The Minnesota Legislature is about to increase property taxes for
business and residential owners next year by cutting local government
aid to cities and counties.
ECM Editorial Writer
The Minnesota Legislature is about to increase property taxes for business and residential owners next year by cutting local government aid to cities and counties.
For every dollar cut in state aid to cities and counties, the property tax could go up by 67 cents.
The Legislature is looking to reduce local government aid (LGA) to cities by $487 million, which the DFL says could make property taxes in the state go up by $300 million.
Republican legislators are crying foul and saying property taxes won’t go up by that amount.
Minnesota Gov. Mark Dayton is hoping he won’t have to reduce LGA by that much.
Last year LGA was cut twice and the total ended up being $426 million. That’s compared to 2002 when LGA was $565 million.
The League of Minnesota Cities is lobbying for the $527 million as set in statute and determined by the Department of Revenue. Representatives of cities say they’ll be lucky to get half that amount.
Faced with a loss of that kind of revenue, cities and counties are tightening their belts, and will have to cut some essential employees for next year.
The policy of the League of Minnesota Cities is to have the State Legislature consider all options, including tax increases, without specifying which tax.
So far, in most cities, city councils have not cut police and fire department members, although some cities have cut essential employees and others are pursuing contracting with counties for law enforcement services.
Some cities like Forest Lake, Rosemount, Elk River, Farmington and Otsego no longer receive any LGA, which is based on a complicated formula.
Other cities, such as Cambridge, knowing what’s ahead, are budgeting for half of what they should receive under the law.
Elk River receives no LGA and no market value homestead credit from the state.
Back in 2007, Elk River received $686,820 in LGA. That dropped to $343,410 in 2008 and to $0 in 2010. The city countered by reducing spending and taking $336,640 out of its reserves.
Little Falls is feeling the pain from losing LGA and the $182,000 in market value tax credit. Since 2009 when LGA was cut, Little Falls has increased the property tax 10.8 percent. The city has made changes in staff, not filled positions and cut the budget for maintaining parks.
Most communities have had to increase property taxes, because it is their only way to raise operating revenues. Republicans, rather than raise taxes and help cities, are shoving the state budget problems back to the cities, saying city councils and county boards are in the best position to make the decisions.
Local officials are frustrated at not knowing what their revenues will be. The city of Isanti lost $500,000 in four years, which is a hit, because Isanti’s operating budget is $3.3 million.
Isanti Mayor George Wimmer complains the state, rather than “lying” about aid they promise and are not granting, should end it if that’s their plan. He, like many other city officials, no longer plans to receive any LGA and that’s bad news for property taxpayers.
Don Heinzman, former editor of the Star News in Elk River, is an editorial writer for ECM Publishers. His blog is posted on HometownSource.com.