State Auditor Julie Blaha’s office reported that Minnesota cities’ revenues increased by 6.7 percent and expenses increased 7.2 percent in 2019.

The 2019 Minnesota City Finances Report, released at the end of February, summarizes current and long-term trends based on city reporting forms, financial statements and audits.

“While the strain on city finances caused by the COVID-19 pandemic remains ongoing, this report shows robust growth for cities in both revenues and expenditures in the year prior,” Blaha said in a media release.

According to the report, investment earnings had the highest percentage increase on the year while intergovernmental revenues showed the largest dollar increase. On the expenditures side, streets and highways showed the largest dollar increase while culture and recreation had the largest percentage increase.

Park Rapids

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Park Rapids, population 4,145 as of the 2019 study, appears in the audit report’s tables with a footnote saying its data could not be fully verified. Only four other cities have the same note.

According to data tables from the state auditor’s office, the city’s 2019 revenues totaled about $6 million, including $3.26 million in taxes, $650,000 in special assessments and $1.23 million in intergovernmental revenues, of which about $1 million came from state grants.

Other sources of income included $92,500 in license and permit fees, $499,000 in charges for services, $27,000 in fines and forfeits, $158,000 in interest and $110,000 in other revenues.

The city covered its remaining expenses mainly by transferring $56,000 in its enterprise funds and borrowing about $1.1 million.

The city’s current expenditures in 2019 totaled about $4.1 million, with the largest expense areas being public safety at $1.6 million, general government at $827,000, housing and economic development at $655,000 and streets at $573,000.

Park Rapids also spent $1.5 million on capital outlay in 2019, $1 million on principal payments and $300,000 on interest for total expenditures of nearly $7 million. The largest area of capital outlay expense was streets, accounting for $1.4 million of the total.

As of the end of 2019, the city had a total outstanding indebtedness of $10,755,000, including $9.95 million in special assessment bonds and $805,000 in general obligation bonds.

Broken down another way, Park Rapids owed $8.84 million in refunding debt and $1.7 million in other long-term debt.

The city’s unrestricted general fund balances totaled about $3.8 million at the end of 2019. This total represented a 17 percent increase from the prior year and 91.5 percent of its current expenditures for the year. This percentage was somewhere in the middle of statewide rankings, with cities’ fund balances running from negative 99 percent to over 650 percent.

In enterprise funds – liquor store and water, sewer and stormwater utilities – Park Rapids saw a net loss of about $72,000 in 2019, with the sewer fund taking the biggest hit at about $250,000. Enterprise fund capital outlay totaled about $220,000 with debt service for the water fund totaling over $103,000.

Infogram by Enterprise staff
Infogram by Enterprise staff

Menahga

With a population of 1,329 in 2019, Menahga brought in revenues totaling about $1.6 million. Of this total, about $458,000 came from taxes, $137,000 from special assessments and $520,000 from intergovernmental aid, of which $437,000 came from state grants.

Among other revenue sources, the state auditor’s data tables list $404,000 from “all other revenues,” not including permits, fees, fines and interest.

Menahga’s current expenditures for 2019 totaled about $1 million, with the largest shares going toward general government at $400,000, public safety at $270,000, streets at $160,000 and housing and economic development at $112,000.

The city also spent about $40,000 for capital outlay, $440,000 in principal payments and $240,000 on interest for total expenditures of over $1.7 million. The capital outlay was divided between public safety at $17,000, streets at $13,000 and culture and recreation at $9,600.

Menahga’s total debt as of the end of 2019 was about $7.77 million, including $2 million in general obligation bonds, $5 million in G.O. revenue bonds and $615,000 in special assessment bonds. $1.4 million of the total took the form of refunding debt.

Menahga ended 2019 with an unrestricted general fund balance of about $371,000, a 5.7 percent decrease from 2018. This balance represented 36.5 percent of the city’s current expenditures for the year, toward the bottom of statewide rankings between Bloomington and St. Cloud.

The city’s enterprise funds – including liquor store, water and sewer utilities and the Greenwood Connections nursing facility – showed a total net loss of about $400,000 for the year.

In dollar totals, the biggest net loss was due to Greenwood Connections, with a deficit of about $200,000 out of revenues and expenses both exceeding $7 million. Percentage-wise, the water fund had the toughest year, with operating expenses more than double the revenues.

