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LGA increases for Minnesota communities

Like buried treasure, a gem of a factoid was tucked into the Minnesota Town Finances report issued this week by State Auditor Rebecca Otto.  On the bottom of Page 6, a Local Government Aid (LGA) program increased intergovernmental revenues 40.3 percent.  Those intergovernmental revenues increased from $40.4 million to $56.6 million from 2013 to 2014. It primarily reflects increases in federal disaster assistance and state distributions.  That means more money flowing to burgs like Akeley, Nevis, Menahga, Laporte and Park Rapids and is good news for taxpayers.  

The Local Government Aid program has been longstanding, Otto said.  LGA ebbs and flows with each administration, but like County Program Aid, is necessary to small towns and cities to thrive.  As part of the budget proposed by Gov. Mark Dayton and passed by the Minnesota Legislature in 2013, cities were slated to receive an $80 million boost in LGA for the 2014–15 budget year.  Under that plan Akeley received 32.15 percent more funds; Nevis 29.58 percent; Menahga got 22.59 percent; Laporte got the same amount and Park Rapids received an increase of 46.42 percent.  It is based on the 2010 census population for each city.  Akeley, with a population of 432, received $64,598 in 2014, the latest year for which figures were available in the report; Nevis, population 390, received $53,936; Menahga, population 1,316, received $345,644; Laporte, population 111, received $10,915 and Park Rapids, population 3,709, received $459,947.  According to Department of Revenue statistics, Akeley received $67,099 in 2015 and stands to get $68,032 in 2016.  Nevis got $55,133 in 2015 and will get $55,626 in 2016. Laporte received $9,815 in 2015 and was the only regional city to drop in 2016 to $8,824. Menahga received $354,266 in 2015 and is in line to get $356,723 in 2016.  Park Rapids received $474,922 in 2015 and will receive $477,864 next year.  

The state’s 87 counties have 852 cities and 1,783 towns, according to the 2010 census. Almost 17 percent of the state’s population lives in towns with more than half having a population of less than 300.  A city’s need for LGA is based roughly on a population formula. For small cities of less than 2,500 residents like Akeley, Nevis, Menahga and Laporte, need is a per capita amount starting at $410 per resident and going up to $630 per capita as the city size increases.  For medium cities with between 2,500 and 10,000 residents like Park Rapids, need is determined by the percent of the city’s housing stock built before 1940, the average household size and population decline (percentage) from the city’s peak population of the last 40 years.  Once need is determined, the Department of Revenue considers a city’s capacity by multiplying the city’s tax base by the statewide average tax rate. If there is a gap - if the calculated need exceeds a city’s capacity - some percentage of that gap will be filled with LGA. The percentage of the gap that is filled is the same for all cities receiving LGA in a given year.  Gov. Mark Dayton and the DFL-controlled House and Senate increased LGA to reduce property taxes, but critics say that did not happen.  Between 2005 and 2014, according to Otto’s report, total town revenues increased 33.4 percent. Adjusted for inflation, revenues increased 2.6 percent over the decade.  That’s because since 2005, revenues derived from taxes increased from 65.5 percent to 72.7 percent while the share of revenues from intergovernmental sources has remained flat during that decade.  

Local Government Aid (LGA) is a general purpose aid that can be used for any lawful expenditure. It is also intended to be used for property tax relief. The Department of Revenue certifies LGA for cities based on current LGA statutes, including any changes enacted during the most recent legislative session. The total amount of LGA certified for all cities in 2016 is $519,398,012.  According to the Minnesota Department of Revenue, towns and cities have also received increases in County Program Aid (CPA) annually. The DOR certifies CPA for counties based on current statutes, including any changes enacted during the most recent legislative session, by Aug. 1 each year. The total amount of County Program Aid certified for all counties for 2016 is $208,562,724.  Hubbard County Auditor-Treasurer Kay Rave said Hubbard County receives around $700,000 annually in CPA that goes into the general fund for expenditures such as public safety and human services.  “Absolutely,” that money is needed, Rave said, even though right now it trickles in incrementally  The Association of Minnesota Counties is hoping to introduce a newly revamped CPA program that would result in Park Rapids getting an additional $200,000.  Park Rapids city treasurer Angela Brumbaugh said the funds are indeed used to defray taxes, and that the funds are put into general revenues.

Sarah Smith

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

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