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Proposed LGA formula good for long term

Published 9:00am Thursday, April 18, 2013

Column: City View, by Chad Adams

The city of Albert Lea has been closely monitoring a significant change to the local government aid formula that is being reviewed in the Minnesota House and Senate. Gov. Mark Dayton has also proposed a new formula for LGA and recently challenged cities to present a new formula.

Chad Adams
Chad Adams

Minnesota cities have delivered on that request by agreeing to a compromise bill on a new LGA formula. Reaching a consensus on LGA has been a challenge for Minnesota cities these past several years, but provides great opportunity for cities to move forward with more certainty, fairness and understanding on LGA as a revenue source for many years.

Albert Lea depends highly on LGA in the city’s budget to provide core essential services, such as public safety and street maintenance. LGA helps cities that have lower property tax wealth and/or greater needs, ensures reasonable property tax rates and supports city services necessary for economic growth.

In 2013, LGA represents about a third of the city’s revenue source for our general fund. Since 2002, the city’s LGA has been decreasing, which has resulted in the city cutting personnel or services and increasing the local property tax levy to preserve various services. To place the numbers into perspective, the city received just under $6.5 million of local government aid in 2002 and is slated to receive $4.7 million in 2013. The $6.5 million in 2002 was a little over half of the city’s general fund budget.

City officials support the new LGA formula because it will provide stability in our forecasting of LGA and subsequent property tax levy to meet our community needs.

For many years, the city has been faced with uncertainty in the LGA and distributions of market value home credit. We have experienced receiving less LGA than what has been certified by the state. Because of this, we have been forced mid-year to cut personnel, reduce services, borrow funds or defer infrastructure projects to future years.

An important component to the new formula is the inclusion of an inflation adjustment to ensure long-term stability. The inflation adjustment has been absent in past years. The proposed inflator would be based on state and local government purchases, not the more popular “consumer price index,” which takes into account food and clothing purchases, for example, that cities do not frequently incur as expenses.

Another positive and welcoming change to the formula is its simplicity. For cities with a population of more than 10,000, the main factors to determine our LGA “unmet need” will be pre-1940 housing, jobs per capita and percent of housing built between 1940 and 1970.

The jobs-per-capita variable is important to Albert Lea serving as a regional job center in southern Minnesota. Our population and demands for public services increases during the daytime, which places strain on only local property taxpayers to fund those services and needs.

Recent proposals in the funding of LGA range from an additional $60 million in the House to $80 million by Gov. Dayton. To make the new formula most effective for Greater Minnesota cities, we support the $80 million, even though 2013 LGA is $139 million less than in 2002. The new formula and funding would bring additional LGA to Albert Lea in 2014 and likely for future years based on the inflator. The additional LGA funding would increase our ability to maintain core essential services and address infrastructure needs that have been delayed or unable to be addressed due to lack of funding.

We commend our member organizations, the League of Minnesota Cities and Coalition of Greater Minnesota Cities, for reaching compromise legislation with metro cities, Minneapolis and St. Paul on the new LGA formula.

Albert Lea city officials have been active in working with our local legislators in advocacy for the new LGA formula and will continue doing so in the closing weeks of this session.

 

Chad Adams is the city manager of Albert Lea.