Stillwater's state aid cut by $2 million since 2001

Unallotment has become a curse word in city halls across the state.

The governor's decision to balance the budget himself at the end of the last session led to deeper cuts in local government aid (LGA), which provides most Minnesota cities with a percentage of their yearly budgets.

Tuesday, the League of Minnesota Cities presented the Stillwater City Council with an update on its work at the state level, as well as a list of how different cities across the state have scaled back costs in light of such LGA cuts.

Stillwater has seen its local government aid decline sharply over the last decade. In 2001, the city received $2.1 million in local government aid. In 2010, the city is projected to get $183,000. With a city budget of around $11 million, the cut has made a fairly substantial hole in the city's budget, which has been made up many different ways.

"Looking through this list, we've, as probably every city has, done everything possible from hiring freezes to capital freezes to even encouraging marsh districts and the school district to cooperate with us to lend and borrow equipment back and forth," said Mayor Ken Harycki.

In terms of the reductions that cities have actually made, the League's survey found that at least 60 percent of the 300 cities they followed had made service reductions, many of which came in parks and recreation, but also police and public safety and capital projects.

Cities have also been using pay freezes and furloughs, combining services and equipment with other government entities, and also looking to increased fees as ways to help balance the budget.

Rachel Walker, manager of policy analysis for the League, says the cuts cities have made have been a bit more drastic this year, when compared to the last difficult economic period, 2003-04.

"The range of things that cities are doing is much, much broader than it was in 2003 and 2004 and the number of individual actions or strategies that cities are using is much higher," she said. "For example, in the past a city may have been able to solve their budget situation by doing a couple of things. Now cities are doing, 10, 12, 13, 14, 15 different things. So that's something that rally stands out to me."

The League has been collecting data through news reports, list serves and regional meetings about how cities have reduced services.

As the Legislature enters the 2010 session, which is not a budget session, there are many issues the League is hoping will get addressed.

Jim Miller, the executive director of the League of Minnesota Cities, said that the Legislature could be looking at a few new tools for cities to create revenues, such as allowing cities to roll excess Tax Increment Financing money into their general funds, expanding cities uses for lodging tax revenues and giving them more authority with local sales taxes.

On the flip side, the Legislature will also be trying to balance its budget, and some of those measurements may hurt cities.

For example, there has been discussion about taxing municipal bonds, and charging a sales tax for legal and accounting services.

But in the end, it will be an election year, Miller said, which usually doesn't lead to huge changes. But with looming budget issues, that might not ring true.

Miller warned that forecasts are already showing fewer revenues than anticipated for the state this year.

"I think it is a remote chance, but nevertheless one that could happen, that the governor could, as he did last year, unallot payments to local governments for local government aid and homestead credit this December," he said.

In other action, the council...

¥ heard from City Finance Director Sharon Harrison that the city's truth in taxation hearing will be held on Dec. 1.

¥ approved the hiring of 1.5 full time staff in order to replace two administrative secretaries with city offices who will both be retiring within three days of each other at the end of January.

The council had to approve the hiring, as the city is in a hiring freeze. City Administrator Larry Hansen said he would need at least one full-time and one part-time employee to handle the workload.

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Peter Cox covers crime and the cities of Stillwater and Bayport for the Gazette. He can be reached by phone at 651-796-1108.

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