounts to about 5.5 percent, much lower than past increases reaching up to 25 percent in 2015.
The city recently learned, according to City Administrator David Murphy, that it might be receiving less money than it is eligible for according to its lack of older housing. The LGA formula considers old housing to determine what kind of infrastructure costs a city might have.
"When the formula is calculated, East Grand Forks actually takes a hit because we lost a lot of that (housing) in the flood," said City Administrator David Murphy.