Cities vow to treat bump in state aid as windfall, not a 'new normal'

Nearly $2.4 million in additional aid is expected to flow to eight south-metro communities after the Minnesota Legislature agreed to bump up taxes and spending.

But, burned too often in the past, cities say they are loath to build those state aid dollars back into budgets. They're more inclined to treat the money as a temporary windfall, useful but nothing to rely on long-term.

"It is very, very good news,'' said South St. Paul City Administrator Steve King, whose city is one of the biggest winners in the south metro. "Not just the dollars but the philosophy that underlies it.''

His city's so-called "local government aid," or LGA, will rise from about $1.7 million to about $2.3 million.

Of the eight cities, three, including Burnsville, will get not a dime in 2013, but they are being added back to the list for next year. Hastings and Jordan are the other two to go from zero to something.

Five others that have been getting money will see jumps ranging from 25 percent for Elko New Market to a near quintupling for Belle Plaine, though it comes from a low starting point.

In dollar terms, increases range from just over $40,000 to South St. Paul's $627,000, following a formula designed to gauge a city's need for outside help.

At the helm of a city that lost its primary tax base and employer, the meatpacking industry, King said he appreciates the use of local government aid to "equalize the resources available to cities.''

Abrupt callbacks of local government aid to balance the state budget have trained South St. Paul to largely wean itself from reliance on the aid. It won't spend the money until it's sure it has it, King said.

There is no shortage of things to spend it on, however, King said. One possibility is upgrading the city's Mississippi River levee as required by the Army Corps of Engineers.

West St. Paul is getting the third-biggest dollar bump — about $1.2 million next year — up from about $774,000 in 2013.

Overall, the state will deliver $80 million more in aid to local governments this year with money raised through state tax increases.

Distribution of the aid will come via a revised formula that better reflects the needs of cities, said Rep. Jim Davnie, DFL-Minneapolis, chairman of the property and local tax division of the House Tax Committee. For the first time, the formula responds better to the needs of first- and second-ring suburbs, which are starting to look more and more like the two central cities, Davnie said.

Burnsville and Bloomington, for example, will get aid for the first time. Legislators intend for cities to use the money to hold down property taxes and deliver adequate public services, Davnie said.

Cities are happy for the help.

"We are very thankful for the property tax relief," said West St. Paul Mayor John Zanmiller. It's unlikely that the city will bundle the aid back into the operating budget because of the uncertainty of the funding, Zanmiller said.

"I would love to just take the whole thing and roll it into the budget, but that makes us dependent on it again.''

There are plenty of projects it could be applied to, he said. "We've had a decade of things we've had to pass on or delay. We have been without a park and rec director for about seven years."

Hastings got a windfall of $510,682, the second-biggest increase in the south metro, after receiving no local government aid this year.

Finance Director Charlene Stark said she is happy to see the money on the city's doorstep. In the past, she said, "We went from receiving $2.5 million down to nothing.''

The City Council will have to discuss how to spend it, but going ahead with planned improvements in the city's downtown levee park is one possibility, Stark said.

It's unlikely that the city will use it to reduce property taxes, because that would make it part of the operating budget again, she said.

In Jordan, Council Member Thom Boncher said he doesn't think his council colleagues have discussed the matter in any detail, adding, "There are a lot of things it could be used for." Like other city officials, he'd favor using the money for capital projects.

"We could pay down the cost of a new bridge here or apply it to rehabbing City Hall into a police department building," he said. "Construction results in long-term costs, and paying them down as quickly as possible reduces costs. Using money like this for short-term things, such as patching streets, or changing the oil on squad cars, doesn't help Jordan in the long run."

A number of the newer and more prosperous suburbs in the south metro aren't entitled to any of this type of state aid. In fact, when Burnsville wound up with nearly $86,000 in local government aid, it was the first time anyone could remember the city receiving it, said City Manager Heather Johnston.

The fact that the city is aging likely brought it within the formula for eligibility, Johnston said. "We are going to use that local government aid to help cover the increasing cost of current services.''

Although the city is "absolutely happy to have the money,'' Burnsville is not so happy about the 3 percent levy limit increase legislators imposed for next year, Johnston said. "If we had to choose between not having levy limits and not having local government aid, we would choose local control.''

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