Community leaders and CGMC discuss LGA
WORTHINGTON -- In the first of a series of several meetings around the state, the Coalition of Greater Minnesota Cities (CGMC) and St. Paul Mayor Chris Coleman met with community leaders in Worthington for a discussion regarding the background, purpose and benefits of Local Government Aid (LGA).
ThankLGA.org representative Bradley Peterson said there are lots of myths and misconceptions about LGA, which was established as a method of providing fairness in property taxation across the state in the 1970s. The purpose was to fund local services and reduce tax disparities, and also to help cities that bear an overburden.
Even though LGA is a much-discussed subject, Peterson said, it only equates to two percent of the state's general fund, or approximately $427 million this year. Back in 2002, before all the cuts began, the total was closer to $565 million.
Worthington Mayor Al Oberloh, who recently received the CGMC's President's Award, is one of 15 mayors serving on the Governor's Tax Reform Advisory Group on LGA. Coleman, who referred to Oberloh as one of his "favorite mayors in Minnesota," said the group was appointed by the governor to take a look at the formula used to determine the amount of LGA cities receive.
"You can devise a formula any way you want, but there still is not enough money to do what you have to do," Coleman said.
The lack of funding has caused gaps, because it has not kept up with the cost of inflation.
"Our fire department budget exceeds what we get in LGA, and our police department exceeds what we get in property taxes," he explained.
The recent talk and media attention regarding the crime lab in the city is a perfect example of what happens when public safety services are cut to the bone.
The consequences, he said, are significant. It is not just about dollars, he explained, but about quality of life.
The misperception of legislators, Coleman added, was they think cities are out spending money "on all kinds of frilly things."
"They don't understand about the services we provide," he said. "If they keep cutting at the current level, I would have to increase property taxes at a rate of 30 percent a year."
Oberloh said he sees the state as an unreliable partner. The LGA cutting started in 2003, he said, and the city of Worthington has lost $6 million in the time period between then and now. In 2003, he added, LGA was "just shy of" six percent of the general fund.
Essential services are different for each city, Oberloh said, and the oversight of LGA spending in each city should be left to the city officials and the people who elect them.
Another misperception, Coleman said, is LGA is charity the state is giving to cities, but it is, in fact, revenue the state received that is generated in cities.
"If they would just allow us to capture the taxes going to the state, we wouldn't need the aid," he said.
Luverne Mayor Pat Baustian said losing LGA would force the city to raise property taxes by 20 to 25 percent, which would cause a mass exodus of businesses and people.
"Our LGA goes to provide essential services," he said, explaining most neighboring small towns use Luverne's fire department as mutual aid for almost every fire. "There are less people in a small town, and they have a harder time staffing a fire department."
Baustian called 2003 an "ugly year," and said some city services have been cut since then.
"And it is two percent," he said. "They argue over two percent. Every one of us has a balanced budget at the end of the year, and we spend wisely and efficiently."
Of the 854 cities in Minnesota, over 600 of the receive LGA, yet about half of the state's population lives in a city that receives it.
"Isn't about 70 percent of the state taxes raised in the cities?" Baustian asked. "LGA is to help the lower tax-based communities, to keep rural Minnesota healthy and vibrant."
"And we can't have a healthy Twin Cities if the rural areas are not doing well," Coleman added. "We are all in this together."
Oberloh said we should be able to expect a safe community, and as the trend to cut LGA continues, that gets further out of sight.
The same people who are refusing to help the rural areas don't seem to realize the food they eat and fuel they use is coming from greater Minnesota, he added.
"I would hate to see it continue on its path," Baustian said. "If we can't cut an immense amount out of our budget, reverse it and keep rural Minnesota healthy, businesses will vacate. It is like a big sucking hole."