Menahga’s enterprise funds also spent about $687,000 on capital outlay and $500,000 on debt service in 2019.

Infogram by Enterprise staff
Infogram by Enterprise staff

Nevis

Nevis, population 417 as of 2019, had total revenues of about $608,500 that year.

Of these revenues, $232,000 were from taxes, $89,000 from state grants, $151,000 from charges for services and $123,000 from all other sources. The city also transferred $35,000 in its enterprise funds.

Meanwhile, Nevis saw expenses totaling about $565,000, of which $199,000 were for public safety, $184,000 for general government, $61,000 for streets and $90,000 for capital outlay.

Capital outlay expenditures were split between culture and recreation at $56,100, general government at $20,600 and public safety at $13,800.

The city’s debt as of the end of 2019 totaled $222,560 in G.O. revenue bonds.

In its enterprise funds, Nevis posted a net income of about $45,000 for the year, with a liquor store net income of over $80,000 outweighing losses in the water and sewer utilities. The enterprise funds transferred out a net $35,000, spent about $37,000 on capital outlay – mostly for the sewer department – and paid about $45,000 in debt service, also on the sewer fund.

Infogram by Enterprise staff
Infogram by Enterprise staff

Akeley

With a population of 457 in 2019, Akeley brought in revenues totaling about $367,000.

These included about $212,000 in taxes and $142,000 in state grants. There were also $50,000 in enterprise fund transfers.

Expenditures for the year totaled about $329,000 and included $97,000 for general government, $96,000 for public safety, $85,000 for streets and $49,000 for housing and economic development.

Akeley reported no capital outlay expenses for 2019. Its outstanding debt at the end of the year totaled about $6.6 million, all in special assessment bonds.

Akeley’s enterprise funds – liquor, park, sewer and water – came out of the year with a net income of about $77,000, despite the water fund’s net loss of about $17,000.

Enterprise fund expenditures included nearly $26,000 in capital outlay, mostly for the sewer department, and $61,000 in debt service payments on the water fund.

Infogram by Enterprise staff
Infogram by Enterprise staff

Laporte

Laporte, population 111 as of 2019, raised revenues totaling about $76,000 that year. The largest share came from taxes at about $46,000, followed by $9,000 in state grants.

The city also took in $17,000 in “all other revenues,” not including permits, fees and interest earnings.

Laporte’s current expenditures for 2019 totaled about $46,000, of which $33,000 went to general government. With capital outlay totaling about $13,000, Laporte’s total expenditures were $58,600. Also, there were $25,000 worth of enterprise fund transfers.

The city’s capital outlay expenses broke down as $8,400 for general government and $4,300 for culture and recreation.

Laporte ended 2019 with a total indebtedness of $645,000 in general obligation bonds. Its water and sewer fund posted a net loss of about $8,800 for the year and made debt service payments totaling about $47,000.

Statewide trends

Blaha’s office reported that total revenues of all governmental funds for Minnesota cities totaled $6.24 billion in 2019. For cities over 2,500 in population, revenues increased 7.1 percent while cities under 2,500 increased 1.6 percent over a two-year period.

Expenditures of all governmental funds for cities statewide totaled $7.09 in 2019 – a two-year increase of 7.6 percent for cities over 2,500 in population and 3.9 percent for cities under 2,500.

Smaller cities tend to carry a greater debt burden per capita than large cities, the audit report showed. In 2019, small cities carried a long-term debt burden of $1.36 billion, or $3,805 per capita, compared to $8.07 billion, or $1,865 per capita, for large cities.

In 10-year trends for 2010-19, city revenues adjusted for inflation increased 10.2 percent.

The proportion of total revenues derived from property taxes grew from 37.9 percent in 2010 to 40.5 percent in 2019. Meanwhile, intergovernmental revenues decreased from 25.9 percent to 23.4 percent of total revenues.

During the same decade, inflation-adjusted expenditures increased 8.5 percent. In actual dollars, it was a 31.8 percent increase from $5.38 billion to $7.09 billion.

However, comparing the five year periods of 2010-14 and 2015-19 reveals a significant reversal during the most recent period. Inflation-adjusted total expenditures decreased 2.7 percent during 2010-14, but increased 8.1 percent during 2015-19.

To view the complete report, visit here.