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Small towns facing tough budget choices

Mayor Nancy Carroll talks with DFL Reps. Paul Marquart, left, of Dilworth, and Kent Eken of Twin Valley about cuts to Local Government Aid. (Sarah Smith / Enterprise)1 / 2
This city graph shows how much property taxes have risen to offset cuts in Local Government Aid.2 / 2

The military has a famous phrase for operations that go awry.

It's not fit for print.

But it could be applied to government programs passed with lofty aspirations that devolve into disarray, too.

Without the "great equalizer" of Local Government Aid, Minnesota's small cities will slowly crumble to death, a group of lawmakers was told Sunday in Park Rapids.

Small town taxpayers and businesses simply can't shoulder repairs to geriatric infrastructure, fixing cracked streets and sidewalks and providing essential services much longer, the mayors of Park Rapids and Bagley maintained.

Park Rapids mayor Nancy Carroll relayed the backlash city leaders got when a much needed water project in the Riverside district was postponed due to public outrage.

"The city has been trying to keep taxes down" while taxpayers "have been very vocal about the imposition of assessments," she said.

"So your residents are deciding between sewer backups and property taxes?" asked Rep. Paul Marquart (Dist. 9B - Dilworth).

Yes, was the answer.

Marquart, the former chair and now a ranking member of the Property and Local Tax Committee, toured outstate Minnesota Sunday with fellow DFLers Rep. Debra Hilstrom (Dist. 46B - Brooklyn Center), the Deputy Minority Leader of the House, and Kent Eken (Dist. 2A - Twin Valley), Assistant Minority Leader.

"We're not able to build a community center" and the library's old computers are being recycled into city offices, she said. "Our capital improvements needs are not being met...It's not helping us to delay."

The only thing left to cut is personnel, admitted Carroll. Projects and programs have already been cut. Summer parks workers will not be hired.

LGA'S great experiment

Local Government Aid was passed with the aim of providing small tax bases with affordable services and erasing the disparities between flourishing cities and struggling rural towns.

Continuing cuts have eroded small cities' ability to create new revenue streams through job creation, much less provide basics like police protection. Since 2003, there have been $1.3 billion in cuts to cities, said Marquart. Meanwhile, property taxes have risen 85 percent since 2002, he added.

That has forced local government to increases property taxes, explore shared services and make cuts, he said.

"We're going to suffer," he said. Property taxes, because they fall on the elderly and lower middle class, are considered regressive, Marquart said.

"Seniors are paying 40 percent more of their income" for in-state and local taxes, he said. "It hits us doubly hard" because rural Minnesota is increasingly made up of seniors on fixed incomes and farmers.

Bagley and Park Rapids are worried about how to fix the sidewalks so a citizen doesn't fall into a gigantic pothole and sue.

"We'd lose," said Bagley mayor Mark Edevold. "Our sidewalks are a pure liability for us."

As a city whose budget is nearly half LGA, "we look to Park Rapids with a certain amount of envy," he said.

And Edevold gets incensed when lawmakers mull more cuts to cities under the theory the small towns have budgeted for it by assigning priorities to capital improvement projects. He called it "pre-identifying the sacrifices.

"It's like a homeowner planning for getting his house burned down because he bought insurance," Edevold said. "It's just plain wrong."

Budgeting uncertainties

Edevold said uncertainties have created havoc for small towns trying to budget for 2011.

"Which numbers do we base our budget on?" he asked. Certified state figures or rumors of cuts to come, he wanted to know.

"Here's what we were promised, here's what we budgeted, here's what we got," he said of the vast disparities.

While legislators await the Republican majority's budget proposals this week, weary taxpayers are justifiably worried their shoulders will just have to broaden more. The state is projected to have a $5 billion shortfall during the next biennium.

"We need to keep LGA robust, viable and predictable," Marquart said.

Meanwhile cities are left to grapple with which street gets repaired and accruing debt and anger if they make the repairs.

The affect on Main street

RiverBend Home Expressions owners Cynthia and Ellis Jones told the lawmakers the bittersweet story of purchasing a downtown business in 2001.

"It was not a good move," she admitted. With property taxes steadily rising, many of the Mom and Pop stores downtown depend on one spouse's outside income to stay afloat.

Nevertheless, business owners supported a major renovation downtown, and are now awaiting the assessments to fall on them.

Jones worried that the lack of outside help won't allow small towns to attract new industry or professionals.

"It has taken a concerted effort on our part to hold the city together," she said.

"The frustrated ones sold and got out," she said. "We've worked very hard. We're not sitting back here crying foul but we need help. We can't afford to be disenfranchised from the whole system" of taxation.

"We have really felt the pressures," Jones said. What used to be a five-month tourist season is now down to six weeks - "July 1 to August 15. It's pretty darn hard to budget. The tourist season from May to September is nonexistent. That shrinking to six weeks doesn't give you much leeway."

Ellis Jones compared the tourist economy to that of a Minnesota farmer.

"You get one spike in revenue," he said.

With a relatively small tax base, Park Rapids doesn't have a variety of big box stores, industry, state and federal government agencies.

"It's a great place to be but it's harder to maintain base services," Carroll acknowledged. Should the city, like others, charge for streetlights and wastewater services?

The city is attracting more seniors on fixed incomes, Cynthia Jones said.

Coordinating services

Park Rapids council member Sue Tomte said the city and county might be forced to combine law enforcement departments.

"It's important that the city and county work together," she said. Council members are looking at whether police department functions can be contracted out. Shared services may be the only way to get through the fiscal crisis, she told lawmakers,

"We're coordinating services because we have to," Eken acknowledged.

Some cities, due to a lack of police, aren't even enforcing ordinances anymore, he said. If a defendant pleads to the charge, it works well.

If the defendant challenges the charge, it's usually dismissed because municipalities don't have the resources to take each matter to court.

Deferred maintenance

Even the most rudimentary band-aids like seal coating are beyond the reach of city finances, Carroll said.

"We haven't done it for years," she said.

"Deferred maintenance is happening a lot," Eken agreed.

A decade ago, Park Rapids' fleet of equipment was an average of eight years old.

Today it's 12, Carroll said.

If something catastrophic were to happen, like more sewer backups in people's basements, the city isn't positioned to help.

Sales taxes

Many cities, the latest being Detroit Lakes, have explored passing 1 percent local sales taxes. Park Rapids city leaders have looked cautiously at such solutions and seem divided.

Marquart said LGA was enacted specifically to deter cities from going out on their own, implementing local sales taxes. LGA was intended to equalize the tax bases of the haves and have nots.

Now "18 or 19 cities have them," he said.

Sales taxes might work in a more thriving metropolitan area like Bemidji, he said.

Traditionally LGA funds have been tempting pots of money raided to plug holes elsewhere. That leaves taxpayers holding the bag to make up the difference.

Whether it's a higher tax or charges for services, taxpayers are saying statewide their well has run dry.

And while lawmakers look for a solution to the state's budget mess, ominous signs are on the horizon.

Rising food and oil prices could set any recovery back further.

Sarah Smith

Sarah Smith is the outdoors editor. She covers courts, business and breaking news in addition to outdoors events.

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